Document:

Exclusive Licensing Agreement

 

 

 

between

The University of Washington

and

Lumera Corporation

 

 

 

 

 

Effectively Dated October 16, 2000

 

 

TABLE OF CONTENTS

1.0     Recitals        

2.0     Definitions    

3.0     Grant  

4.0     Sublicensing  

5.0     Disclosure of Patents and
Technical Information        

6.0     Diligence      

7.0     Patent Prosecution and Cost
Recovery  

8.0     Consideration; Licensing Fees,
Common Stock and Royalty          

9.0     Payment and Reports        

10.0   Recordkeeping       

11.0   Term and Termination of
Agreement; Dispute Resolution     

12.0   Notices        

13.0   Proprietary Rights   

14.0   Patent Marking       

15.0   Patent Infringement 

16.0   Patent Validity Claims       

17.0   Use of Names; Relationship of
Parties   

18.0   Representations, Warranties,
Disclaimer; Assumption of Risk and Release         

19.0   Indemnification       

20.0   Applicable Laws; Jurisdiction; Venue    

21.0   Attorney’s Fees      

22.0   Insurance      

23.0   Confidential
Information    

24.0   General        

List of Exhibits

Exhibit A      Field of Use

Exhibit B      Description of Invention

Exhibit C      Invention Disclosures, Patent
Applications and/or Patents

Exhibit D      University Inventors

Exhibit E       Notices

Exhibit F       Restricted Stock Purchase Agreement

Exhibit G      Voting Agreement

Exhibit H      Electro-Optic Modulator
Product Development Schedule

 

EXCLUSIVE LICENSING AGREEMENT

          This
Exclusive Licensing Agreement is entered into by and between the University of
Washington (the “University”) and Lumera, Inc., a Washington corporation (the
“Licensee”) as of the Effective Date, subject to the following terms and
conditions.

1.0     Recitals

          WHEREAS,
the University has developed, owns and/or has the right to license certain
technology relating to electro-optic polymers and related organic materials and
processes;

          WHEREAS,
the University desires that the technology be used as soon as possible in the
public interest and to this end desires to license the technology to a company
capable of commercially exploiting the technology;

          WHEREAS,
Licensee desires, for the purpose of commercial exploitation, to acquire a
license to certain patent rights in and to the technology and to certain
related information;

          WHEREAS,
Licensee desires to advance the development of a new class of nonlinear optical
(NLO) materials currently under development at the University that appear to
offer the potential to enable a range of light modulation components and
systems for a variety of optical processing and communications applications;

          WHEREAS,
Licensee intends to complement such development with component and device fabrication
capabilities and facilities to achieve rapid commercialization of the
underlying materials technology; and

          WHEREAS,
University and Lumera believe that University research facilities and
capabilities can play a role in the further development of this technology,
including related systems and applications, and to that end have also entered
into a Sponsored Research Agreement in connection with this Agreement.

          NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements set
forth herein, the University and Licensee do hereby agree as follows:

2.0     Definitions

          Unless
the context clearly requires otherwise, the following capitalized terms, used
in either the singular or plural, shall be defined as follows:

2.1     “Agreement” means this Exclusive Licensing
Agreement, including the exhibits attached hereto, which are incorporated by
reference herein.

2.2     “Affiliate”
means any corporation, company, or other business entity (including any joint
venture, partnership, form of association or otherwise) directly or indirectly
controlling, controlled by, or under common control with Licensee.  For purposes of this definition, control of
an entity means having the right to direct or to appoint or remove a majority
of the members of the entity’s board of directors (or its equivalent) or the
entity’s management (including the entity’s president, chairman of the board,
or general or managing partner, as applicable), irrespective of whether such
right exists by reason of one or more of the following:  (i) contract, agreement, arrangement or
understanding; (ii) provisions in the applicable articles, bylaws or other
similar governing document; (iii) ownership of or holding rights to vote
sufficient numbers of voting shares, securities or other rights entitled to
vote for, appoint, or remove; (iv) any applicable law; or (v) otherwise.

2.3     “Confidential Information” has the meaning
set forth in Section 23.1 of this Agreement.

2.4     “Effective Date” means October 16, 2000.

2.5     “Electro-Optic Modulator” means an integral
device capable of using an electrical signal to modulate a laser light source
at high speed commonly employing, but not limited to, a Mach-Zehnder design,
examples of which are generally represented (and referenced herein for
illustrative purposes only) by the following commercially available
products:  Lucent Technologies Part
Numbers 2623N, 2623CSA, JDS Uniphase Part Numbers 25150-002280, 25150-002281,
DZ150-002282, DZ150-002283, PM-150-080-50-1-1-C2 and SDL Integrated Optics Ltd.
Part Numbers IOAP-MOD 9140, 9189, 9201, 9203

2.6     “Field of Use” means the field of use
described in Exhibit A attached hereto.

2.7     “First Commercial Use” means the date upon
which Net Sales Revenue or Sublicense Fees first occurs.

2.8     “Invention” means the inventions (i)
described in Exhibit B attached hereto and (ii) that Licensee may hereafter
elect to add to this Agreement by exercise of an option to license pursuant to
Section 8 of the Sponsored Research Agreement.

2.9     “Licensed Patents” means the invention
disclosures, patent applications, and/or patents (i) described in Exhibit C
attached hereto and (ii) that Licensee may hereafter elect to add to this
Agreement by exercise of an option to license pursuant to Section 8 of the
Sponsored Research Agreement.  Licensed
Patents shall also include all patents, reissues, divisionals, continuations,
reexaminations and extensions thereof, and subject matter in any
continuations-in-part on which claims issuing obtain the benefit of a priority
date of any of the foregoing, together with all corresponding foreign patents,
extensions, supplemental protection certificates, applications, and related
intellectual property rights corresponding thereto now issued or issued during
the term of this Agreement and which directly relate to the Invention.

2.10   “License” means the license granted to
Licensee under the terms of this Agreement.

2.11   “Licensed Subject Matter” means any subject
matter, including but not limited to products and processes, (i) that is
covered in whole or in part by any issued, unexpired patent claim or a claim in
a pending patent application contained in the Licensed Patents in the country
in which said subject matter is made, used, or sold, or (ii) that incorporates
any Technical Information.

2.12   “Licensee” means Lumera, Inc., a Washington
corporation.

2.13   “Net Sales
Revenue” means the gross revenues billed or invoiced by Licensee for
sales of Electro-Optic Modulators using or incorporating Licensed Subject
Matter and for sales of other Licensed Subject Matter, whether billed or
invoiced by Licensee or its Sublicensees, less discounts and allowances given
and actually taken and which are customary in Licensee’s trade, other than
those which permit a reduction in payment by the customer in exchange for early
payment, and less sales and similar taxes actually paid by Licensee on said
sales transactions (but not including any taxes assessed on Licensee’s business
generally), import and export duties actually paid, and amounts allowed or
credited due to returns (not to exceed the original billing or invoice).  Licensed Subject Matter shall be deemed
“sold” upon the earlier of billing out, invoicing, or shipping.

2.14   “Party” or “Parties” mean the University and/or Licensee as the context
requires.

2.15   “Restricted Stock Purchase Agreement” means
the agreement entered into by and between the Parties attached as Exhibit F
hereto.

2.16   “Sponsored Research Agreement” means a
research agreement entered into by and between the Parties as of the Effective
Date of this Agreement.

2.17   “Sublicense” means the present, future or
contingent transfer of any license, right, option, first right to negotiate or
other right granted to a Sublicensee under the Licensed Subject Matter, in
whole or in part.  Sublicense shall also
include, without limitation, strategic partnerships, affiliations, and
marketing collaborations.

2.18   “Sublicensee” means a third party not an
Affiliate of Licensee granted a Sublicense pursuant to a bona fide arms length
transaction.

2.19   “Sublicense Fees” means all forms of
consideration received by Licensee for a Sublicense, including, but not limited
to royalties, cash, stock and other valuable non-cash consideration.

2.20   “Technical Information” means Confidential
Information –

i.        that is owned by the University or whose
use or disclosure is legally controlled by the University, and

ii.        that is in any manner related to any
Invention or the Licensed Subject Matter or to the Project as defined in the
Sponsored Research Agreement, and

iii.       that is included within one or more of
the following:

(a)      a Licensed Patent, as defined herein,

(b)      a disclosure of Technical Information by
the University to the Company pursuant to Section 5.3 of this Agreement,

(c)      Research
Results, as defined in the Sponsored Research Agreement, including any
description of Research Results contained in any report to the Company,

(d)      a report by the University to the Company
pursuant to Sections 2.7 or 2.8 of the Sponsored Research Agreement,

(e)      a Disclosure, as defined in the Sponsored
Research Agreement, made pursuant to Section 8.1 thereof;

(f)       a disclosure by the University to the
Company and identified in writing as Technical Information by the University
pursuant to any material transfer, nondisclosure or other similar agreement,
document or arrangement between the University and the Company, or

(g)      a disclosure by the University to the
Company pursuant to that certain Nondisclosure Agreement among the Parties
hereto executed on July 19, 2000 and effectively dated January 1, 2000.

Notwithstanding
anything in the foregoing to the contrary, Technical Information shall not in
any event include any information to the extent and as of the date:  (x) excluded as Confidential Information
under Sections 23.2 or 23.6 of this Agreement, (y) publicly disclosed by the
University as a Scholarly Disclosure pursuant to Article 5.0 of the Sponsored
Research Agreement, or (z) included within a Licensed Patent upon public
disclosure thereof by the University or by any applicable governmental
patenting authority.

2.21   “Territory” means the entire world.

2.22   “University of Washington,” “University,” and “UW” all mean the University of Washington,
a public institution of higher education and an agency of the State of
Washington, having its principal campus located in Seattle, Washington.

2.23   “University Inventors” means (i) the persons
described in Exhibit D attached hereto and (ii) any other University Personnel
who may participate in the development of Inventions arising from the Sponsored
Research Agreement.

2.24   “University Personnel” shall have the same
meaning as defined in the Sponsored Research Agreement.

2.25   “Voting Agreement” means the agreement
entered into by and between the Parties and others attached as Exhibit G.
hereto.

3.0     Grant

3.1     Subject
to Licensee’s performance of the terms and conditions of Articles 8.0 and 9.0
of this Agreement and Article 3.0 of the Sponsored Research Agreement,
University hereby grants to Licensee for the term of this Agreement, and
Licensee accepts, an exclusive, royalty-bearing license, with the right to
sublicense, to import, make, have made, use, sell, offer for sale, have sold,
and otherwise commercially exploit Licensed Subject Matter within the Field of
Use in the Territory.

3.2     The
License granted herein is subject to a reserved non-exclusive, non-transferable
license in the Field of Use retained by the University to:  (i) publish the general scientific findings
from research related to Licensed Subject Matter, subject to the terms
regarding publication described in Article 5.0 of the Sponsored Research
Agreement; and (ii) use the Licensed Subject Matter only for its own bona fide
research, teaching and other educationally-related purposes.

3.3     In
the event the University has received or will receive any funding from a
funding agency of the U. S. government for research contributing in whole or
part to the development of the Licensed Subject Matter, Invention, Licensed
Patents, and Technical Information, Licensee understands and agrees that such
intellectual property may be subject to the rights and limitations of U.S.
Public Laws  96-517 and 98-620, 35 USC
§§200-211, and various implementing regulations, including those codified at 37
CFR Part 401, known generally and collectively as the “Bayh-Dole
Requirements.”  In such case, the
Parties agree to include, where applicable, in any application for a U.S.
Patent a statement fully identifying the rights of the U.S. government under
the Bayh-Dole Requirements; and Company acknowledges that the University shall
be required to grant the U.S. government a worldwide, non-exclusive,
royalty-free license for such intellectual property, including the Licensed
Patents, notwithstanding anything in this Agreement to the contrary.

4.0     Sublicensing

4.1     During
the term of exclusivity of the license granted in this Agreement, Licensee
shall have the right to grant Sublicenses to Licensed Patents in the Field of
Use, or any part thereof, and for the Territory, or any portion thereof, at
royalty rates and with other terms and conditions not less favorable to
University than those required of Licensee by this Agreement.

4.2     Licensee
agrees to forward to University a copy of any and all fully executed Sublicense
agreements pertaining to Licensed Patents within thirty (30) days of the date
of execution.

5.0     Disclosure
of Patents and Technical Information

5.1     University,
within sixty (60) days of the Effective Date, shall provide to Licensee copies
of all issued patents and pending patent applications comprising the Licensed
Patents as of that date.

5.2     University
agrees to provide Licensee with a copy of any future patent application or
applications filed by University relating to the Invention.  University acknowledges that such patents
and applications may become Licensed Subject Matter as otherwise provided under
the terms of this Agreement and the Sponsored Research Agreement.

5.3     University
agrees to disclose to Licensee any other Technical Information, not obtained by
University under conditions of confidentiality, in University’s possession as
of the Effective Date or during the term of this Agreement that University
reasonably considers to be necessary or valuable to the commercial exploitation
of Licensed Patents.

5.4     Where Technical Information is intended or
reasonably expected to be included in a patent application, Licensee agrees to
keep such Technical Information received from University and identified by
University as confidential under conditions of strict secrecy until the filing
and public disclosure of such application and to use the same degree of care
Licensee would for its own confidential information, but not less than
reasonable care, to protect University’s confidential Technical Information
from disclosure to unauthorized third parties.

6.0     Diligence

6.1     Licensee,
during the term of this Agreement, shall utilize its best efforts in proceeding
with the development, manufacture and sale of commercial products and/or
processes incorporating and/or utilizing the Licensed Subject Matter and with
other commercial exploitation of the Licensed Subject Matter, and in creating a
supply and demand for the Licensed Subject Matter.

6.2     Without
limiting the foregoing, Licensee shall: 
(i) develop an Electro-Optic Modulator incorporating and/or utilizing
Licensed Subject Matter substantially in accord with the schedule attached as
Exhibit H hereto, including the milestones specified therein; and (ii) offer
for general commercial sale an Electro-Optic Modulator incorporating and/or
utilizing Licensed Subject Matter no later than eighteen (18) months after
University discloses to and fully enables Company to obtain a sample of a
nonlinear electro-optic material suitable for use in a commercially-saleable
Electro-Optic Modulator, except that with respect to any such disclosure and
enablement in existence on or after June 1, 2001, no later than twelve (12)
months after the occurrence of any such disclosure and enablement.

6.3     If
Licensee fails to adhere to the diligence obligations set forth in this
Agreement, University may terminate this Agreement in accordance with Article
11.0 of this Agreement.

7.0     Patent
Prosecution and Cost Recovery

7.1     University
or its designee shall have sole control over the filing, prosecution and
maintenance of any and all patent applications, whether pending or not yet
filed as of the Effective Date of this Agreement, in Licensed Patents, and of
the maintenance and other management of any and all issued patents in Licensed
Patents.  The Parties agree to use the
Seattle, Washington law firm of Christensen, O’Connor, Johnson and Kindness as
legal counsel for all patent matters and to change such counsel by mutual
agreement.

7.2     University
shall keep Licensee informed of the status of any and all patents and patent
applications comprising Licensed Patents and shall provide to Licensee timely
copies of all correspondence with the United States Patent and Trademark Office
(as well as any foreign equivalent bodies), and shall provide Licensee with the
opportunity from time to time to advise University on courses of action respecting
the filing of new patent applications relating to the Invention, prosecution of
patent applications, and management of patents in Licensed Patents, provided
University shall have sole authority to prosecute Licensed Patents. If
University determines that it will not maintain any of the Licensed Patents,
University will provide timely notice to Licensee and shall provide to Licensee
reasonable opportunity to maintain such Licensed Patents.

7.3     Licensee agrees to reimburse University for
all fees and costs relating to the preparation (including any investigation and
analysis directly relating to such preparation), filing, prosecution and
maintenance of patent applications, including, without limitation,
interferences, oppositions, and reexaminations, and maintenance and defense of
patents, in Licensed Patents, whether incurred prior to the execution of this
Agreement or during the term of this Agreement.  Such fees and costs shall not include costs incurred by the
University in the use of its own resources, such as employee time, and shall
not extend to patenting fees and costs incurred by University after termination
of this Agreement.  Licensee agrees to
pay invoices for such fees and costs submitted by University with thirty (30)
days after receipt of any such invoice. 
Alternatively, University may instruct its legal counsel to send copies
of all invoices related to the Licensed Patents directly to Licensee, and
Licensee shall reimburse the invoicer directly as if that invoicer were
University.  University shall further
instruct its legal counsel to notify University should any such invoice remain
unreimbursed for a period of more than thirty days from the date of
invoice.  In any country where Licensee
fails to pay fees and costs invoiced to Licensee by University within sixty
(60) days of the date of such invoice, University may file, prosecute and/or
maintain a patent application or patent at its own expense and for its own
exclusive benefit, and Licensee thereafter shall not be licensed under such patent
or patent application within such country.

8.0     Consideration;
Licensing Fees, Common Stock and Royalty

8.1     Licensee
agrees to pay to University a one-time, non-refundable, non-creditable license
issue fee of Two Hundred Thousand Dollars ($200,000.00) due and payable upon
execution of the Research Plan of the Sponsored Research Agreement.

8.2     Licensee
will deliver to the University shares of its common stock and perform such
other obligations in accordance with the Stock Subscription and Rights Agreement
attached hereto as Exhibit F.

8.3     Commencing
upon First Commercial Use but in no event later than January 1, 2002, Licensee
agrees to pay to University a non-refundable annual license maintenance fee of
seventy-five thousand dollars ($75,000) due and payable in four quarterly
installments on the schedule specified in Section 9.1 of this Agreement and
fully creditable against any royalties payable by Licensee under Section 8.4 of
this Agreement.

8.4     Licensee
agrees to pay to University an earned royalty calculated as a percentage of Net
Sales Revenue during the term of this Agreement in accordance with the
following:

8.4.1  With respect to Net Sales Revenue arising from
sales of software constituting Licensed Subject Matter, the royalty rate shall
be determined in accordance with Section 8.5 of this Agreement.

8.4.2  With respect to Net Sales Revenue arising from
sales of Electro-Optic Modulators, the royalty rate shall be determined in
accordance with Section 8.5. 
[CONFIDENTIAL TREATMENT REQUESTED]

8.4.3  With
respect to Net Sales Revenue arising from sales of any Licensed Subject Matter
other than as described in subsections 8.4.1 and 8.4.2, the royalty rate shall
be determined in accordance with Section 8.5. 
[CONFIDENTIAL TREATMENT REQUESTED]

8.4.4  No multiple royalties on Net Sales Revenue
shall be payable by Licensee to University more than once on a particular
product or process licensed under this Agreement as a result of any Licensed
Subject Matter, its manufacture, use, or sale, are or being included within any
of the following:  (i) one or more
patents (including any invention disclosures and patent applications)
constituting Licensed Patents; or (ii) any item of Technical Information
(irrespective of whether any such Technical Information is also included as
part of a Licensed Patent).  Royalties
shall be determined at the component level for sales or similar transfers of
items, i.e., if the component or process is used as a component that is part of
a larger system, the royalty shall be payable on the component, not the system,
unless the Licensed Subject Matter covers the system as a whole.

8.5     Royalties
and royalty rates under this Agreement shall be determined in accordance with
the following:

8.5.1  Within any applicable ranges set forth in
Section 8.4 of this Agreement, the Parties agree to negotiate and determine
royalty rates and other factors material to the application of a royalty on a
product-by-product basis no later than the first sale or other commercial use
of each product incorporating Licensed Subject Matter, except that, with
respect to Electro-Optic Modulators, the royalty rate shall be determined no
later than September 1, 2001. 
[CONFIDENTIAL TREATMENT REQUESTED] 
The Parties agree to promptly execute appropriate amendments to this Agreement
reflecting all such determinations.

8.5.2  Royalty rates under this Agreement shall be
commercially reasonable, taking into account usual and customary commercial
factors, including, without limitation, the nature and character of the
particular product, the industry within which it will be marketed and sold,
Licensee’s anticipated profitability from the particular product sales, and the
value added of Licensed Subject Matter to the product, and with respect to
Licensed Subject Matter arising from Joint Intellectual Property as defined in
the Sponsored Research Agreement, the relative contributions of the Parties to
the development of such Joint Intellectual Property.  Determination of the relative contributions of the Parties to the
development of such Joint Intellectual Property shall be based on the relative
value added by each Party to the commercial value of such Joint Intellectual
Property and shall not necessarily be limited to matters disclosed in any
Licensed Patent.  Notwithstanding the
foregoing, in no event shall royalty rates be inconsistent with any applicable
ranges set forth in Section 8.4 of this Agreement.

8.5.3  Licensee agrees to provide timely notice of
the planned offering for sale of any product incorporating any Licensed Subject
Matter, which notice shall in no event be less than one-hundred twenty (120)
days prior to the first sale.  Either
Party may at any time request the other Party to meet for the purpose of
negotiating a royalty rate with respect to a particular product, including the
definition of the product for purposes of calculating the royalty; providing,
however, a Party shall not be required to enter into negotiations more than
one-hundred twenty (120) days prior to the planned offering for sale of the
particular product that is the subject of the requested negotiation.

8.5.4  In
the event the Parties are unable to agree on the royalty rate for a particular
product after three (3) meetings, either Party may submit the particular matter
to binding interest arbitration to be decided by a single arbitrator in
Seattle, Washington and administered by the American Arbitration
Association.  The arbitrator shall be
experienced in conducting interest arbitration proceedings and knowledgeable in
matters relating to the marketing and sale of electronic devices in the
telecommunications industry, including usual and customary licensing
arrangements.  The arbitrator’s
authority shall be limited to determining (without issuing either a reasoned
opinion or findings of fact):  (i) a commercially
reasonable royalty rate in accordance with the requirements set forth in
Section 8.4 and subsection 8.5.2 of this Agreement, and (ii) the definition of
the particular product to which such royalty shall apply.  The arbitrator shall have no authority to
award any damages, costs or attorney fees or to decide any other matter or
dispute arising under this Agreement, including without limitation any disputes
regarding the validity of the Licensed Patents.  All arbitration proceedings shall be conducted on an informal
basis and no rules of evidence shall be applicable to such proceedings, except
those as the arbitrator deems appropriate to a speedy and efficient
determination.  Prior to commencement of
arbitration, each Party shall submit to the arbitrator and exchange with each
other in advance of the hearing their last, best offers.  The arbitrator shall be limited to awarding
only one or the other of the two figures submitted, providing such figure is
within any range applicable to the particular product as specified in Section
8.4 of this Agreement.  Each Party shall
bear its own costs and expenses and an equal share of the arbitrator’s and
administrative fees of arbitration.  The
written decision of the arbitrator shall be binding and final on the Parties
and shall not be subject to any judicial or other appeal.  Upon issuance, the arbitrator’s written
decision shall be deemed to be incorporated herein and shall, without further
action of the Parties, be deemed to be an amendment to this Agreement.

8.6     Licensee
agrees to pay to University a percentage of Sublicense Fees, due and payable at
the end of each calendar quarter in which such Sublicense Fees are received by
Licensee on the schedule specified in Section 9.1 of this Agreement, according
to the following:

8.6.1  With respect to Sublicense Fees received by
Licensee from the sale of Electro-Optic Modulators by a Sublicensee, Licensee
will pay to the University. 
[CONFIDENTIAL TREATMENT REQUESTED]

8.6.2  With respect to Sublicense Fees received by Licensee
from the sale of software by a Sublicensee, Licensee will pay to the University
a commercially reasonable percentage of all such Sublicense Fees determined in
accordance with Section 8.5.4 of this Agreement.

8.6.3  With
respect to Sublicense Fees received by Licensee other than as described in
either subsection 8.6.1 or 8.6.2, Licensee will pay to the University a
commercially reasonable percentage of all such Sublicense Fees determined in
accordance with Section 8.5.4 of this Agreement, providing, however, that the
percentage payable to the University as set forth in subsection 8.6.1 will be
presumed to be commercially reasonable for purposes of this subsection 8.6.3
unless the objecting Party can produce clear and convincing evidence to the
contrary.

8.6.4  Licensee shall be entitled to a credit for
amounts payable to University under Section 8.5 of this Agreement for any
amounts of Sublicense Fees allowed or credited by Licensee to a Sublicensee due
to returns or similar circumstances (not to exceed the original billing or
invoice).

8.7     If
Licensee receives consideration in any form other than cash in connection with
the use or sale of Licensed Subject Matter, or in connection with the grant of
any Sublicense, Licensee shall, in the applicable report pursuant to Article 9
(Payment and Reports) of this Agreement, state the cash value to Licensee of
such non-cash consideration.  University
may either (a) accept Licensee’s statement of cash value, in which case such
stated cash value will be shared with University in accordance with the
provisions in Article 8 (Licensing Fees and Royalty) of this Agreement; or (b)
elect to have such non-cash consideration appraised by a qualified third party
appraiser selected by University and reasonably acceptable to Licensee, in
which case the appraised cash value will be shared with University in
accordance with the provisions in Section 8.4 of this Agreement.  If the appraised cash value is either more
than one-hundred ten percent (110%) of Licensee’s stated value or more than
$100,000 over Licensee’s stated value, the Licensee shall pay for the
appraisal.  In all other cases, the
University shall pay for the appraisal.

8.8     If
Licensee receives Sublicense Fees in the form of equity, all provisions of
Section 8.6 of this Agreement shall apply, except that University may, at its
sole discretion, elect to receive University’s share of such equity as either
equity or the cash equivalent of such equity. 
If University elects to receive the equity, such equity shall be issued in
the name “University of
Washington.”

9.0     Payment and
Reports

9.1     Licensee
shall pay earned royalties to University quarterly within sixty (60) days of
March 31, June 30, September 30, and December 31 of each year during the term
of this Agreement.  Each such payment
shall reflect royalties due with respect to Net Sales Revenue occurring during
the preceding calendar quarter.

9.2     With
each payment, Licensee shall include a report setting forth such particulars of
the business conducted by Licensee and each Sublicensee during the preceding
calendar quarter as shall be pertinent to accounting as specified in this
Agreement.  The report, for Licensee and
each Sublicensee, shall include at least (a) the number of units of Licensed
Subject Matter manufactured, used, or sold; (b) gross amounts billed or
invoiced for Licensed Subject Matter; (c) names and addresses of any and all
Sublicensees; (d) the amount of Sublicense income received; (e) discounts and
allowances; and (f) calculation of total amounts due University.

9.3     Until Licensee or any Sublicensees engage
in First Commercial Use or other commercial use of Licensed Subject Matter,
Licensee shall prepare and submit to University within sixty (60) days of June
30 and December 31 of each year a report regarding the progress of Licensee and
any Sublicensee in developing Licensed Subject Matter for commercial
exploitation.  Said report shall include
such particulars as are necessary to demonstrate compliance with diligence
obligations set forth in the Article 6.0 of this Agreement.

9.4     On
or before the ninetieth (90th) day following the close of Licensee’s
fiscal year, Licensee shall provide University with Licensee’s certified
financial statements (or, if available, audited financial statements) for the
preceding fiscal year, including, at a minimum, a balance sheet and an
operating statement.

9.5     All
payments required under this Agreement shall be made in U.S. dollars by check
or money order payable to the “University of Washington”, and delivered to the Attention
of Fiscal Specialist at the University’s Office of Technology Transfer
delivered to the address as specified in this Agreement; or, if so directed in
writing by University, in such currency, form, and to such account as
University may designate.  If applicable,
the rate of exchange to be used in computing the amount of currency equivalent
to the United States dollars shall be the rate of exchange as published in the
Wall Street Journal on the last business day of the calendar quarter in which
the Net Sales Revenue occurred.

9.6     Licensee
agrees to pay a late fee for any payment more than ten (10) days overdue
University under the terms of this Agreement, which shall be computed as simple
interest at the rate of twelve percent (12%) per annum on any such overdue
amounts.  The payment of such a late fee
shall not foreclose or limit University from exercising any other rights it may
have as a consequence of the lateness of any payment.

10.0   Recordkeeping

10.1   Licensee
shall keep complete and accurate records and books of account containing all
information necessary for the computation and verification of the amounts to be
paid hereunder.  Licensee shall keep
these records and books for a period of five (5) years following the end of the
accounting period to which the information pertains.

10.2   Licensee
agrees, at the request of University, to permit one or more accountants
selected by University (“Accountant”) and reasonably acceptable to Licensee to
have access to Licensee’s records and books of account during ordinary working
hours with reasonable notice to audit with respect to any payment period ending
prior to such request, the correctness of any report or payment made under this
Agreement, or to obtain information as to the payments due for any such period
in the case of failure of the Licensee to report or make payment pursuant to
the terms of this Agreement.

10.3   The
Accountant shall not disclose to University any information relating to the
business of Licensee except that which is necessary to inform University
of:  (a) the accuracy or inaccuracy of
Licensee’s reports and payments; (b) compliance or noncompliance by Licensee
with the terms and conditions of this Agreement; and (c) the extent of any
inaccuracy or noncompliance.

10.4   Should the Accountant believe there is an
inaccuracy in any of the Licensee’s payments or noncompliance by the Licensee
with any of such terms and conditions, the Accountant shall have the right to
make and retain copies (including photocopies) of any pertinent portions of the
records and books of account.

10.5   In
the event that Licensee’s royalties calculated for any quarterly period are
underreported by more than ten per cent (10%) or by more than $25,000, the
costs of any audit and review initiated by University will be borne by
Licensee; but, otherwise, University shall bear the costs of any audit
initiated by University.

11.0   Term and
Termination of Agreement; Dispute Resolution

11.1   The
term of this Agreement shall commence on the Effective Date and shall continue
until the last of Licensed Patents expires, unless sooner terminated in
accordance with the provisions set forth in this Article 11.0 of this
Agreement.

11.2   If
Licensee breaches any material obligation imposed by this Agreement or fails to
cure, within the appropriate cure period, a material obligation of the
Sponsored Research Agreement, including without limitation any payment
obligation under Section 3.1 of the Sponsored Research Agreement, then
University may, at its option, send a written notice that it intends to
terminate the license granted by this Agreement.  If Licensee does not cure the breach within sixty (60) days from
the notice date, then University shall have the right, without further notice,
to immediately terminate this Agreement.

11.3   In
no event shall an early termination of the Sponsored Research Agreement by the
University pursuant to Section 11.1 of the Sponsored Research Agreement be
deemed to be or give rise to a breach of this Agreement.

11.4   This
Agreement, and the license granted to Licensee herein, shall terminate
immediately in the event that (1) Licensee seeks liquidation, reorganization,
dissolution or winding-up of itself, Licensee makes any general assignment for
the benefit of its creditors, or Licensee ceases doing business; (2) a petition
is filed by or against Licensee, or any proceeding is initiated by or against
Licensee, or any proceeding is initiated against Licensee as a debtor, under
any bankruptcy or insolvency law, unless the laws then in effect void the
effectiveness of this provision, and such filing remains unopposed for a period
exceeding thirty (30) business days; or (3) a receiver, trustee, or any similar
officer is appointed to take possession, custody, or control of all or any part
of Licensee’s assets or property.

11.5   Beginning
five (5) years after the Effective Date, Licensee shall have the right to
terminate this Agreement with or without cause, upon ninety (90) days prior
written notice to University. 
Notwithstanding the foregoing, Licensee may terminate this Agreement
upon ninety (90) days written notice to University upon payment to the
University, to the extent not previously paid, of five (5) years of annual
maintenance fees as described in Section 8.3 of this Agreement.

11.6   Termination
of this Agreement pursuant to Articles 11.2, 11.3, or 11.4 shall terminate all
rights and licenses granted to Licensee hereunder.

11.7   Upon termination of this Agreement, any and
all existing Sublicense agreements shall be immediately assigned to University
and University agrees to keep them in force to the extent that University is
capable of performing as a licensor in place of Licensee.

11.8   Termination
by University or Licensee under the options set forth in this Agreement shall
not relieve Licensee from any obligation to University arising under Article 8
of this Agreement and accruing prior to termination and shall not relieve
either party from performing according to any and all other provisions of this
Agreement that survive termination.

11.9   In
the event that there remain no valid, enforceable, and infringed Licensed
Patents covering Licensed Subject Matter, then following termination Licensee
and any Sublicensees shall have no further obligation to pay royalties thereon
or to account to University therefor.

11.10 The
provisions under which this Agreement may be terminated shall be in addition to
any and all other legal remedies which either Party may have for the
enforcement of any and all terms hereof and shall not in any way be interpreted
to limit any other legal remedy such Party may have.

11.11 In
the event of termination of this Agreement for whatever reason, Articles 18.0
and 19.0 shall survive such termination.

11.12 Prior to commencing any legal action, the
Parties will attempt in good faith to resolve through negotiation any dispute,
claim or controversy arising out of or relating to this Agreement.  Either Party may initiate such negotiations
by providing written notice to the other Party specifying that this provision
of this Agreement is being utilized and setting forth the subject of the
dispute and the relief requested.  The
Party receiving such notice will respond in writing within five (5) business
days with a statement of its position on and recommended solution to the
dispute.  If the dispute is not resolved
by this exchange of correspondence, then representatives of each Party with
full settlement authority shall meet at a mutually agreeable time and place in
Seattle, Washington within ten (10) business days of the date of the initial
notice in order to exchange relevant information and perspectives, and to
attempt in good faith to resolve the dispute. 
If the dispute is not resolved by these negotiations, the matter will be
submitted to a mutually agreeable and recognized mediation service prior to initiating
legal action.  Any such mediation shall
be conducted in Seattle, Washington and the costs of the mediation service
shall be shared equally by the Parties.

12.0   Notices

12.1   Any
notice to a Party provided pursuant to the terms of this Agreement shall be
delivered either in person, mailed by registered mail (return receipt requested
and postage prepaid), or transmitted by facsimile or electronic mail with
operator confirmation, and addressed as indicated in Exhibit 5 attached hereto.

12.2   Notice
shall be deemed effective upon the earlier of: 
(i) actual delivery to the Party; (ii) five (5) days after the date on
which such notice was postmarked within the United States; or (iii) receipt by
facsimile or other electronic means with operator confirmation.  All notices given by facsimile or other
electronic means shall be immediately followed by delivery in person or
delivery by first class mail.

13.0   Proprietary Rights

Licensee will not, by performance under this
Agreement, obtain any ownership interest in Licensed Patents or any other
proprietary rights or information of University, its officers, inventors,
employees, students, or agents.

14.0   Patent
Marking

Licensee shall mark, and shall require any
sublicensee to mark, any and all material forms of Licensed Subject Matter or
packaging pertaining thereto made and sold by Licensee (and/or by its
Sublicensees) in the United States with an appropriate patent marking
identifying the pendency of any U.S. patent application and/or any issued U.S.
or foreign patent forming any part of Licensed Patents.  All Licensed Subject Matter shipped to or
sold in other countries shall be marked in such a manner as to provide notice
to potential infringers pursuant to the patent laws and practice of the country
of manufacture or sale.

15.0   Patent
Infringement

15.1   Each
Party shall promptly inform the other Party of any alleged infringement of
Licensed Patents by a third party of which that Party is aware and provide any
available evidence thereof.

15.2   During
the term of exclusivity of the license granted hereunder, Licensee shall have
the first right to settle any alleged infringement of Licensed Patents by
securing cessation of the infringement, instituting suit against the infringer,
or entering into a sublicensing agreement in and to relevant patents in
Licensed Patents.  To enjoy said first
right, Licensee must notify University of such infringement within ninety (90)
days of learning of said infringement and if University notifies Licensee in
writing of its intent to initiate litigation on its own behalf, Licensee must
initiate bona fide action to settle any alleged infringement within ninety (90)
days of such notice.  After Licensee has
recovered its reasonable attorney’s fees and other out-of-pocket expenses
directly related to any action, suit, or settlement for infringement of
Licensed Patents, University and Licensee shall divide any remaining damages,
awards, or settlement proceeds in the following manner:

University   [CONFIDENTIAL TREATMENT REQUESTED]

Licensee     [CONFIDENTIAL TREATMENT REQUESTED]

provided, however,
that any payment by an alleged infringer as consideration for the grant of a
Sublicense shall be handled according to the payment provisions for Sublicenses
set forth in this Agreement.

15.3   In
the event Licensee institutes suit against an alleged infringer during the term
of exclusivity as provided in this Agreement, then the University may agree to
voluntarily participate as a named party at its sole discretion.  Otherwise, the University shall participate
as an involuntary plaintiff only if the University is determined by a court to
be a necessary or indispensable party, in which case the University agrees to
be bound by any final judgment rendered by the court.  Providing, however, the foregoing shall not be interpreted to
limit any right of the University to intervene in any such suit within three
(3) months of initiation of such lawsuit, and at any time thereafter for good
cause, which right is hereby fully reserved. 
Unless the University intervenes, the University’s participation in any
such suit shall be at Licensee’s sole expense, and University shall at
Licensee’s expense for University’s direct associated expenses, fully and
promptly cooperate and assist Licensee in connection with any such suit.

15.4   If Licensee fails, within ninety (90) days of
the University’s written notice as described in Section 15.2 above, to secure
cessation of the infringement, institute suit against the infringer, or provide
to University reasonably satisfactory evidence that Licensee is engaged in bona
fide negotiation for the acceptance by infringer of a sublicense in and to
relevant patents in Licensed Patents, University may then, upon written notice
to Licensee, assume full right and responsibility to secure cessation of the
infringement, institute suit against the infringer, or secure acceptance of a
sublicense from Licensee in and to relevant patents in Licensed Patents,
approval for which sublicense Licensee shall not unreasonably withhold.

15.5   If
University in accordance with the terms and conditions of this Agreement
chooses to institute suit against an alleged infringer, University may bring
such suit in its own name (or, if required by law, in its and Licensee’s name)
and at its own expense, and Licensee shall, but at University’s expense for
Licensee’s direct associated expenses, fully and promptly cooperate and assist
University in connection with any such suit. 
Any and all damages, awards, or settlement proceeds arising from such a
University-initiated action shall be the sole property of the University.

15.6   Neither
Licensee nor University shall be obligated under this Agreement to institute a
suit against an alleged infringer of the Licensed Patents.

16.0   Patent
Validity Claims

16.1   If
any claim challenging the validity or enforceability of any Licensed Patents
shall be brought against Licensee, Licensee shall promptly notify
University.  University, at its option,
shall have the right, within thirty (30) days after notification by Licensee of
such action, to intervene and take over the sole defense of the claim at
University’s expense.

16.2   If
Licensee challenges the validity or enforceability of any Licensed Patents,
Licensee agrees not to suspend any payments due University until such time as
that patent in Licensed Patents is determined to be invalid or unenforceable by
final judgment of a court of competent jurisdiction.  During the pendency of any appeal there from, Licensee agrees to
deposit any such payments due University into an escrow mutually agreeable to
the Parties.  Upon expiration of any
period from which no further appeals can be taken in such proceedings, the
proceeds of such escrow shall be paid to Licensee if the Licensed Patent at
issue is determined to be invalid or unenforceable and shall be paid to
University if the Licensed Patent at issue is determined to be valid and
enforceable.

17.0   Use of
Names; Relationship of Parties

17.1   Each
Party agrees that it will not use the name, trademark or other identifier of
the other Party for any advertising, promotion, or other commercially related
purpose without the express prior written consent of the other Party.  Nothing contained in this Agreement shall be
construed as conferring any right to use in advertising, publicity or other
promotional activities any name, trade name, trademark or other designation of
a Party hereto including any contraction, abbreviation or simulation of any of
the foregoing, unless the express written permission of the other Party has
been obtained, provided that Licensee may state the existence of this Agreement
and the fact that both Parties entered into it.  For any use other than the foregoing, Licensee hereby expressly
agrees not to use any name, tradename or trademark of the University, including
without limitation “University
of Washington” or its substantial equivalent, without the prior
written approval from University.

17.2   The Parties each agree and understand that
they are each acting as independent contractors and nothing contained herein
shall be construed to be inconsistent with such relationship or status.  Under no circumstances, shall either Party
be considered an agent, representative or employee of the other Party.  This Agreement shall not constitute, create,
nor in any way be interpreted as giving rise to any joint venture, partnership,
profit-sharing, or other similar business relationship of any kind between the
Parties.

18.0   Representations,
Warranties, Disclaimer; Assumption of Risk and Release

18.1   University
represents and warrants that it has the right to grant the License in and to
Licensed Patents and to disclose the Technical Information set forth in this
Agreement.

18.2   FOR
PURPOSES OF ARTICLE 18.0 OF THIS AGREEMENT, “SUBJECT MATTER” MEANS ALL LICENSED
SUBJECT MATTER, LICENSED PATENTS, INVENTIONS, AND TECHNICAL INFORMATION AND ANY
OTHER MATTER RELATING TO THE FOREGOING. 
THE SUBJECT MATTER IS PRELIMINARY AND EXPERIMENTAL IN NATURE.  LICENSEE HAS BEEN PROVIDED A FULL OPPORTUNITY
TO REVIEW AND INQUIRE ABOUT THE SUBJECT MATTER PRIOR TO USE AND ENTERING INTO
THIS AGREEMENT.  EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, THE UNIVERSITY MAKES NO REPRESENTATIONS AND
DISCLAIMS:  ALL WARRANTIES, BOTH EXPRESS
AND IMPLIED, WITH RESPECT TO THE UTILITY, PATENTABILITY, SAFETY,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE SUBJECT MATTER; AND
THAT LICENSEE USE OF THE SUBJECT MATTER WILL NOT INFRINGE ANY THIRD PARTY
PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS. 
ALL OBLIGATIONS OR LIABILITIES ON THE PART OF THE UNIVERSITY FOR
DAMAGES, INCLUDING BUT NOT LIMITED TO, INCIDENTAL, DIRECT, INDIRECT OR
CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE FURNISHING,
PERFORMANCE, OR USE OF THE SUBJECT MATTER ARE DISCLAIMED.  IF LICENSEE UTILIZES ANY OF THE SUBJECT
MATTER, LICENSEE DOES SO AT ITS OWN RISK AND RELEASES AND DISCHARGES THE
UNIVERSITY, ITS REGENTS, OFFICERS, AGENTS, EMPLOYEES, AND STUDENTS, FROM ALL
LOSSES, CLAIMS, DAMAGES, AND EXPENSES (INCLUDING ATTORNEY’S FEES AND LEGAL
COSTS) ARISING FROM LICENSEE’S USE OF THE SUBJECT MATTER.  IN NO EVENT SHALL THE UNIVERSITY’S TOTAL
LIABILITY UNDER THIS AGREEMENT EXCEED THE COSTS AND FEES PAID TO UNIVERSITY
UNDER THIS AGREEMENT.

19.0   Indemnification

19.1   Except
for those matters referred to Article 18.0 and section 19.2 of this Agreement,
the Parties agree to defend, indemnify, and hold each other harmless from
losses, claims, damages, and expenses (including reasonable attorneys’ fees and
legal costs) arising from the negligent acts or omissions of their respective
officers, employees, and agents acting in the course and scope of their duties
under this Agreement.  However, neither
Party assumes responsibility for indirect or consequential damages suffered by
the other Party or by any person, firm, or corporation not a Party to this
Agreement.

19.2   Licensee
agrees to defend, indemnify, and hold University harmless from losses, claims,
damages, and expenses (including reasonable attorneys’ fees and legal costs)
resulting from any theory of product liability (including, but not limited to,
actions in the form of tort, warranty or strict liability) concerning any
product, process or service made, used, or sold pursuant to any right or
license granted under this Agreement, except to the extent attributable to the
gross negligence or willful misconduct of the University, its officers,
employees, and agents.

19.3   When
invoking its rights under sections 19.1 or 19.2 of this Agreement, a Party
shall promptly notify the other Party of the action, claim or other matter
which gives rise to the defense and indemnity obligation and shall cooperate
fully with the defense or settlement of the action, claim or other matter.  The indemnifying Party shall have full
control of the defense or settlement of the action, claim or other matter and
shall ensure that all indemnified liabilities of the indemnified Party are
fully discharged.

20.0   Applicable
Laws; Jurisdiction; Venue

20.1   Licensee
agrees to abide by all applicable federal, state, and local laws and
regulations pertaining to the management and commercial deployment of any
intellectual property or other rights transferred to Licensee under this
Agreement or under any other agreement entered into pursuant to this Agreement.

20.2   Licensee
understands that the University is subject to the laws and regulations of the
United States, including the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended, and the Export Administration Act of 1979), and that the
University’s obligations hereunder are contingent upon compliance with all
applicable laws and regulations, including those for export control.  Licensee understands that any transfer of
any intellectual property or other rights to Licensee under this Agreement or
under any other agreement entered into pursuant to this Agreement, including
transfers to Licensee’s Affiliates and permitted uses by certain third parties,
may require a license from a cognizant agency of the United States Government
and/or written assurances by Licensee that Licensee shall not transfer data or
commodities to certain foreign countries without the prior approval of an
appropriate agency of the United States government.  The University neither represents that any such export license
shall not be required, nor that, if required, it shall be issued.

20.3   This
Agreement shall be governed by and enforced according to the laws of the State
of Washington, without giving effect to its or any other jurisdiction’s choice
of law provisions, and the Superior Court of Washington for King County shall
have exclusive jurisdiction and venue of all disputes arising under this
Agreement, except that in any case where the courts of the United States shall
have exclusive jurisdiction over the subject matter of the dispute, the United States
District Court for the Western District of Washington, Seattle division, shall
have exclusive jurisdiction and venue.

21.0   Attorney’s
Fees

The prevailing Party in any action sought to
enforce or interpret this Agreement or any provision of this Agreement shall be
entitled to its reasonable attorney’s fees and costs, including any appeals
thereon, as determined by a court in conjunction with any such legal
proceeding.

22.0   Insurance

22.1   Licensee
shall maintain general liability insurance including product liability and
contractual liability coverage in such commercially reasonable amounts and with
such qualified commercial insurers as are reasonably acceptable to University,
but in no event less than one (1) million dollars.  Licensee must declare whether the insurance is provided on a
“claims-made” form and must notify University if coverage is canceled.

22.2   Licensee shall issue irrevocable instructions to its
insurance agent and to the issuing company to notify University of any
discontinuance or lapse of such insurance not less than thirty (30) days prior
to the time that any such discontinuance or lapse is due to become
effective.  Licensee shall provide
University a copy of such instructions upon their transmittal to the insurance
agent and issuing company.  Licensee
shall further provide University, at least annually, proof of continued
coverage.

23.0   Confidential
Information

23.1   For
purposes of this Agreement, “Confidential Information” shall mean:  (i) all non-public information pertaining to
any Invention or to the Licensed Subject Matter in written, graphic, oral or
other tangible form, including without limitation all data, algorithms,
formulae, techniques, improvements, technical drawings, computer software and
materials; or (ii) Confidential Information as defined in the Sponsored
Research Agreement.

23.2   Notwithstanding
any other provisions of this Article 23.0 of this Agreement, a Party shall be
free from any obligations of confidentiality hereunder regarding any
information which is or becomes:

23.2.1          already known to such Party, other
than under an obligation of confidentiality, at the time of disclosure;

23.2.2          generally available to the public or
otherwise part of the public domain at the time of disclosure to such Party;

23.2.3          generally available to the public or
otherwise part of the public domain after its disclosure other than through any
act or omission of such Party in breach of this Agreement or other agreement or
legal obligation;

23.2.4          subsequently
lawfully disclosed to such Party by a third party under no obligation of
confidentiality to the other Party;

23.2.5          independently developed by such Party
as documented by written evidence;

23.2.6          approved for release by written
authorization of the other Party;

23.2.7          furnished to a third party by the
other Party without a similar restriction on the third party’s rights; or

23.2.8          disclosed pursuant to the requirement
of a governmental agency or was legally required to be disclosed, including
with respect to the University, disclosures of public records pursuant to RCW
42.17.250 et seq., and any administrative rules adopted pursuant thereto.

23.3   Subject
to the University’s publications rights set forth in Article 5.0 of the
Sponsored Research Agreement and the limitations of Sections 4.2 and 4.7 of the
Sponsored Research Agreement, the University and Licensee agree not to engage
in unauthorized disclosure or use of Confidential Information and to take
reasonable measures to prevent unauthorized disclosure and use of Confidential
Information, including without limitation taking reasonable measures to prevent
creating a premature bar to a United States or foreign patent application.  Each Party shall limit access to
Confidential Information received from the other Party to those persons having
a need to know in connection with the Licensed Subject Matter or in the
operation of the business of the Company and shall use reasonable efforts to
ensure that any such person receiving Confidential Information understands its
confidential nature and agrees not to make unauthorized disclosure or use
thereof.  Each Party further agrees to
employ no less than the same measures to protect Confidential Information that
it uses to protect its own valuable information.

23.4   The
Parties will take reasonable measures to mark and identify all Confidential
Information as confidential. 
Confidential Information disclosed in oral form shall be identified as
such by the disclosing Party to the other Party in writing within thirty (30)
days of any such disclosure. 
Information that is not marked or not identified in writing as
confidential within such period shall not be Confidential Information.  Upon termination of this Agreement and to
the extent otherwise consistent with this Agreement, any Confidential Information
of the disclosing Party shall be promptly returned or destroyed upon written
request of the disclosing Party.

23.5   In
no event shall the obligations of confidentiality set forth in this Agreement
be construed to limit either Party’s right to independently develop products or
conduct research without the use of the other Party’s Confidential Information,
except as may be expressly limited by this Agreement or any other applicable
agreements between the Parties.

23.6   The
Parties agree that, unless otherwise mutually agreed to in writing, the
obligations regarding nondisclosure, protection and nonuse of Confidential
Information set forth in this Agreement shall, in any event, end three (3)
years after disclosure of Confidential Information.

24.0   General

24.1   If
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be in any way affected or impaired thereby.

24.2   No
omission or delay of either Party hereto in requiring due and punctual
fulfillment of the obligations of any other Party hereto shall be deemed to
constitute a waiver by such Party of its rights to require such due and
punctual fulfillment, or of any other of its remedies hereunder.

24.3   No
amendment or modification hereof shall be valid or binding upon the Parties
unless it is made in writing, cites this Agreement, and is signed by duly
authorized representatives of University and Licensee.

24.4   This
Agreement, and any rights or obligations hereunder, may be assigned by the
University but shall not be assigned, transferred or delegated in whole or in
part by Licensee, whether by a merger, a sale of assets, or in any other
manner, except with the University’s express written approval.  Any attempted assignment, transfer or
delegation in breach of this provision shall be deemed to be void and of no
effect, and shall entitle the University to terminate this Agreement upon
written notice to Licensee.  Except as
otherwise provided, this Agreement shall be binding upon and inure to the
benefit of the Parties’ successors and lawful assigns.

24.5   The
headings of the several sections of this Agreement are inserted for convenience
and reference only, and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.

24.6   This
Agreement, the exhibits attached hereto, and the Sponsored Research Agreement
embody the entire understanding of the Parties and supersede all previous
communications, representations, or understandings, either oral or written,
between the Parties relating to the subject matter hereof.

24.7   Nonperformance
by a Party, other than payment of any amounts due hereunder by Licensee, shall
not operate as a default under or breach of the terms of this Agreement to the
extent and for so long any such nonperformance is due to:  strikes or other labor disputes; prevention
or prohibition by law; the loss or injury to products in transit; an Act of
God; or war or other cause beyond the control of such Party.

(THE REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK)

 

 

          The University and Licensee, each
agreeing to be bound hereby, do hereby assent to the above Agreement by the
signatures of their duly-authorized representatives.

	 
  	
  The University of Washington
  	 
  	 
  	
  Lumera Corporation
  
	
  By:
  	
  /s/ Robert C. Miller

  

  	 
  	
  By:
  	
  /s/ Todd R. McIntyre

  

  
	 
  	 
  	 
  	 
  	 
  
	
  Name:
  	
  Robert C. Miller

  

  	 
  	
  Name:
  	
  Todd R. McIntyre

  

  
	 
  	 
  	 
  	 
  	 
  
	
  Title:
  	
  Vice Provost

  

  	 
  	
  Title:
  	
  Vice President

  

  
	 
  	 
  	 
  	 
  	 
  
	
  Date:
  	
  October 20, 2000

  

  	 
  	
  Date:
  	
  October 20, 2000Prepared by MerrillDirect

Sponsored
Research Agreement

between

The University of Washington

and

Lumera Corporation

Effectively Dated October 16, 2000

 

TABLE OF CONTENTS

Recitals

1.0     Definitions

2.0     Research Plan, Project Work,
Principal Investigator and Reports

3.0     Company
Payments

4.0     Confidential Information

5.0     University Publication Rights

6.0     Intellectual Property

7.0     Patents, Patent Costs and
Option to License

8.0     Technology Transfer; Option
Exercise and License Agreement

9.0     University Disclaimer; Company
Assumption of Risk and Release

10.0   Indemnification

11.0   Early Termination, Nonrenewal
and Termination

12.0   Notices

13.0   Other Sponsored Research Agreements

14.0   Compliance with Applicable Laws

15.0   Internal Revenue Code

16.0   Sublicenses and Assignments

17.0   Relationship of the Parties

18.0   Disputes; Attorney’s Fees and
Legal Costs

19.0   Miscellaneous

 

 

List of Exhibits

Exhibit
1       Project Goals and Objectives

Exhibit
2       Background Intellectual Property

Exhibit
3       Company Representative, Principal
Investigator, and Certain University Personnel

Exhibit
4       Company Payments

Exhibit
5       Notices

Exhibit
6       Form of Research Plan

Exhibit
7       Progress Report Information

SPONSORED RESEARCH AGREEMENT

          This Research Agreement is entered into by
and between the University of Washington (the “University”) and Lumera, Inc.
(the “Company”) as of the Effective Date, subject to the following terms and
conditions.

Recitals

          WHEREAS, Company desires to sponsor certain
research to be conducted under the direction of the University;

          WHEREAS, the University desires to conduct
the Project as defined herein and is willing to grant certain rights to Company
upon the terms and conditions set forth herein and in a related Exclusive
Licensing Agreement also entered into in connection with this Agreement;

          WHEREAS, the University and Company desire to
achieve the goals and objectives of the Project as described in Exhibit 1
attached hereto and to appropriately commercialize the results of the Project;

          WHEREAS, Lumera desires to sponsor directed
research by the University for the ongoing development of new and/or improved
nonlinear electro-optic materials and devices designed to address a broad range
of microphotonics applications based on a mutually agreed Research Plan.

          NOW, THEREFORE, in consideration of the
foregoing and the mutual agreements set forth herein, the University and
Company do hereby agree as follows:

1.0     Definitions

          Unless the context clearly requires
otherwise, the following capitalized terms, used in either the singular or
plural, shall be defined as follows:

1.1     “Agreement”
means this Sponsored Research Agreement, including the exhibits attached
hereto, which are incorporated by reference herein.

1.2     “Company”
means Lumera, Inc., a Washington corporation.

1.3     “Company
Representative” means the representative designated by Company and
described in Exhibit 3 to be the primary contact with Principal Investigator
with respect to Project Work.

1.4     “Company
Personnel” means Company staff, employees, contractors,
subcontractors, and volunteers and any other similar persons or entities to the
limited extent that any of the foregoing are performing Project Work and other
similar activities related to the Project.

1.5     “Confidential
Information,” “University
Confidential Information,” “Company
Confidential Information,” and “Joint
Confidential Information” have the meanings set forth in Section 4.1
of this Agreement.

1.6     “Disclosure”
means the disclosure of Intellectual Property and Research Results described in
Section 8.1 of this Agreement.

1.7     “Effective
Date” means October 16, 2000.

1.8     “Exclusive
Licensing Agreement” means an exclusive licensing agreement entered
into by and between the Parties as of the Effective Date of this Agreement.

1.9     “Good
Cause” means:  (i) the
University’s failure, without legal excuse, to perform its material obligations
under this Agreement; or (ii) the substantial failure of the Project to make
reasonable progress towards achieving the goals and objectives described in
Exhibit 1.

1.10   “Intellectual
Property,” “University
Intellectual Property,” “Company
Intellectual Property,” “Joint
Intellectual Property,” “Background
Intellectual Property,” “University
Background Intellectual Property,” and “Company Background Intellectual Property” means the meanings
set forth in Section 6.1 of this Agreement.

1.11   “OIPTT”
means the University’s Office of Intellectual Property and Technology Transfer.

1.12   “Option to
License” means the option to obtain a license to Intellectual
Property as described in Section 7.3 of this Agreement.

1.13   “Party”
or “Parties” mean the University
and/or Company as the context requires.

 

1.14   “Principal
Investigator” means Dr. Larry Dalton and any other principal
investigator thereafter assigned by the University and approved by Company
pursuant to Section 2.6 of this Agreement to manage the Project and supervise
Project Work.

1.15   “Project”
means the research project that is the subject of this Agreement whose goals
and objectives are described in Exhibit 1 and whose work plan will be outlined
in the Research Plan.

1.16   “Project
Period” means the period of time described in Section 2.3 of this
Agreement.

1.17   “Project
Schedule” means the schedule for the Project and conduct of Project
Work described in the Research Plan.

1.18   “Project
Work” means all work, research, study and analysis performed by the
University Personnel and Company Personnel on behalf of and during the
existence of the Project as generally described in the Research Plan, but shall
not include any work, research, study or analysis performed by University
Personnel or Company Personnel in connection with any other research agreements
or any other arrangements, other than the Project, to which the Parties may now
or hereafter become a party.

1.19   “Research
Plan” means a written plan to be mutually agreed upon by the Parties
after the execution of this Agreement that includes a summary, in outline form,
of the research activities and an estimated schedule, to be undertaken by
University Personnel in accomplishing the goals and objectives of the Project
and in carrying out Project Work, the general form of which is attached as
Exhibit 6.

1.20   “Research
Results” means all Intellectual Property, Confidential Information,
data, other information, materials, and work products developed as part of the
Project and as a result of Project Work, including without limitation all
inventions, discoveries, products, devices, models, prototypes, computer
software, documentation, and technical data, regardless of whether protectable
by patents, copyrights, or otherwise.

1.21   “Scholarly
Disclosure” means usual and customary scientific and scholarly
disclosures of Project Results and Project Work (whether performed directly by
University Personnel or otherwise), of Intellectual Property, of information
connected with or arising from Project Work, and of any Confidential Information
incidental to disclosure of any of the foregoing, including presentations at
scientific and governmental meetings and publications (whether in the form of
written, electronic, or other media) in scientific, scholarly or professional
journals.

1.22   “Start Date”
means the date set forth in the Research Plan.

1.23   “University
of Washington,” “University,”
and “UW” all mean the University
of Washington, a public institution of higher education and an agency of the
State of Washington, having its principal campus located in Seattle,
Washington.

1.24   “University
Personnel” means the Principal Investigator, University faculty,
staff, employees, students, fellows, visiting scholars, contractors,
subcontractors, and volunteers and any other similar persons or entities to the
limited extent that any of the foregoing are performing Project Work and other
similar activities related to the Project, the initial roster for which is
partially set forth in Exhibit 3 and the Research Plan.

2.0     Research Plan, Project Work, Principal
Investigator and Reports

2.1     Promptly after execution of this Agreement,
representatives of the Parties will meet and confer in good faith for the
purpose of outlining the terms of a Research Plan consistent with the goals and
objectives of the Project as set forth in Exhibit 1 and diligently work towards
preparation of a mutually agreeable Research Plan within the time period stated
herein.  Unless extended by mutual
agreement of the Parties, no later than forty-five (45) days after execution of
this Agreement, the Parties will execute a document setting forth a mutually
agreeable Research Plan, generally in the form attached hereto as Exhibit
6.  Upon execution, the Research Plan
shall be deemed to be an amendment to and become part of this Agreement.  In the event a Research Plan is not executed
within such period, this Agreement and the Exclusive Licensing Agreement shall
thereupon terminate.

2.2     The University will make all reasonable
efforts to achieve the goals and objectives of the Project and to carry out the
Project Work within the Project Period substantially in accordance with Exhibit
1 and the Research Plan, using commonly accepted professional standards of
workmanship and effort, subject to the Company providing the support described
in Article 4.0 of this Agreement.

 

2.3     The Project Period shall consist of a
period of time beginning on the Start Date and ending three (3) years after the
Start Date, except if as provided in Section 11.2, Company for Good Cause
elects not to renew this Agreement, the Project Period shall end two (2) years
after the Start Date.

2.4     The University shall have the exclusive and
sole authority to manage, control and direct the Project, conduct Project Work,
and supervise University Personnel and any Company Personnel working at
University facilities pursuant to the mutual agreement of the Parties;
providing, however, that Company shall have reasonable opportunities to advise
and consult with the University and Principal Investigator regarding the Project
and the conduct of Project Work.

2.5     Company understands that because the
Project is experimental in nature, the outcome is inherently uncertain and
unpredictable.  Company agrees and
understands that the University makes no representation, guarantee or warranty,
express or implied, regarding the outcome of the Project, the Research Results
or the patentability, legal protectability or usefulness of any Intellectual
Property arising from the Project.

2.6     The University shall promptly advise
Company of any change in the employment status of the Principal Investigator
that could adversely affect the Project and conduct of Project Work.  If the Principal Investigator ceases to be
associated with the University or otherwise becomes unavailable to manage the
Project and supervise Project Work, the Principal Investigator shall be
replaced by a qualified research scientist nominated by the University and
reasonably acceptable to Company.  If no
such Principal Investigator is identified, Company shall have the right to
terminate this Agreement upon not less than thirty (30) days’ written notice to
the University prior to the due date of the next payment under Exhibit 4.

2.7     The University shall provide Company
quarterly progress reports (or as often as otherwise specified in the Project
Schedule) during the period Project Work is being conducted.  Progress reports may be oral or written, or
a combination thereof, depending on the nature of the information conveyed.  If requested by Company, the University
shall confirm such oral progress reports with written reports.  The reports shall include the information
described in Exhibit 7.  All such
progress reports shall be considered Confidential Information under this
Agreement.

2.8     The University shall provide Company a final
written report within ninety (90) after the conclusion of the Project Work (or
such other time period specified in the Project Schedule) summarizing the
Research Results, including any discoveries made or innovations developed
during the course of the Project, and other pertinent findings and results from
the Project and describing the methods used and the results obtained.

3.0     Company Payments

3.1     Company shall pay the University the
amounts in the manner and on the dates as described in Exhibit 4.

3.2     If, as of the end of the quarter in which
the first anniversary of the Start Date occurs (and from time to time
thereafter as may be necessary and appropriate), the Company’s total payments
under Section 3.1 of this Agreement exceed the University’s total incurred
expenditures for performance of Project Work under this Agreement (including
all amounts irrevocably committed and all amounts expended as indirect costs in
accordance with University’s normal and customary practices) by more than
$750,000, the Parties agree to renegotiate in good faith a reasonable revision
to the payment schedule described in Exhibit 4 such that the Company’s payments
under this Agreement do not exceed, at any time, approximately $750,000 more
than the University’s anticipated actual expenditures.

3.3     In the event the University terminates this
Agreement pursuant to Section 11.1 herein, the Company payments as described
Exhibit 4 shall be adjusted to cease as of the effective date of any such early
termination by the University, subject to payment by the Company of any
additional amounts described in Section 11.4 herein.

3.4     Unless otherwise expressly agreed in
writing by the Parties, the University shall have sole right and interest to
all equipment and other tangible materials purchased, acquired or otherwise
used in the Project, whether as in-kind support from Company, purchased by the
University using funds paid to the University by Company, or otherwise.

3.5     Company agrees to pay simple interest at
the rate of twelve percent (12%) per annum on any amounts more than thirty (30)
days overdue under this Agreement.

4.0     Confidential Information

4.1     For purposes of this agreement, the
following terms shall have the indicated meanings:

4.1.1  “Confidential
Information” shall mean all non-public information pertaining to the Project,
Project Work and Research Results in written, graphic, oral or other tangible
form, including without limitation all data, algorithms, formulae, techniques,
improvements, technical drawings, computer software and materials.

4.1.2  “University
Confidential Information” means Confidential Information owned by the
University or whose use or disclosure is legally controlled by the University.

4.1.3  “Company
Confidential Information” means Confidential Information owned by the Company
or whose use or disclosure is legally controlled by Company.

4.1.4  “Joint
Confidential Information” means Confidential Information jointly owned by the
University and Company or whose use or disclosure is legally controlled jointly
by the University and Company.

 

4.2     Notwithstanding any other provisions of
this Article 4.0 of this Agreement, a Party shall be free from any obligations
of confidentiality hereunder regarding any information which is or becomes:

4.2.1  already
known to such Party, other than under an obligation of confidentiality, at the
time of disclosure;

4.2.2  generally
available to the public or otherwise part of the public domain at the time of
disclosure to such Party;

4.2.3  generally
available to the public or otherwise part of the public domain after its
disclosure other than through any act or omission of such Party in breach of
this Agreement or other agreement or legal obligation;

4.2.4  subsequently
lawfully disclosed to such Party by a third party under no obligation of
confidentiality to the other Party;

4.2.5  independently
developed by such Party as documented by written evidence;

4.2.6  approved
for release by written authorization of the other Party;

4.2.7  furnished
to a third party by the other Party without a similar restriction on the third
party’s rights; or

4.2.8  disclosed
pursuant to the requirement of a governmental agency or was legally required to
be disclosed, including with respect to the University, disclosures of public
records pursuant to RCW 42.17.250 et seq., and any administrative rules adopted
pursuant thereto.

4.3     Subject to the University’s publications
rights set forth in Article 5.0 and the limitations of Sections 4.2 and 4.7 of
this Agreement, the University and Company agree not to engage in unauthorized
disclosure or use of Confidential Information and to take reasonable measures
to prevent unauthorized disclosure and use of Confidential Information,
including without limitation taking reasonable measures to prevent creating a
premature bar to a United States or foreign patent application.  Each Party shall limit access to
Confidential Information received from the other Party to those persons having
a need to know in connection with the Project or in the operation of the
business of the Company and shall use reasonable efforts to ensure that any
such person receiving Confidential Information understands its confidential
nature and agrees not to make unauthorized disclosure or use thereof.  Each Party further agrees to employ no less
than the same measures to protect Confidential Information that it uses to
protect its own valuable information.

4.4     The Parties will take reasonable measures
to mark and identify all Confidential Information as confidential.  Confidential Information disclosed in oral
form shall be identified as such by the disclosing Party to the other Party in
writing within thirty (30) days of any such disclosure.  Information that is not marked or not
identified in writing as confidential within such period shall not be Confidential
Information.  Upon termination of the
Project and to the extent otherwise consistent with this Agreement, any
Confidential Information of the disclosing Party shall be promptly returned or
destroyed upon written request of the disclosing Party.

 

4.5     In no event shall the obligations of
confidentiality set forth in this Agreement be construed to limit either
Party’s right to independently develop products or conduct research without the
use of the other Party’s Confidential Information, except as may be  expressly limited by this Agreement or any
other applicable agreements between the Parties.

4.6     The Parties agree that, unless otherwise
mutually agreed to in writing, the obligations regarding nondisclosure,
protection and nonuse of Confidential Information set forth in this Agreement
shall, in any event, end three (3) years after disclosure of Confidential
Information.

5.0     University Publication Rights

5.1     Notwithstanding any other provision in this
Agreement to the contrary, the University reserves the right to make or permit
to be made “Scholarly Disclosures” subject only to the express limitations with
respect thereto as described in this Article 5.0 of this Agreement.

5.2     To prevent unauthorized disclosure of
Company Confidential Information, Joint Confidential Information, Company
Background Intellectual Property, or materials proprietary to Company, and to
protect possible patent rights with respect to Intellectual Property, the
University shall provide Company Representative with a copy or other
appropriate description of any proposed Scholarly Disclosure no less than
thirty (30) days prior to public disclosure thereof.

5.3     If during such thirty (30) day review
period, Company reasonably determines that information of the Company
restricted from public disclosure is included in the proposed Scholarly
Disclosure and so notifies the University in writing describing with
particularity the information not entitled to be disclosed by the University as
Scholarly Disclosure, the University will at Company’s request remove such
information from the proposed Scholarly Disclosure.

5.4     If during such thirty (30) day review
period, Company reasonably determines that a patent application would be
adversely affected by the proposed Scholarly Disclosure and so notifies the
University in writing describing with particularity the nature of the potential
patent claims that would be so adversely affected, the University will delay
such Scholarly Disclosure for a period of up to an additional ninety (90) days
for the purpose of preparing and filing an appropriate patent application.

6.0     Intellectual Property

6.1     For purposes of this agreement, the
following terms shall have the indicated meanings:

6.1.1  “Intellectual
Property” means the following rights developed in the course of, or as a direct
result of the Project:  any and all
patents or rights to patent, copyrights, trademarks, and any and all technical
data and computer software within the scope of Confidential Information.

6.1.2  “University
Intellectual Property” means Intellectual Property developed solely by
University Personnel.

 

6.1.3  “Company
Intellectual Property” means Intellectual Property developed solely by Company
Personnel.

6.1.4  “Joint
Intellectual Property” means Intellectual Property developed jointly by Company
Personnel and University Personnel, except that in the case of works subject to
copyright, “Joint Intellectual Property” shall mean only those works in which
the University and Company intend that their contributions be merged into inseparable
or interdependent parts of a unitary whole.

6.1.5  “Background
Intellectual Property” means intellectual property not arising within the
Project but of use to the Project, the rights to which are controlled by the
University or Company, as the case may be, and which is expressly made
available to the Project by the controlling party as further set forth in
Exhibit 2.

6.1.6  “University
Background Intellectual Property” means Background Intellectual Property under
the control of the University.

6.1.7  “Company
Background Intellectual Property” means Background Intellectual Property under
the control of Company.

6.2     Nothing in this Agreement shall be
interpreted as granting or conveying to a Party any ownership interest in the
other Party’s Background Intellectual Property, except as provided in the
Exclusive Licensing Agreement.

6.3     Title to University Intellectual Property
shall be vested in the University and title to Company Intellectual Property
shall be vested in the Company.  Title
to Joint Intellectual Property shall be vested jointly as tenants in common in
the University and Company and neither Party may use Joint Intellectual
Property except as provided in the Exclusive Licensing Agreement or other
written agreement between the Parties.

7.0     Patents, Patent Costs and Option to
License

7.1     Subject to Section 7.2 of this Agreement,
the University shall have the sole and exclusive right to file or have filed
and to prosecute or have prosecuted and shall undertake to pay all reasonable
costs thereof, all United States and foreign patent applications relating to
University Intellectual Property and Joint Intellectual Property, providing
that prior to any such filing, the University shall consult with Company.  The Parties agree to use the Seattle,
Washington law firm of Christensen, O’Connor, Johnson and Kindness as legal
counsel for all patent matters and to change such counsel only by mutual
agreement.

 

7.2     In the event the University elects not to
file any patent applications relating to all or a portion of University
Intellectual Property or Joint Intellectual Property or in the event the
University elects to abandon any such previously filed patent applications, it
shall provide timely notice thereof to Company, and to the extent lawful and
otherwise consistent with University policies regarding such matters, the
University will, upon Company’s written request, assign such rights to Company.

7.3     In addition to the license granted to
Company by University under the Exclusive Licensing Agreement, in consideration
of Company’s agreement to pay all reasonable costs of prosecuting the patent
applications referred to Section 7.1, the University hereby grants Company an
option to license the Intellectual Property, including Joint Intellectual
Property, and to certain additional University Background Intellectual Property
not previously licensed to Company by University as described in Section 8.4 of
this Agreement (the “Option to License”) exercisable in accordance with Article
8.0 of this Agreement.  In the event
Company fails to pay any such patenting costs within thirty (30) days of
invoice from the University, Company’s Option to License will terminate.

8.0     Technology Transfer; Option Exercise and
License Agreement

8.1     The University and Company shall make all
reasonable efforts to ensure that their respective University Personnel and
Company Personnel prepare, sign and submit a comprehensive written disclosure
to OIPTT of all Intellectual Property, Research Results and any other matters
that are potentially protectable as to ownership (the “Disclosure”) prior to
any public disclosure thereof.  Within
thirty (30) days of receipt of any such Disclosure, the University will provide
Company a copy thereof together with a general description of any University
Background Intellectual Property to the extent that the University:  (i) reasonably believes such University
Background Intellectual Property would be beneficial to a successful
exploitation of the matters set forth in the Disclosure; (ii) is reasonably
aware of the existence of the University Background Intellectual Property; and
(iii) is able, within limitations imposed by any obligations to third parties,
to disclose and/or license the University Background Intellectual Property to
Company.

8.2     Company shall have a period of three (3)
months from the date upon which the University delivers any such Disclosure to
Company to exercise the Option to License. 
If Company fails to exercise the Option to License within such period by
notifying the University in writing of its unconditional exercise thereof,
Company’s Option to License shall thereupon terminate, without further notice
by the University, at the end of such exercise period.

8.3     If Company exercises the Option to License,
such rights shall become Licensed Patents and/or Licensed Subject Matter under
the Exclusive Licensing Agreement subject to all of the terms and conditions
therein.

8.4     In the event Company so elects in writing
and subject to the limitations specified in Section 8.1 of this Agreement, the University
shall include within the license described in Section 8.3 of this Agreement,
such University Background Intellectual Property as is reasonably beneficial to
practice and commercially exploit the Intellectual Property that is the subject
of the Option to License; providing, however, such University Background
Intellectual Property shall be included only to the extent consistent with any
applicable laws, rules and regulations governing the University.

 

9.0     University Disclaimer; Company
Assumption of Risk and Release

9.1     FOR PURPOSES OF ARTICLE 9.0 OF THIS AGREEMENT,
“SUBJECT MATTER” MEANS ALL INTELLECTUAL PROPERTY, CONFIDENTIAL INFORMATION,
TECHNICAL INFORMATION, OTHER INFORMATION, DATA, PATENTS, COPYRIGHTS,
PROPRIETARY MATTER, AND ANY OTHER MATTER ARISING FROM PROJECT WORK AND OTHER
PROJECT ACTIVITIES.

9.2     THE SUBJECT MATTER IS PRELIMINARY AND EXPERIMENTAL IN
NATURE.  COMPANY HAS BEEN PROVIDED A
FULL OPPORTUNITY TO REVIEW AND INQUIRE ABOUT THE SUBJECT MATTER PRIOR TO
USE.  EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, THE UNIVERSITY MAKES NO REPRESENTATIONS AND DISCLAIMS:  ALL WARRANTIES, BOTH EXPRESS AND IMPLIED,
WITH RESPECT TO THE UTILITY, PATENTABILITY, SAFETY, MERCHANTABILITY, OR FITNESS
FOR A PARTICULAR PURPOSE OF THE SUBJECT MATTER; AND THAT COMPANY USE OF THE
SUBJECT MATTER WILL NOT INFRINGE ANY THIRD PARTY PATENT, COPYRIGHT, TRADEMARK,
OR OTHER RIGHTS.  ALL OBLIGATIONS OR
LIABILITIES ON THE PART OF THE UNIVERSITY FOR DAMAGES, INCLUDING BUT NOT LIMITED
TO, INCIDENTAL, DIRECT, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN
CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF THE SUBJECT MATTER ARE
DISCLAIMED.  IF COMPANY UTILIZES ANY OF
THE SUBJECT MATTER, COMPANY DOES SO AT ITS OWN RISK AND RELEASES AND DISCHARGES
THE UNIVERSITY, ITS REGENTS, OFFICERS, AGENTS, EMPLOYEES, AND STUDENTS, FROM
ALL LOSSES, CLAIMS, DAMAGES, AND EXPENSES (INCLUDING ATTORNEY’S FEES AND LEGAL
COSTS) ARISING FROM COMPANY’S USE OF THE SUBJECT MATTER.

10.0   Indemnification

10.1   Except for those matters referred to in
Sections 9.1, 9.2 and 10.2 of this Agreement, the Parties agree to defend,
indemnify, and hold each other harmless from losses, claims, damages, and
expenses (including reasonable attorneys’ fees and legal costs) arising from
the negligent acts or omissions of their respective officers, employees, and
agents acting in the course and scope of their duties under this
Agreement.  However, neither Party
assumes responsibility for indirect or consequential damages suffered by the
other Party or by any person, firm, or corporation not a Party to this
Agreement.

10.2   Company agrees to defend, indemnify, and hold
University harmless from losses, claims, damages, and expenses (including
reasonable attorneys’ fees and legal costs) resulting from any theory of
product liability (including, but not limited to, actions in the form of tort,
warranty or strict liability) concerning any product, process or service made,
used, or sold pursuant to any right or license granted under this Agreement,
except to the extent attributable to the gross negligence or willful misconduct
of the University, its officers, employees, and agents.

10.3   When invoking its rights under Sections 10.1
or 10.2 of this Agreement, a Party shall promptly notify the other Party of the
action, claim or other matter which gives rise to the defense and indemnity
obligation and shall cooperate fully with the defense or settlement of the
action, claim or other matter.  The
indemnifying Party shall have full control of the defense or settlement of the
action, claim or other matter and shall ensure that all indemnified liabilities
of the indemnified Party are fully discharged.

11.0   Early Termination, Nonrenewal and
Termination

11.1   University may terminate this Agreement prior
to the completion of the Project and Project Work upon sixty (60) days’ written
notice to Company.  In the event of any
such early termination by the University, the Company’s payments to the
University shall be adjusted as provided in Section 3.3 of this Agreement.

11.2   During the period beginning eighteen (18)
months after the Start Date and ending twenty-one (21) months after the Start
Date, Company may, for Good Cause only, elect not to renew this Agreement prior
to the completion of the Project and Project Work upon written notice to
University during such period.  Any such
notice of nonrenewal shall be effective not earlier than two (2) years after
the Start Date and shall specify with particularly what facts shall constitute
Good Cause.

11.3   Upon failure of a Party to cure a material
breach of this Agreement within sixty (60) days after written demand thereof
from the non-breaching Party, the non-breaching Party shall have the right to
terminate this Agreement upon five (5) business days’ written notice to the
breaching Party, including, with respect to the University, the right to
terminate the Option to License and any licenses arising from the exercise of
the Option to License.

11.4   In the event of any early termination or
nonrenewal of this Agreement, the University will take reasonable steps to
mitigate costs and expenses arising from any outstanding obligations;
providing, however, Company shall pay all non-cancelable costs incurred by the
University for a period of three (3) months following any termination by
Company, including any employment, graduate student and contractual
commitments.

11.5   In no event will Company be
entitled to a refund of the payments or other support, or any part thereof, nor
will Company be relieved of any obligations arising under this Agreement or
under any license agreement entered into by Company pursuant to this Agreement
(including payment of any amounts due under all such agreements), prior to any
termination of this Agreement, whether by the University, Company or operation
of law.

12.0   Notices

12.1   Any notice to a Party provided pursuant to
the terms of this Agreement shall be delivered either in person, mailed by
registered mail (return receipt requested and postage prepaid), or transmitted
by facsimile or electronic mail with operator confirmation, and addressed as
indicated in Exhibit 5 attached hereto.

12.2   Notice shall be deemed effective upon the
earlier of:  (i) actual delivery to the
Party; (ii) five (5) days after the date on which such notice was postmarked
within the United States; or (iii) receipt by facsimile or other electronic
means with operator confirmation.  All
notices given by facsimile or other electronic means shall be immediately
followed by delivery in person or delivery by first class mail.

13.0   Other
Sponsored Research Agreements

13.1   The Parties understand and agree that nothing
herein shall preclude either the University or the Company from entering into
sponsored research agreements or other activities with each other or with third
parties that may be related to but the conduct of which are otherwise outside
and independent of the Project, Project Work, and other Project activities on
condition that any such sponsored research agreements or other activities are
not inconsistent with the rights and obligations of the Parties to this
Agreement.

14.0   Compliance with Applicable Laws

14.1   Company agrees to abide by all applicable
federal, state, and local laws and regulations pertaining to the management and
commercial deployment of any intellectual property or other rights transferred
to Company under this Agreement or under any other agreement entered into
pursuant to this Agreement.

14.2   Company understands that the University is
subject to the laws and regulations of the United States, including the export
of technical data, computer software, laboratory prototypes and other
commodities (including the Arms Export Control Act, as amended, and the Export
Administration Act of 1979), and that the University’s obligations hereunder
are contingent upon compliance with all applicable laws and regulations,
including those for export control. 
Company understands that any transfer of any intellectual property or
other rights to Company under this Agreement or under any other agreement entered
into pursuant to this Agreement, including transfers to Company’s affiliates
and permitted uses by certain third parties, may require a license from a
cognizant agency of the United States Government and/or written assurances by
Company that Company shall not transfer data or commodities to certain foreign
countries without the prior approval of an appropriate agency of the United
States government.  The University
neither represents that any such export license shall not be required, nor
that, if required, it shall be issued.

14.3   In the event the University receives any
funding from a funding agency of the U. S. government for the Project, Company
understands and agrees that the intellectual property or other similar rights
covered by this Agreement may be subject to the rights and limitations of U.S.
Public Laws  96-517 and 98-620, 35 USC
§§200-211, and various implementing regulations, including those codified at 37
CFR Part 401, known generally and collectively as the “Bayh-Dole Requirements.”  In such case, the Parties agree to include, where
applicable, in any application for a U.S. Patent a statement fully identifying
the rights of the U.S. government under the Bayh-Dole Requirements; and Company
acknowledges that the University shall be required to grant the U.S. government
a worldwide, non-exclusive, royalty-free license for such invention covered by
any Patent notwithstanding anything in this Agreement to the contrary.

15.0   Internal
Revenue Code

15.1   The University will comply with any present
or future requirements of the Internal Revenue Code and its regulations with
respect to providing information that may affect the allowance of tax credits
for payments made to qualified organizations for basic research.  Upon request, the University will inform
Company, within ninety (90) days after the close of Company’s taxable year,
what proportion of payments and other support provided by Company pursuant to
this Agreement were expended on basic research during the taxable year.

16.0   Sublicenses
and Assignments

16.1   Except as otherwise expressly permitted
herein or by the Exclusive Licensing Agreement, neither Party shall sublicense,
assign, or otherwise transfer any rights, duties or obligations, other than a
right to receive payment of money, conferred by this Agreement and exhibits
attached hereto without the prior, written consent of the other Party.  Any such attempt to sublicense, assign, or
transfer by a Party without such consent shall be null and void.  Any sublicenses, assignments, or transfers
shall be subject to the terms of this Agreement, including the duties of
confidentiality herein.

17.0   Relationship
of the Parties

17.1   Each Party agrees that it will not use the
name, trademark or other identifier of the other Party for any advertising,
promotion, or other commercially related purpose without the express prior
written consent of the other Party.

17.2   The Parties each agree and understand that
they are each acting as independent contractors and nothing contained herein
shall be construed to be inconsistent with such relationship or status.  Under no circumstances, shall either Party
be considered an agent, representative or employee of the other Party.  This Agreement shall not constitute, create,
nor in any way be interpreted as giving rise to any joint venture, partnership,
profit-sharing, or other similar business relationship of any kind between the
Parties.

18.0   Disputes; Attorney’s Fees and Legal
Costs

18.1   Prior
to commencing any legal action, the Parties will attempt in good faith to
resolve through negotiation any dispute, claim or controversy arising out of or
relating to this Agreement.  Either
Party may initiate such negotiations by providing written notice to the other
Party specifying that this provision of this Agreement is being utilized and
setting forth the subject of the dispute and the relief requested.  The Party receiving such notice will respond
in writing within five business (5) days with a statement of its position on
and recommended solution to the dispute. 
If the dispute is not resolved by this exchange of correspondence, then
representatives of each Party with full settlement authority shall meet at a
mutually agreeable time and place in Seattle, Washington within ten business
(10) days of the date of the initial notice in order to exchange relevant information
and perspectives, and to attempt in good faith to resolve the dispute.  If the dispute is not resolved by these
negotiations, the matter will be submitted to a mutually agreeable and
recognized mediation service prior to initiating legal action.  Any such mediation shall be conducted in
Seattle, Washington and the costs of the mediation service shall be shared
equally by the Parties.

18.2   This
Agreement shall be governed by and enforced according to the laws of the State
of Washington, without giving effect to its or any other jurisdiction’s choice
of law provisions, and the Superior Court of Washington for King County shall
have exclusive jurisdiction and venue of all disputes arising under this
Agreement, except that in any case where the courts of the United States shall
have exclusive jurisdiction over the subject matter of the dispute, the United
States District Court for the Western District of Washington, Seattle division,
shall have exclusive jurisdiction and venue.

18.3   The
prevailing Party in any action sought to enforce or interpret this Agreement or
any provision of this Agreement shall be entitled to its reasonable attorney’s
fees and costs, including any appeals thereon, as determined by a court in
conjunction with any such legal proceeding.

19.0   Miscellaneous

19.1   No waiver or modification of this Agreement
shall be valid or enforceable unless it is in writing and signed by both
Parties.  The waiver by any Party of the
other Party’s default under or breach of any provision of this Agreement shall
not operate or be construed as a waiver by a Party of any subsequent default
under or breach of this Agreement by the other Party.

19.2   This Agreement, the exhibits attached hereto,
and the Exclusive Licensing Agreement, including the exhibits attached thereto,
embody the entire understanding of the parties and supersede all previous
communications, representations, or understandings, either oral or written,
between the Parties relating to the subject matter hereof.

19.3   If any of the provisions of this Agreement
shall be determined to be illegal or unenforceable by a court of competent
jurisdiction, the other provisions shall remain in force and effect.

19.4   This Agreement shall inure to the benefit of
and be binding upon each Party’s successors and assigns.

19.5   Nonperformance by a Party, other than payment
of any amounts due hereunder by Company, shall not operate as a default under
or breach of the terms of this Agreement to the extent and for so long any such
nonperformance is due to:  strikes or other
labor disputes; prevention or prohibition by law; the loss or injury to
products in transit; an Act of God; or war or other cause beyond the control of
such Party.

19.6   The headings herein are for convenience and
reference only and shall not govern the interpretation of any of the terms of
this Agreement.

          The University and Company, each agreeing to
be bound hereby, do hereby assent to the above Agreement by the signatures of
their duly-authorized representatives.

	

The University of Washington

  	

Lumera Corporation

  
	 

  	

a Washington Corporation

  
	

By:

  	

/s/ Carol Zuiches

  

  	

By:

  	

/s/ Todd R. McIntyre

  

  
	

Name:

  	

Carol Zuiches

  

  	

Name:

  	

Todd R. McIntyre

  

  
	

Title:

  	

Director of  Grant and Contract Services

  

  	

Title:

  	

Vice President 

  

  
	

Date:

  	

October 20, 2000

  

  	

Date:

  	

October 20, 2000

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