Document:

Exhibit 10.3

 

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST

FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE

SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED

WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

LICENSE AGREEMENT

 

This
License Agreement (this “Agreement”), effective as of January 8, 2008
(the “Effective  Date”), is
by and between PREDICTION SCIENCES, L.L.C., a
Delaware limited liability company (“Prediction Sciences”), having an address of 9404
Genesee Avenue, Suite 210, La Jolla, California 92037, and CLARIENT, INC., a Delaware corporation (“Clarient”), having
an address of 31 Columbia, Aliso Viejo, California 92656.

 

RECITALS

 

A.
Prediction Sciences has developed and owns GeneRxTM Breast Cancer
Profile, a laboratory developed multiple marker profile useful in the clinical
prognosis of breast cancer.

 

B.
Clarient desires to obtain an exclusive license under Prediction Sciences’
rights in such profile to promote, market and sell diagnostic testing products
and services utilizing such profile.

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements of the
parties set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:

 

1              DEFINITIONS

 

1.1          “Additional Licensed Solutions”
shall have the meaning set forth In Section 2.2.

 

1.2          “Affiliate”  shall mean any
company or entity controlled by, controlling, or under common control with a
party hereto and shall include any company more than 50% of whose voting stock
or participating profit interest is owned or controlled, directly or
indirectly, by a party, and any company which owns or controls, directly or
indirectly, more than 50% of the voting stock of a party.

 

1.3          “Change of Control”  means, with
respect to a party hereto, any of the following transactions: (i) acquisition
of the party by another entity by means of any transaction or series of
transactions (including, without limitation, any sale of stock, sale of assets,
reorganization, merger or consolidation, but excluding any transaction for
which the primary purpose is to raise equity capital), unless the party’s
shareholders of record, as constituted immediately prior to such transaction,
will immediately after such transaction hold at least 50% of the voting power
of the surviving or acquiring entity; or (ii) the sale, transfer or other
disposition of all or substantially all of the party’s assets in complete
liquidation or dissolution of the party.

 

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1.4          “Clarient Inventions”  shall have the
meaning provided in Section 6.2(a).

 

1.5          “Clarient IF”  shall have the
meaning provided in Section 6.2(b).

 

1.6          “Confidential Information”
shall mean any confidential or proprietary information of a party that
is disclosed to the other party under this Agreement, which may include,
without limitation, specifications, know-how, knowledge, skills, experience,
test data and results (including pharmacological, toxicological and clinical
test data and results), analytical and quality control data, results or
descriptions, trade secrets, technical information, drawings, models, business
information, inventions, discoveries, methods, procedures, practice,
algorithms, formulae, protocols, techniques, data and unpublished patent
applications, whether disclosed in oral, written, graphic or electronic form.

 

1.7          “Excluded IP” shall mean any Intellectual Property Rights claiming
or covering the Prediction Science Markers, any assays to the Prediction
Science Markers, or any use of the foregoing.

 

1.8          “Field”  shall mean the
prognosis of breast cancers in the commercial reference laboratory space, which
includes, without limitation, any facility or academic institution to the
extent engaging in a commercial reference laboratory business.

 

1.9          “First Licensed Solutions”
shall have the meaning set forth in Section 2.2.

 

1.10        “Intellectual Property Rights” means patents,
copyrights, trademarks (including service marks) trade secrets, mask work
rights, or forms of protection of a similar nature having equivalent or similar
effect to any of the foregoing, which may subsist anywhere in the world.

 

1.11        “Inventions”  means any
innovation, invention, development, concept, idea or work that is created,
conceived, developed or reduced to a tangible medium of expression by a party,
including, without limitation, models, formulae, algorithms, methods,
processes, procedures and techniques.

 

1.12        “Know-How”  shall mean any know-how
or other data which is owned or controlled by Prediction Sciences and is
relevant to the application of the Prediction Sciences Algorithm to the
Prediction Sciences Markers.

 

1.13        “License”  shall mean the
license granted pursuant to Section 2.1 of this Agreement.

 

1.14        “Licensed Solution(s)”  shall mean a
product, including diagnostic kits, research reagents, proprietary
compositions, substances, methods, services or a part thereof, the manufacture,
use, sale, offer to sell, importation, distribution, or transfer of which

 

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(a) is covered in whole or in part by one or more valid
and unexpired claims of a Prediction Sciences Patent; or

 

(b) is covered in whole or in part by one or more
un-cancelled claims being prosecuted in a pending application for a Prediction
Sciences Patent.

 

Licensed
Solutions also includes any product, including diagnostic kits, research
reagents, proprietary compositions, substances, methods, services or a part
thereof, which may not necessarily be covered by one or more claims described
in clauses (A) or (B) above, but either (i) assay one or more of
the Prediction Science Markers, or (ii) are otherwise necessary to utilize
the Prediction Sciences Algorithm.

 

1.15        “Licensed Technology”  shall mean,
collectively, the Prediction Sciences Patents, the Prediction Sciences
Algorithm and the Know-How.

 

1.16        “Net Sales”  shall mean
gross amounts actually collected by Clarient, its sublicensees and their
respective Affiliates (whether such amounts are received from Medicare or other
governmental payors, private payors, consumers or otherwise) for the sale of
Licensed Solutions, or providing services comprising Licensed Solutions, less
the following items, as allocable to such Licensed Solutions (if not previously
deducted from the amount invoiced): (i) discounts actually allowed and
taken, not to exceed amounts customary in the trade, (ii) sales taxes, use
taxes, and duties, including import, export, and excise duties imposed, (iii) freight
and insurance charges, to the extent separately invoiced to and paid by the
purchaser, and (iv) credits actually granted for damaged goods, rejections
or returns.

 

1.17        “Prediction Sciences Algorithm”
shall mean the algorithm that is specifically directed to the
Prediction Sciences Markers, as more fully described in Exhibit A hereto, together with any
improvements, modifications and derivatives thereof.

 

1.18        “Prediction Sciences Inventions”
shall have the meaning provided In Section 6.2(a).

 

1.19        “Prediction Sciences IP”
shall have the meaning provided in Section 6.1(a).

 

1.20        “Prediction
Sciences Marker”  shall mean any
of the biomarkers identified in Exhibit B
hereto.

 

1.21        “Prediction
Sciences Patents”  shall mean: (a) the
U.S. patent applications listed on Schedule 1
attached hereto; (b) all continuations, continuations-in-part (but only to
the extent claiming subject matter disclosed in the patent applications
described in (a)), divisionals, and non-provisionals of patent applications
described in (a); (c) all patents issuing from the applications described
in (a) or (b); and (d) all reissues, re-examinations, renewals or
extensions of the patents described in (c).

 

1.22        “Prediction
Sciences Trademarks”  shall mean the
trademarks and trade names of Prediction Sciences listed in Schedule 2 attached hereto, as such list
may be updated from time to time by Prediction Sciences upon written notice to
Clarient.

 

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1.23        “Territory”  shall mean the
United States of America.

 

1.24        “Third Party”  shall mean any
entity other than Prediction Sciences or Clarient or an Affiliate of Prediction
Sciences or Clarient.

 

2              EXCLUSIVE
LICENSE

 

2.1          License Grant. Subject to the terms and
conditions of this Agreement, Prediction Sciences hereby grants Clarient an
exclusive, royalty bearing license, with the right to grant sublicenses, under
the Licensed Technology to use, sell, have sold, offer for sale, promote,
market and advertise Licensed Solutions within the Field in the Territory.

 

2.2          First and Additional Licensed Solutions. References
made in this Agreement to “First Licensed
Solutions” shall be deemed to refer to the first set of Licensed
Solutions developed or marketed by the parties during the term of this
Agreement. Each subsequent set of Licensed Solutions developed or marketed by
the parties after the First Licensed Solutions shall be referred to herein as “Additional Licensed Solutions.” Upon the
development of any Additional Licensed Solutions, such Licensed Solutions shall
be deemed to be included in each reference in this Agreement to the First
Licensed Solutions, and accordingly, all rights and obligations of the parties
with respect to the First Licensed Solutions shall also apply to the Additional
Licensed Solutions.

 

2.3          Responsibilities of Prediction
Sciences. During the term of this Agreement, Prediction
Sciences shall: (i) prosecute and maintain the Prediction Sciences
Patents; (ii) use its best efforts to procure approval and/or clearance
from the FDA (and other appropriate regulatory agencies) with respect to the
First Licensed Solutions; (iii) use its best efforts to conduct further
research and development with respect to the First Licensed Solutions
(including procurement of grants to continue development of clinical studies); (iv) provide
patient tumor samples in connection with the submission of the First Licensed
Solutions to the FDA and completion of [***]; and (v) provide relevant
information and data reasonably needed to support the reimbursement strategy with
respect to the First Licensed Solutions.

 

2.4          Responsibilities of Clarient. During the
term of this Agreement, Clarient shall: (i) use its best efforts to
actively promote, market, distribute and otherwise commercialize (including
sales and marketing) the First Licensed Solutions in the Territory and in the
Field; (ii) provide labor, reagents and other necessary resources in
connection with the submission of the First Licensed Solutions to the FDA and
completion of [***]; (iii) provide assistance in connection with the
identification of sites for study samples; (iv) effect compliance with
CLIA and/or QSR requirements as applicable; and (iv) implement a
reimbursement (CMS and third party) strategy.

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED
SEPARATELY WITH THE COMMISSION

 

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2.5          Branding. Clarient shall have the
sole and exclusive right to brand the Licensed Solutions for use in the
Territory and in the Field in any manner it sees fit; provided that each
Licensed Solution shall include a prominent reference to Prediction Sciences on
the exterior packaging, product inserts and associated marketing material as
described herein. In connection with such branding, Prediction Sciences hereby
grants to Clarient a non-exclusive, non-transferable, royalty-free license to
use and reproduce the Prediction Sciences Trademarks in connection with
promotion, marketing, advertising, sale, and distribution of Licensed Solutions
in the Field in the Territory in accordance with and during the term of this
Agreement. Clarient shall obtain the prior written approval of Prediction
Sciences which approval shall not be unreasonably withheld, of the form and
manner in which the Prediction Sciences Trademarks will be used upon, in connection
with, or in relation to, the Licensed Solutions (e.g., “powered by Prediction
Sciences”), or any packaging, labels, containers, advertisements and other
materials related thereto. Prediction Sciences shall retain the ownership of
the entire right, title and interest in and to the Prediction Sciences
Trademarks, and all goodwill associated with or attached to the Prediction
Sciences Trademarks arising out of the use thereof by Clarient and its
Affiliates shall inure to the benefit of Prediction Sciences. Clarient shall
not reproduce or use (or authorize the reproduction or use of) the Prediction
Science Trademarks in any manner whatsoever other than as expressly authorized
by this Agreement. During the term and after any termination of this Agreement,
Clarient shall not use as its own any service mark, service name, trade name,
trademark, design or logo(s) confusingly similar to any of the Prediction
Science Trademarks.

 

2.6          No Conflicts of Interest. During the
term of this Agreement, Clarient will not, and will not enable or support any
Third Party to, actively promote, market or advertise any Competitive Products.
A “Competitive Product” shall
mean a product or service that serves substantially the same clinical need as a
Licensed Solution. Notwithstanding the foregoing, Clarient may continue to
offer those Competitive Products on its menu of services as of the Effective
Date and accept requisitions for such products from its pathology customers so
long as Clarient is not actively promoting or marketing such Competitive
Products (e.g. distributing advertising materials or sponsoring presentations).
If at any time Clarient determines (in its sole and good faith discretion) that
the Prediction Sciences Algorithm no longer constitutes the best available and
most clinically relevant technology available in the market, then upon written
notice from Clarient to Prediction Sciences (a) Clarient’s obligations
under this Section 2.6 shall terminate, (b) the licenses granted to
Clarient in Sections 2.1 and 2.5 shall convert from exclusive to nonexclusive
and shall be limited to Licensed Solutions sold to repeat patients of Clarient
(i.e., those patients that have previously purchased a Licensed Solution from
Clarient), and (c) the following sections shall terminate: 2.3, 2.4, 4,
6.3, 6.4 and 8.2.

 

2.7          Compliance with Laws. In performing
its duties under this Agreement, each party will at all times comply with all
applicable federal, state, and local regulatory requirements. To the extent
permitted thereunder, Clarient may offer the Licensed Solutions as
laboratory-developed tests for clinical use prior to the receipt by Prediction
Sciences of applicable approval or clearance from the FDA. Notwithstanding the
foregoing, Prediction Sciences shall be responsible for procuring approval
and/or clearance from the FDA as required by Section 2.3 hereof.

 

5

 

2.8          Expenses. Each party shall bear its
own expense in connection with the performance of its obligations hereunder.

 

3              FEES AND PAYMENTS

 

3.1          License Fees. In partial consideration
for the License granted herein shall be payable in the form of cash in the
aggregate amount of $50,000 and an aggregate of up to 350,000 shares of
Clarient’s common stock registered in the name of Prediction Sciences
(collectively, the “License
Fee”), each of
which shall be payable in accordance with and contingent upon achievement of
certain milestones as described in further detail on Exhibit C attached hereto. All payments
and stock grants described on Exhibit C shall be made no later than thirty
(30) business days following the date the applicable milestone is achieved.
Payment of the portion of the License Fee consisting of shares of Clarient’s
common stock is conditioned on the execution and delivery by Prediction
Sciences on the date hereof of the Investor Representation Letter in the form
of Exhibit E attached hereto.

 

3.2          Royalties. In addition to the License
Fee set forth in Section 3.1 above, Clarient shall pay to Prediction
Sciences a royalty based on the Net Sales of Licensed Solutions in accordance
with the royalty structure described on Exhibit D  attached hereto. Clarient shall calculate
and report anticipated royalties payable within thirty (30) days following the
end of each calendar quarter, commencing with the first calendar quarter in
which a commercial sale of a Licensed Solution takes place. Payment for
royalties owed for any calendar quarter shall be due and payable no later than
thirty (30) days after the end of the subsequent calendar quarter and shall be
accompanied by a report of Net Sales collected during such quarter. Clarient
will keep complete and accurate records pertaining to the sale, use or other
disposition of Licensed Solutions in sufficient detail to permit Prediction
Sciences to confirm the accuracy of the royalty payments due hereunder.

 

3.3          Manner and Place of Payment. All payments
hereunder will be payable in U.S. dollars. All payments owed under this
Agreement will be made by wire transfer in immediately available funds to a
bank and account designated in writing by Prediction Sciences, unless otherwise
specified in writing by Prediction Sciences.

 

3.4          Audits. During the term of this
Agreement and for a period of three years thereafter, Clarient shall keep complete
and accurate records pertaining to the sale, use or other disposition of
Licensed Solutions and Net Sales in sufficient detail to permit Prediction
Sciences to confirm the accuracy of the royalty payments due hereunder.
Prediction Sciences will have the right to cause an independent, certified
public accountant reasonably acceptable to Clarient to audit such records to
confirm Net Sales and royalty payments for a period covering not more than the
preceding three years. Such audits may be exercised during normal business
hours upon reasonable prior written notice to Clarient. Prompt adjustments will
be made by the parties to reflect the results of such audit. Prediction
Sciences will bear the full cost of such audit unless such audit discloses an
underpayment by Clarient of more than ten percent (10%) of the amount of
royalty payments due under this Agreement, in which case, Clarient will bear
the full cost of such audit. Clarient will promptly remit to Prediction
Sciences the amount of any underpayment.

 

6

 

3.5          Taxes. Prediction
Sciences shall pay any and all taxes levied on account of payments due to
Prediction Sciences under this Agreement. If any taxes are required to be
withheld by Clarient, Clarient shall (a) deduct such taxes from the
payment made to Prediction Sciences, (b) timely pay the taxes to the
proper taxing authority, (c) send proof of payment to Prediction Sciences
and certify its receipt by the taxing authority within 30 days following such
payment, and (d) cooperate with Prediction Sciences to obtain any refunds
or favorable treatment with respect thereto.

 

4              NEW DEVELOPMENTS

 

4.1          Additional Licensed Solutions. [***]

 

4.2          Additional Markers. Each party
will use its best efforts to identify additional clinically relevant markers
based on the Licensed Technology with application in the Field (e.g. [***])
(each, a “New Marker”) which will strengthen the results of the
tests generated using the Licensed Technology. Subject to any confidentiality
obligations with Third Parties, each party shall keep the other fully informed
as to its discovery and/or development of any New Marker. All information
disclosed in connection therewith shall be deemed Confidential Information
hereunder and will be subject to applicable confidentiality obligations between
the parties. Under the guidance of the Steering Committee, the parties will
execute a statement of work which will set forth the respective rights of the
parties with respect to the New Marker and the specific terms relating to the
development and/or commercialization thereof; provided, however, that (i) if
either party (a) discovers and/or (b) licenses from a Third Party a
New Marker, such party shall retain ownership of (or the license rights to)
such New Marker upon any termination or expiration of this Agreement; and (ii) in
no event shall Clarient be required to pay any royalty to Prediction Sciences
with respect to the increase in the price of the Licensed Solution to the
extent such increase is due to the inclusion of any New Marker (a) discovered
and/or (b) licensed from a Third Party by Clarient.

 

4.3          Additional Territories. In the event
that Prediction Sciences desires to provide one or more Third Parties with an
exclusive license for the Field under the Licensed Technology beyond the
Territory, and such one or more Third Parties are located in the Territory and
are providing the Licensed Solutions on a technology-only basis, then
Prediction Sciences shall also negotiate in good faith with Clarient to be the
technology-only provider.

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED
SEPARATELY WITH THE COMMISSION

 

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5              STEERING COMMITTEE

 

5.1          Purpose and Membership. Prediction
Sciences and Clarient will create a Steering Committee for the purpose of
facilitating communications between the parties in the course of their
performance under this Agreement. The membership of the Steering Committee
shall include an equal number of members appointed from each party and at least
the following: (i) the chief executive officer (or other executive sponsor
of each of the parties); (ii) a program manager for each of the parties;
and (iii) a business development manager for each of the parties. No later
than ten (10) business days following the Effective Date, the parties will
identify the members of the Steering Committee and will agree
upon a process for replacement of the Steering Committee’s members. The
membership of the Steering Committee may be increased as the Steering Committee
may deem reasonably necessary, but the membership shall never consist of less
than the individuals identified above.

 

5.2          Duties. The Steering Committee
shall meet in person or by teleconference or videoconference no less than
quarterly during the Term and its responsibilities shall include, without
limitation, the following: (i) valuation of the respective contributions
of each of the parties with respect to Additional Licensed Solutions or New
Markers and determination of the appropriate allocation between the parties of (a) the
relative license rights with respect thereto; and (b) the revenues
obtained from commercialization of such Additional Licensed Solution or
increased revenues resulting from the inclusion of a New Marker; (ii) oversight
of the parties activities hereunder; (iii) development of business terms
related to Additional Licensed Solutions and New Markers; (iv) resolution
of disputes regarding the relative license rights and other issues related to
commercialization of the Joint Inventions, (v) resolution of other
disputes arising during the business relationship; (vi) decisions
regarding other responsibilities contemplated by this Agreement, and (vii) proposal,
as needed, of possible amendments to this Agreement. For the avoidance of
doubt, the Steering Committee shall not consider including a New Marker unless
the inclusion of the New Marker would increase the sales price of the Licensed
Solution or would otherwise materially increase the efficacy of the Licensed
Solution.

 

5.3          Disputes. In the event
that the Steering Committee is deadlocked on any issue, the Steering Committee
shall submit the dispute to voluntary mediation. The Chief Executive Officers
of each Party shall select a mediator who is an expert with no less than seven
(7) years of experience in the subject matter to which the dispute
relates. For example, if the dispute relates to the relative license rights
related to commercialization of the Joint Inventions, then the mediator must be
an expert in intellectual property matters. Alternatively, if the dispute
relates to FDA approvals, then the mediator must be an expert in regulatory
requirements. In the event that the Chief Executive Officers of the parties are
unable to agree upon a mediator within twenty (20) days, then the Chief
Executive Officers shall contact the Orange County office of the American
Arbitration Association (“AAA”)
to select a mediator from the AAA panel. If they are unable to agree,
AAA shall provide a list of three available mediators and each party may strike
one. The remaining one will serve as the mediator. The mediation shall be
conducted under AAA rules. The parties agree that they shall share equally the
cost of the mediation filing and hearing fees, and the cost ofthe mediators
that constitute the panel. Each party shall bear its own attorneys’ and expert
fees and all associated costs and expenses.

 

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6              INTELLECTUAL PROPERTY RIGHTS

 

6.1          Existing
Intellectual Property Rights.

 

(a)           Prediction
Sciences Intellectual Property Rights.
Prediction Sciences shall retain all right, title and interest in and to all
Intellectual Property Rights owned by Prediction Sciences as of the Effective
Date, including the Licensed Technology, and shall be, as between the parties,
the sole owner of all right, title and interest in and to any and all
modifications and improvements thereto and derivatives thereof (collectively, “Prediction Sciences IP”), subject
to any licenses provided to Clarient under this Agreement.

 

(b)           Clarient
Intellectual Property Rights. Clarient
shall retain all right, title and interest in and to all Intellectual Property
Rights owned by Clarient as of the Effective Date and shall be, as between the
parties, the sole owner of all right, title and interest in and to any and all
modifications and improvements thereto and derivatives thereof (the “Clarient IF”).

 

6.2          Inventions.

 

(a)           Solely
Created Inventions.
Prediction Sciences shall solely own all Inventions created, conceived,
developed or reduced to a tangible medium of expression or practice during the
term of this Agreement solely by Prediction Sciences employees or
subcontractors (“Prediction
Sciences Inventions”). Clarient
shall solely own all Inventions created, conceived, developed or reduced to a
tangible medium of expression or practice during the term of this Agreement
solely by Clarient employees or subcontractors (“Clarient  Inventions”).

 

(b)           Jointly
Created.

 

(i)            The
parties acknowledge and agree that the parties may jointly create, conceive or
develop new Inventions which include contributions of each of the parties
(collectively, “Joint
Inventions”). Given
the number of possible scenarios and complexity of the Intellectual Property
Rights, the parties agree that the Steering Committee shall be charged with
full responsibility for the valuation of the respective contributions of each
of the parties to each Joint Invention and determination of the
commercialization of any and all Intellectual Property Rights relating to each
Joint Invention; provided, however, that
to the extent any new Inventions fall within the scope of the Prediction
Sciences Patents, Prediction Sciences will be deemed to own sole and exclusive
rights to such Inventions, subject to the license provided to Clarient in Section 2.1
hereof. The determinations of the Steering Committee shall be expressly set
forth in a mutually agreeable license agreement between the parties relating to
the Joint Invention in question.

 

(ii)           In
connection with any Joint Inventions, the parties will (a) execute any and
all documents necessary to effectuate their respective ownership interests in
such Inventions as determined by the Steering Committee; and (b) reasonably
cooperate with respect to providing information and preparing and filing any
documents necessary (including patent applications) to secure each party’s
rights with respect to such Joint Inventions.

 

9

 

6.3          Patent Maintenance.

 

(a)           Prediction
Sciences Patents.
Prediction Sciences shall use best efforts to prosecute and maintain the
Prediction Sciences Patents, including, but not limited to, payment of
maintenance, annuity and renewal fees as required by the respective national
patent offices that issued the patents, and payment of all attorney fees and
costs for prosecution, maintenance, grant of any pending patent applications,
and any other actions required to maintain the rights in the Prediction
Sciences Patents. Prediction Sciences shall obtain and properly record
previously executed assignments for the Prediction Sciences Patents as
necessary to fully perfect its rights and title therein in accordance with
governing law and regulations in each respective jurisdiction.

 

(i)            In
the event that Prediction Sciences is unable or unwilling to maintain anyone or
more of the Prediction Sciences Patents, Clarient may at its option (A) pay
the fees for maintaining the indicated patents within Prediction Sciences
Patent(s) and deduct such payment from any royalties owed to Prediction
Sciences hereunder, or (B) terminate this Agreement in accordance with Section IO.2(c).

 

(ii)           Prediction
Sciences shall notify Clarient as promptly as possible before any rights in an
Prediction Sciences Patent terminate with sufficient time to permit Clarient to
take action to maintain the patent, if it so chooses.

 

(b)           Joint
Patents. The Steering Committee shall
decide on a case-bycase basis which party shall maintain the Joint Patents,
which maintenance shall include retaining one or more patent attorneys to
prosecute and/or direct prosecution of a pending application, payment of
attorney’s fees and costs for the prosecution of pending patent applications,
payment of maintenance fees, and any other actions required to maintain the
rights in the Joint Patents.

 

(i)            The
party responsible for a Joint Patent (the “Filing
Party”) shall
consult with the other party as to the preparation, filing, prosecution and
maintenance of such Joint Patent reasonably prior to any deadline or action
with the United States Patent &  Trademark Office or any foreign patent office, and shall
furnish to the other party copies of all relevant documents reasonably in
advance of such consultation.

 

(ii)           In
the event that the Filing Party is unable or unwilling to maintain any Joint
Patent, the other party (the “Non-Filing
Party”) may pay
the fees for maintaining the particular Joint Patent and shall first be
reimbursed for such maintenance fees from any revenues obtained from the
commercialization of such Joint Patent before such revenues are allocated
between the parties in accordance with the Steering Committee’s determination.

 

(iii)          The
Filing Party shall notify the Non-Filing Party as promptly as possible before
any rights in a Joint Patent terminate with sufficient time to permit the
Non-Filing Party to take action to maintain the patent, if it so chooses.

 

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6.4          Patent
Infringement.

 

(a)           Notification of Infringement. If either
party learns of an infringement of any of the Prediction Sciences Patents or
the Joint Patents in the Field, in the Territory, such party shall promptly
provide written notice of the infringement to the other party with reasonable
evidence of infringement. Neither party will notify a Third Party of
infringement of any of the Prediction Sciences Patents or the Joint Patents
without first obtaining consent of the other party, which consent will not be
unreasonably withheld, if the infringement is within the Field.

 

(b)           Infringement of Prediction Sciences Patents.

 

(i)            Prediction Sciences
will have the first right, but not the obligation, to enforce the Prediction
Sciences Patents, including undertaking litigation or other enforcement action
against a Third Party for infringement of the Prediction Sciences Patents.

 

(ii)           In the event Prediction
Sciences undertakes litigation or other enforcement action against a Third
Party infringer of the Prediction Sciences Patents, Clarient shall at
Prediction Sciences’ expense, for Clarient’s reasonable out-of-pocket costs,
cooperate with Prediction Sciences as may be required to support Prediction
Sciences’ assertions against the Third Party infringer in the Field. Any
proceeds from litigation or other enforcement action will be paid to Prediction
Sciences.

 

(iii) If
Prediction Sciences declines to undertake litigation or other enforcement
action against a Third Party for infringement of the Prediction Sciences
Patents, Clarient may at its option elect to: (i) enforce the Prediction
Sciences Patent(s) at its own expense; or (ii) terminate the
Agreement in accordance with Section 1 0.2( c). In the event Clarient
undertakes litigation or other enforcement action against a Third Party
infringer of the Prediction Sciences Patents, Prediction Sciences shall at
Clarient’s expense for Prediction Sciences’ reasonable out-of-pocket costs,
cooperate with Clarient as may be required to support Clarient’s assertions against
the Third Party infringer. Any proceeds from litigation or other enforcement
action will be paid first to reimburse Clarient for its costs for such
litigation, and any remaining amounts shall be split as follows: fifty percent
(50%) will be paid to Clarient and fifty percent (50%) will be paid to
Prediction Sciences.

 

(c) Infringement of Joint Patents. The Filing Party will
have the primary responsibility to enforce the Joint Patents, including
undertaking litigation or other enforcement action against a Third Party for
infringement of the Joint Patents.

 

(i) In the event the Filing Party undertakes litigation
or other enforcement action against a Third Party infringer of the Joint
Patents, the Non-Filing Party shall at the Filing Party’ s expense for the
Non-Filing Party’ s reasonable out-of-pocket costs, cooperate with the Filing
Party as may be required to support the Filing Party’ s assertions against the
Third Party infringer. Any proceeds from litigation or other enforcement action
shall be split as follows: seventy-five percent (75%) will be paid to the
Filing Party and twenty-five percent (25%) to the Non-Filing Party.

 

(ii) If the Filing Party declines to undertake
litigation or other enforcement action against a Third Party for infringement
of the Joint Patents, the Non-Filing Party may at its option elect to: (i) enforce
the Joint Patent(s) at its own expense; or (ii) terminate the
Agreement upon thirty (30) days’ notice to 

 

11

 

the Filing Party. In the event the Non-Filing Party
undertakes litigation or other enforcement action against a Third Party
infringer of the Joint Patents, the Filing Party shall at the Non-Filing Party’s
expense for the Filing Party’s reasonable out-of-pocket costs, cooperate with
the Non-Filing Party as may be required to support the NonFiling Party’s
assertions against the Third Party infringer. Any proceeds from litigation or
other enforcement action shall be split as follows: seventy-five percent (75%)
will be paid to the NonFiling Party and twenty-five percent (25%) to the Filing
Party.

 

7              CONFIDENTIALITY

 

The
parties have entered into a Confidentiality Agreement dated on or about May 31
, 2007 (the “NDA”) pursuant to
which each of the parties agreed to preserve the confidentiality of the other’s
proprietary information. The parties acknowledge and agree that the terms of
the NDA shall continue to govern the parties throughout the term of this
Agreement.

 

8              REPRESENTATIONS AND WARRANTIES

 

8.1 Mutual Representations and Warranties. Each party
represents and warrants to the other that: (a) it is duly organized and
validly existing under the laws of its jurisdiction of incorporation or
formation, and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof; (b) it is duly
authorized to execute and deliver this Agreement and to perform its obligations
hereunder, and the person or persons executing this Agreement on its behalf has
been duly authorized to do so by all requisite corporate action; (c) this
Agreement is legally binding upon it, enforceable in accordance with its terms;
(d) the execution, delivery and performance of this Agreement by it does
not conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it may be bound, nor violate any material
law or regulation of any court, governmental body or administrative or other
agency having jurisdiction over it; and (e) it has full power and
authority and has obtained all third party consents, approvals, assignments
and/or other authorizations required to enter into this Agreement and to
perform its obligations hereunder.

 

8.2 Prediction Sciences Warranties.

 

(a) Currency Warranty. The Prediction Sciences Algorithm
provided by Prediction Sciences to Clarient as of the Effective Date shall be
the most current technology known to Prediction Sciences as of the Effective
Date. If any modifications or improvements thereto are made to the Prediction
Sciences Algorithm by Prediction Sciences, Prediction Sciences will make the
latest, most current version of the Prediction Sciences Algorithm available to
Clarient.

 

(b) Additional Technology Warranties.

 

(i) The Licensed Technology is free and clear of all
liens, claims, mortgages, security interests, or other encumbrances, and
restrictions of others.

 

(ii) Prediction Sciences owns all right, title and
interest in and to the Licensed Technology, including, without limitation, all
right, title and interest to sue for infringement of the Prediction Sciences
Patents. Prediction Sciences represents and warrants to Clarient that: (1) the
Prediction Sciences 

 

12

 

Algorithm and the Know-How constitute original works of
Prediction Sciences (or are duly licensed by Prediction Sciences for the
purposes for which delivered); and (2) Prediction Sciences is the lawful
owner of the Prediction Sciences Patents.

 

(iii) There
are no existing contracts, agreements, commitments, proposals, offers, or rights
with, to, or in any person to acquire any of the rights under the Licensed
Technology which would prevent, alter or hinder the performance of the
obligations hereunder.

 

(iv) No licenses or other rights under the Licensed
Technology in the Field and in the Territory have been granted or retained by
Prediction Sciences, or any Third Party, including but not limited to any prior
owners, or inventors as to the Field, and Clarient will not be subject to any
covenant not to sue or similar restrictions in its enforcement or enjoyment of
the Licensed Technology.

 

(v) None of the Prediction Sciences Patents has ever
been found invalid, unpatentable, or unenforceable for any reason in any
administrative, arbitration, judicial or other proceeding, and Prediction Sciences
does not know of and has not received any notice or information of any kind
from any source suggesting that the Prediction Sciences Patents may be invalid,
unpatentable, or unenforceable.

 

(vi) Neither Prediction Sciences nor, to its knowledge,
its agents or representatives have engaged in any conduct, or omitted to
perform any necessary act, the result of which would invalidate any of the
Prediction Sciences Patents or hinder their enforcement, including, without
limitation, misrepresenting Prediction Sciences’ patent rights to a
standard-setting organization.

 

(vii) None of the
Prediction Sciences Patents has been or is currently involved in any
reexamination, reissue, interference proceeding, or any similar proceeding, and
no such proceedings are pending or threatened, and there are no actions, claims
or proceedings threatened, pending, or in progress related to the Licensed
Technology.

 

8.3
Limitation of Liability. NEITHER
PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL,
INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATING TO THIS
AGREEMENT, WHETHER LIABILITY IS BASED ON BREACH OF CONTRACT, BREACH OF WARRANTY
OR TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY) OR UNDER ANY OTHER
THEORY OF LIABILITY, AND IRRESPECTIVE OF WHETHER THE PARTIES HAVE ADVISED OR
BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH DAMAGES. IN NO EVENT WILL EITHER
PARTY’S LIABILITY TO THE OTHER UNDER THIS AGREEMENT EXCEED THE AMOUNT OF THE
ROYALTIES PAID HEREUNDER. NOTWITHSTANDING THE FOREGOING, THIS SECTION SHALL
NOT APPLY TO ANY LIABILITY FOR DAMAGES ARISING FROM

(A) BREACH
OF THE OBLIGATIONS OF CONFIDENTIALITY UNDER SECTION 7 OF THIS AGREEMENT OR
(B) LIABILITY FOR INDEMNIFICATION AGAINST THIRD PARTY CLAIMS AS SET FORTH
IN SECTION 9 OF THIS AGREEMENT OR (C) CLAIMS FOR PERSONAL INJURY OR
DEATH OR PROPERTY DAMAGE OR (D) ANY DAMAGES THAT CANNOT BE DISCLAIMED AS
VOID AGAINST PUBLIC POLICY.

 

13

 

9              INDEMNIFICATION

 

9.1
Indemnification by Prediction
Sciences.

 

(a) Prediction
Sciences hereby agrees to save, defend, indemnify and hold harmless Clarient,
its Affiliates and their respective officers, directors, employees, consultants
and agents (collectively, the “Clarient
Indemnitees”) from and against any and all losses, damages,
liabilities, expenses and costs, including reasonable legal expense and
attorneys’ fees (“Losses”), to
which any such Clarient Indemnitee may become subject as a result of any claim,
demand, action or other proceeding instituted against any of them by any Third
Party to the extent such Losses arise out of (i) the material
breach by Prediction Sciences of any representation, warranty, covenant or
agreement made by it under this Agreement; or (ii) the gross negligence or
willful misconduct of any Prediction Sciences Indemnitee; or (iii) any
infringement by the Prediction Sciences Algorithm and/or the Know-How of any
Third Party’s Intellectual Property Rights (other than the Excluded IP),
except, in each case, to the extent such Losses result from Clarient’s breach
of this Agreement or the gross negligence or willful misconduct of a Clarient
Indemnitee. Notwithstanding the foregoing language, Clarient shall not be
deemed to have waived any right or remedy which may be available in law or in
equity.

 

(b) If
the Prediction Sciences Algorithm and/or the Know-How, or any portion of either
of them, becomes, or in Clarient’s reasonable opinion may become, the subject
of any claim, suit or proceeding for infringement of Intellectual Property
Rights of any Third Party (other than the Excluded IP), or if the Prediction
Sciences Algorithm and/or the KnowHow, or any portion of either of them, is
held or otherwise determined to infringe any Intellectual Property Rights of
any Third Party (other than the Excluded IP), Prediction Sciences will: (1) secure
for Clarient the right to continue using the affected Prediction Sciences
Algorithm and/or Know-How; or (2) replace or modify the Prediction
Sciences Algorithm and/or the Know-How to make it non-infringing without
degrading its performance or utility; or (3) should such options not be
available at reasonable expense, terminate this Agreement with respect to the
affected Prediction Sciences Algorithm and/or the Know-How upon thirty (30) days
written notice to Clarient.

 

9.2 Indemnification by Clarient. Clarient hereby
agrees to save, defend, indemnify and hold harmless Prediction Sciences, its
Affiliates and their respective officers, directors, employees, consultants and
agents (collectively, the “Prediction
Sciences Indemnitees”) from and against any and all Losses to which
any such Prediction Sciences Indemnitee may become subject as a result of any
claim, demand, action or other proceeding instituted against any of them by any
Third Party to the extent such Losses arise out of: (a) the manufacture,
use, sale, offer for sale, promotion, marketing or advertising of Licensed
Solutions; 

(b) the material breach
by Clarient of any representation, warranty, covenant or agreement made by it
under this Agreement; or (c) the gross negligence or willful misconduct of
any Clarient Indemnitee; except, in each case, to the extent such Losses result
from Prediction Sciences’ breach of this Agreement or the gross negligence or
willful misconduct of a Prediction Sciences Indemnitee.

 

14

 

9.3 Control of Defense. In the event a party seeks indemnification
under Sections 9.1 or 9.2, to be entitled to indemnification, it shall inform
the other party (the “Indemnifying Party”) of
a claim in writing as soon as reasonably practicable after it receives notice
of the claim, shall permit the Indemnifying Party to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of the Indemnifying Party) in the defense of the claim. The provisions
of this Section 9 shall remain in full force and effect and shall survive
any termination expiration or cancellation of this Agreement.

 

10           TERM AND TERMINATION

 

10.1 Term. The term of
this Agreement will commence on the Effective Date and, unless earlier
terminated in accordance with Section 10.2 below, continue until the
seventh anniversary of the Effective Date. Thereafter, this Agreement shall
automatically renew for successive one (I) year periods
until either party delivers written notice to the other of such party’s intent
not to renew this Agreement not less than ninety (90) days prior to the
expiration of the then-current term, or unless earlier terminated in accordance
with Section 10.2.

 

10.2
Termination. This Agreement may be terminated as follows:

 

(a) Either
party may terminate this Agreement for cause, immediately upon the occurrence
of any of the following events and effective upon delivery of written notice to
the other party:

 

(i)            if the other party ceases to
do business, or otherwise terminates its business operations;

 

(ii)           if the other party fails to
secure or renew any license, permit, authorization, or approval for the conduct
of it’s business or if any such license, permit, authorization, or approval is
revoked or suspended; or

 

(iii) if
the other party seeks protection under any bankruptcy, receivership, trustee,
creditors arrangement, composition, or comparable proceeding, or if any such
proceeding is instituted against such party.

 

(b)           Each
party will have the right to terminate this Agreement if the other party
breaches any of its duties or obligations under this Agreement and such breach
is not cured within thirty (30) days of receipt of written notice of such
breach from the non-breaching party.

 

(c)           Clarient
shall have the right to terminate this Agreement at any time and for any reason
upon sixty (60) days prior written notice to Prediction Sciences.

 

10.3        Effects of
Termination.

 

(a) Upon expiration or termination of this Agreement: (i) all
licenses granted to Clarient hereunder shall terminate; (ii) Clarient
shall immediately discontinue all use of Prediction Sciences Trademarks; and (iii) Clarient
may use its existing inventory of assays to the Prediction Sciences 

 

15

 

Markers to continue to commercialize Licensed Solutions for a
period of up to twelve (12) months following such expiration or termination,
subject to the terms and conditions of this Agreement (including, without
limitation, royalty payments under Section 3 hereof).

 

(b) Upon termination or expiration of this Agreement,
each party will use their best efforts to return to the other party or destroy
all tangible copies of the other party’s Confidential Information in such party’s
possession or control and will erase from its computer systems all electronic
copies thereof; provided, however, that
each party may retain one archival copy of the other party’s Confidential
Information solely for purposes of monitoring compliance with its obligations
under Section 7 hereof.

 

10.4
Survival. Expiration or early termination of this Agreement shall not relieve
either party of any obligation accruing prior to such expiration or
termination, including any payment obligation hereunder. In addition, Sections
3.4, 6.2,8.3,10.3,10.4, and Sections 7, 9 and 11 will survive any expiration or
termination of this Agreement.

 

11 GENERAL

 

11.1
Disputes. The parties recognize that disputes as to certain matters may arise
from time to time during the Term. The parties shall first submit the dispute
to the Steering Committee for resolution in accordance with Section 4.1
hereof. In the event that the Steering Committee is unable to resolve the
dispute pursuant to voluntary mediation, the parties shall be entitled to seek
relief in a court of competent jurisdiction. Notwithstanding the foregoing or Section 4.1,
to the full extent allowed by law, either party may bring an action in any
court of competent jurisdiction for injunctive relief (or any other provisional
remedy) to protect the parties’ rights or enforce the parties’ obligations
under this Agreement pending resolution of any claims related thereto by the
Steering Committee.

 

11.2
Governing Law. This Agreement is governed by the laws of the State of
California, without regard to any conflicts of laws principles that would
result in application of laws of any other jurisdiction. The parties hereby
submit to exclusive jurisdiction and venue of the state and federal courts
located in the county of California in which the principal place of business of
the party against whom the claim is brought is located.

 

11.3
Entire Agreement. This Agreement sets forth all of the agreements and
understandings between the parties with respect to the subject matter hereof,
and supersedes and terminates all prior agreements and understandings between
the parties with respect to the subject matter hereof. Except as expressly set
forth in this Agreement, no subsequent amendment, modification or addition to
this Agreement will be binding upon the parties hereto unless reduced to
writing and signed by the respective authorized officers of the parties. For
purposes of this Agreement, whenever the context requires, any singular numbers
or references will induce the plural and vice versa.

 

16

 

11.4
Assignment.

 

(a) Except as expressly provided hereunder, neither this
Agreement nor any rights or obligations hereunder may be assigned or otherwise
transferred by either party without the prior written consent of the other
party (which consent shall not unreasonably be withheld); provided, however, that either party may
assign this Agreement and its rights and obligations hereunder without the
other party’s consent in connection with a Change of Control transaction. As a
condition to such assignment, any permitted assignee shall assume all
obligations of its assignor under this Agreement. In the event of such a Change
of Control, the parties to this Agreement shall not acquire by such transaction
any access to Intellectual Property Rights of any Third Party or which was not
already included in the technology licensed hereunder prior to such transaction.

 

(b) The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties. Any assignment not in accordance with this
Agreement shall be void.

 

(c) In the event that an assignee of either party fails
to perform all of the material obligations of such assigning party hereunder
and fails to cure such failure within forty-five (45) days following receipt of
written notice thereof from the non-assigning party, (i) the assigning
party shall remain responsible and liable for all unperformed obligations; and (ii) the
non-assigning party shall have the right to terminate this Agreement.

 

11.5 Relationship Between the Parties. The parties’
relationship, as established by this Agreement, is solely that of independent
contractors. This Agreement does not create any partnership, joint venture or
similar business relationship between the parties. Neither party is a legal
representative of the other party, and neither party can assume or create any
obligation, representation, warranty or guarantee, express or implied, on
behalf of the other party for any purpose whatsoever.

 

11.6
Non-Waiver. The failure of a party to insist upon strict performance of any
provision of this Agreement or to exercise any right arising out of this
Agreement shall neither impair that provision or right nor constitute a waiver
of that provision or right, in whole or in part, in that instance or in any
other instance. Any waiver by a party of a particular provision or right shall
be in writing, shall be as to a particular matter and, if applicable, for a
particular period of time and shall be signed by such party.

 

11.7
No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly
made for the benefit of any party other than those executing it.

 

11.8
Severability. If, for any reason, any part of this Agreement is adjudicated
invalid, unenforceable or illegal by a court of competent jurisdiction, such
adjudication shall not affect or impair, in whole or in part, the validity,
enforceability or legality of any remaining portions of this Agreement. All
remaining portions shall remain in full force and effect as if the original
Agreement had been executed without the invalidated, unenforceable or illegal
part.

 

11.9 Notices. Any notice to be given under this Agreement must be in
writing and delivered either in person, by any method of mail (postage prepaid)
requiring return receipt, or by overnight courier or facsimile confirmed
thereafter by any of the foregoing, to the party to be notified 

 

17

 

at
its addressees) given below, or at any address such party has previously
designated by prior written notice to the other. Notice shall be deemed
sufficiently given for all purposes upon the earlier of: (a) the date of
actual receipt; or (b) if mailed, seven calendar days after the date of
postmark.

 

If to Prediction Sciences, notices must be addressed to:

 

Prediction
Sciences, L.L.C.

9404
Genesee Avenue, Suite 210

La
Jolla, California 92037

Attention:

Telephone:

Facsimile:

 

If
to Clarient, notices must be addressed to:

 

Clarient, Inc. 31

Columbia Aliso Viejo, CA 92656

Attention: Ron Andrews, Chief Executive Officer

Telephone:

Facsimile:

 

11.10 Force Majeure. Each party shall be excused
from liability for the failure or delay in performance of any obligation under
this Agreement by reason of any event beyond such party’s reasonable control,
including, but not limited to, Acts of God, fire, flood, explosion, earthquake,
or other natural forces, war, civil unrest, accident, destruction or other
casualty, any lack or failure of transportation facilities, any lack or failure
of supply of raw materials, any strike or labor disturbance, or any other event
similar to those enumerated above. Such excuse from liability shall be
effective only to the extent and duration of the event(s) causing the
failure or delay in performance and provided that the party has not caused such
event(s) to occur. If any such excuse from liability continues for more
than ninety (90) consecutive days, then either party shall have the right to
terminate this Agreement upon written notice to the other party.

 

11.11 Headings. The headings of clauses
contained in this Agreement preceding the text of the articles, sections and
subsections hereof are inserted solely for convenience and ease of reference
only and shall not constitute any part of this Agreement, or have any effect on
its interpretation or construction.

 

11.12 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
document, and all of which, together with this writing, shall be deemed one
instrument.

 

18

 

11.13 Publicity. Neither party shall make any
public disclosure of, or otherwise disclose to any person (other than its
officers, employees, accountants, attorneys and agents whose duties require
them to have access to such information), including but not limited to press
releases, or the existence or terms of this Agreement, without the other party’s
prior written consent, unless such disclosure is required by law (including
securities laws, rules and regulations as well as the rules of any
exchange on which either of the parties is publicly traded). In the event such
disclosure is required by law, the parties shall agree on the language of such
disclosure. Any disclosure by a party to its officers, employees, accountants,
attorneys, and/or agents shall be subject to the confidentiality restrictions
of this Agreement.

 

IN WITNESS WHEREOF, the parties have caused this
License Agreement to be executed by their duly authorized representatives as of
the date first above written.

 

 

	
  PREDICTION
  SCIENCES , L.L.C.

  	
   

  	
  CLARIENT,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ CORNELIUS DIAMOND

  	
   

  	
  By:

  	
  /s/ RON ANDREWS

  
	
   

  	
   

  	
   

  
	
  Name: CORNELIUS DIAMOND

  	
   

  	
  Name: RON ANDREWS

  
	
   

  	
   

  	
   

  
	
  Title: CHIEF EXECUTIVE
  OFFICER

  	
   

  	
  Title: CHIEF EXECUTIVE
  OFFICER

  
					

 

19

 

EXHIBIT A

 

PREDICTION SCIENCES ALGORITHMS

 

The
Prediction Sciences Algorithm is [***]

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED
SEPARATELY WITH THE COMMISSION

 

20

 

EXHIBITB

PREDICTION
SCIENCES MARKERS

 

IHC markers:

 

[***]

 

FISH marker:

 

[***]

 

For purposes of this
Agreement, each of the following shall be referred to as “Pre-Screening Markers”:
[***]. For purposes of this Agreement, each of the
following shall be referred to as “Non-Standard Markers”: [***].

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED
SEPARATELY WITH THE COMMISSION

 

21

 

EXHIBITC

 

LICENSE FEE

 

Payment
of the License Fee described in Section 3.1 shall be based upon the
achievement of the milestones described in this Schedule C, as mutually agreed
by the parties.

 

Milestone #1 -$[***] plus
[***] shares Milestone # 1 is achieved upon [***]. Within [***] after [***] Clarient shall
pay to Prediction Sciences $[***] and issue to Prediction Sciences [***]
registered shares of Clarient’s common stock.

 

Milestone
#2 -$[***] plus [***] shares Milestone #2 is achieved upon [***]. Within [***] after such
achievement Clarient shall pay to Prediction Sciences $[***] and issue to
Prediction Sciences [***] registered shares of Clarient’s common stock.

 

Milestone #3 -[***] shares
Milestone #3 is achieved upon [***]. Within [***] after such
achievement, Clarient shall issue to Prediction Sciences [***] registered shares
of Clarient’s common stock.

 

Milestone #4 -[***] shares
Milestone #4 is achieved upon [***]. Within [***] following such
achievement Clarient shall issue to Prediction Sciences [***] registered shares
of Clarient’s common stock.

 

Milestone #5 -[***] shares
Milestone #5 contemplates [***]. Milestone #5 is further
subdivided into three subcategories as follows:

 

A. Milestone #5A is achieved
upon [***]. Within [***] following such
achievement Clarient shall issue to Prediction Sciences [***] registered shares
ofClarient’ s common stock.

 

B. Milestone #5B is achieved
upon [***]. Within [***] following such
achievement Clarient shall issue to Prediction Sciences an additional [***]
registered shares of Clarient’s common stock.

 

C. Milestone #5C is achieved
upon [***]. Within [***] following such
achievement Clarient shall issue to Prediction Sciences an additional [***]
registered shares of Clarient’s common stock.

 

*** CONFIDENTIAL PORTIONS
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

22

 

Adjustments to Equity
Consideration

 

The portion of the License Fee consisting of Clarient’s common stock
that may be payable hereunder described above shall be subject to adjustment as
follows:

 

(a) If Clarient should fix a record date for the
effectuation of a split or subdivision of the outstanding shares of its common
stock or the determination of the holders of common stock entitled to receive a
dividend or other distribution payable in additional shares of common stock
without payment of any consideration by such holder for the additional shares
of common stock, then, as of such record date (or the date of such
distribution, split or subdivision if no record date is fixed), the number of
shares of common stock that may be required to be issued hereunder after such
date shall be appropriately increased in proportion to such increase of
Clarient’s outstanding shares of common stock. If the number of shares of
Clarient’s common stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of common stock, then the
number of shares of common stock that may be required to be issued hereunder
after the date of such combination shall be appropriately decreased in
proportion to such decrease in Clarient’s outstanding shares of common stock.

 

(b) If there shall be a capital reorganization of
Clarient’s common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for in clause (a) above)
or a merger or consolidation of Clarient with or into another corporation,
then, following such reorganization, merger or consolidation, Prediction
Sciences shall thereafter exclusively be entitled to receive (in lieu of shares
of Clarient common stock that it would otherwise have been entitled to receive
hereunder following such reorganization, merger or consolidation) the number of
shares of stock or other securities or other property (including, if
applicable, cash) (or any combination thereof) which Prediction would have
received as a result of such reorganization, merger or consolidation if it had
received the applicable number of shares of Clarient common stock that would
have otherwise been required to be issued hereunder immediately prior to such
reorganization, merger or consolidation.

 

(c) If Clarient’s common stock shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, conversion, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided for in clause (a) above,
and other than a reorganization, merger or consolidation provided for in clause
(b) above), then Prediction Sciences shall thereafter exclusively be
entitled to receive (in lieu of shares of Clarient common stock that it would
otherwise be entitled to receive hereunder following the date of such
reorganization, conversion, reclassification or other change) the kind and
amount of shares of stock or other securities or other property (including, if
applicable, cash) (or any combination thereof) which it would have received as
a result of such reorganization, conversion, reclassification or other change
if Prediction Sciences had received the applicable number of shares of Clarient
common stock that would have otherwise been required to be issued hereunder
immediately prior to such reorganization, conversion, reclassification or other
change.

 

The provisions and principles set forth in clauses
(a), (b) and (c) above shall apply to successive events of a nature
described above.

 

23

 

EXHIBIT D

 

ROYALTY STRUCTURE

 

The
“Pre-Screening Markers” and the “Non-Standard Markers” referenced in this Exhibit D
are defined in Exhibit B of the Agreement. Except as otherwise set forth
herein, the royalty payable with respect to Net Sales of Licensed Solutions
shall be calculated as follows:

 

A. Basic Royalty
Percentages (the “Basic Royalty”): Except
as set forth below in clause (B) of this Exhibit D, the royalty
described in this clause (A) shall be payable on all Net Sales:

 

Prior to FDA clearance [***]% of Net Sales

 

Subsequent to FDA clearance [***]% of Net Sales for
each quarter where volume of tests is less than [***]

 

[***]%
of Net Sales for each quarter where volume of tests meets or exceeds [***]

 

As
used above a “test” must include running all of the NonStandard Markers and the
Prediction Sciences Algorithm.

 

B. Applicability
of Basic Royalty

 

Assuming
CPT codes with respect to the Licensed Solutions do not allow for the charging
of stacked reimbursements with respect to the Pre-Screening Markers:

 

1              Where
the initial test ordered involves Pre-Screening Markers only -no royalty
payable.

 

2              Where
the initial test ordered involves only Pre-Screening Markers and, subsequent to
receipt of the results of the initial test, the Non-Standard Markers are, in
good faith, added on to the test -the Basic Royalty shall be payable with
respect to the Non-Standard Markers only.

 

3              Where
the initial test ordered includes all the Prediction Sciences Markers -the
Basic Royalty shall be payable with respect to the Net Sales amount for such
test.

 

4              Where
the initial test involves Pre-Screening Markers only and, subsequent to receipt
of the results of the initial test, in good faith computer assistance is needed
which also involves the use of the Non-Standard Markers -the Basic Royalty
shall be payable with respect to the Net Sales for the Non-Standard Markers and
for the computer assistance portion of the Pre-Screening Markers.

 

5              Where
the initial test ordered involves only the Pre-Screening Markers and,
subsequent to receipt of the results of the initial test, all of the Prediction
Sciences Markers are ordered as a second test -the Basic Royalty shall be
payable with respect to the Net Sales amount for the second test.

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH
THE COMMISSION

 

24

 

C. Adjustment to
Basic Royalty Based on Multi-Variant CPT Code

 

The parties agree to use good faith efforts to achieve coverage
decisions that lead to a Reimbursement Determination greater than the value of
all stacked codes based on the value received for the Licensed Solution, from
both the Centers for Medicare and Medicaid Services and private payers.
Examples of Reimbursement Determinations include reimbursement contracts,
reimbursement agreements, reimbursement policies, CPT codes, or specialty codes
based on the value received for the Licensed Solution. In  the event that such
a Reimbursement Determination is established, Net Sales with respect to the
value of all stacked codes (including Pre-Screening Markers and Non-Standard
Markers) will be used to calculate royalties based upon the Basic Royalty. The
parties agree to negotiate the exact proportion of distribution of the
incremental increase in test revenue of the Reimbursement Determination above
value of the stacked codes, in good faith, taking into consideration the
relative resources expended by each party in connection with obtaining the
Reimbursement Determination.  This final
proportion shall be no less than [***]% to Prediction Sciences, and the
remainder to Clarient.

 

*** CONFIDENTIAL PORTIONS
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

25

 

EXHIBIT E

 

INVESTOR REPRESENTATION LETTER

 

Prediction
Sciences, Inc. (“Prediction Sciences”) hereby represents to Clarient, Inc.
(the “Company”) as follows in connection with the transactions contemplated by
that certain License Agreement dated as of January 8, 2008 between
Prediction Sciences and the Company and any shares of common stock or other
securities of the Company (“Securities”) that Prediction Sciences may acquire
at any time under such License Agreement:

 

(a) Prediction Sciences understands that (A) the
Securities have not been registered, and will not be registered, under the
Securities Act of 1933, as amended (the “Securities Act”) and will be issued in
reliance on exemptions from registration under the Securities Act (including Section 4(2) and
Regulation D under the Securities Act) and in reliance upon similar exemptions
under applicable state securities laws and (B) the Securities cannot be
resold unless they are subsequently registered under the Securities Act and
qualified under applicable state securities laws, unless exemptions from such
registration and qualification requirements are available, as evidenced by a
legal opinion of counsel to Prediction Sciences addressed to the Company, the
substance of which shall be reasonably acceptable to the Company.

 

(b) The Securities to be acquired by Prediction Sciences
will be acquired for its own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and the Securities will not be disposed of in
contravention of the Securities Act or any applicable state securities laws.

 

(c) Prediction Sciences has substantial knowledge and
experience in financial and business matters, has specific experience making
investment decisions of a similar nature, and is capable, without the use of a
financial advisor, of utilizing and analyzing the information made available in
connection with the acquisition of the Securities and of evaluating the merits
and risks of an investment in the Securities and protecting Prediction Science’s
own interests in connection with this transaction.

 

(d) Prediction Sciences has carefully reviewed and
understands the risks of, and other considerations relating to, an investment
in the Securities.

 

(e) Prediction Sciences is able to bear the economic
risk of its investment in the Securities for an indefinite period of time
because the Securities have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available and are subject to
additional restrictions as provided herein.

 

(f) Prediction Sciences has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of the Securities and has had full access to such other information
concerning the Company as Prediction Sciences has requested. Without limiting
the generality of the foregoing, Prediction Sciences acknowledges that it has
received and has had an adequate opportunity to review the reports listed on
Annex I hereto (which reports have been filed by the Company under the
Securities Exchange Act of 1934, as amended) and a summary description of the Company’s
common stock.

 

26

 

(g) Prediction Sciences acknowledges that the Securities
will contain a legend in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF \933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

(h) Prediction
Sciences is a resident and domiciliary of the state or other jurisdiction
hereinafter set forth opposite Prediction Science’s signature and Prediction
Sciences has no present intention of becoming a resident of any other state or
jurisdiction.

 

IN
WITNESS WHEREOF, the undersigned has executed this Investor Representation
Letter as of the day and year first written above.

 

	
   

  	
  PREDICTION
  SCIENCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  CORENLIUS DIAMOND

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Cornelius Diamond

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
  State of Residence: California

  

 

27

 

Annex 1

 

Annual Report of Clarient, Inc.
on Form 10-K for the fiscal year ended December 31,2006, as amended
by the Report on Form 10-KiA filed April 30, 2007.

 

Quarterly Reports of
Clarient, Inc. on Form 10-Q for the quarters ended March 31,2007,
June 30, 2007 and September 30, 2007.

 

Current Reports of Clarient, Inc.
on Form 8-K filed with the Securities and Exchange Commission on May 3,
June 13, June 27, June 29, July 17, August 3, October 5,
October 19, October 31, November 5 and November 20, 2007.

 

Schedule
14A
of C1arient, Inc. filed with the Securities and Exchange
Commission on May 25, 2007.

 

28

 

SCHEDULE 1

PREDICTION
SCIENCES PATENTS

 

U.S. patent application [***]

 

U.S. patent application [***]

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH
THE COMMISSION

 

29

 

SCHEDULE
2 PREDICTION SCIENCES

 

TRADEMARKS

 

[***]

 

*** CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH
THE COMMISSION

 

30Exhibit 10.4

 

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST

FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE

SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED

WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

AMENDMENT TO LICENSE AGREEMENT

BETWEEN

PREDICTION SCIENCES, LLC.

AND

CLARIENT, INC.

 

This Amendment to License Agreement (the “Amendment”)
is entered as of October 1, 2009 (the “Amendment Date”).

 

R E C I T A L S

 

A.                                   Prediction
Sciences, LLC (“Prediction Sciences”) and Clarient, Inc. (“Clarient”) are
parties to a License Agreement, dated January 8, 2008, relating to the
Insight®Dx (formerly known as, GeneRxTM) Breast Cancer Profile technology of
Prediction Sciences (the “License Agreement”).

 

B.                                     The parties
desire to amend the License Agreement to modify the content of certain
provisions and Exhibits thereto, and add other provisions.

 

A G R E E M E N T

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       a.  Payment for CBCTR Study Expenses.  The parties acknowledge that Clarient has
paid Prediction Sciences fifty thousand dollars ($50,000) in May, 2009, as
reimbursement for a portion of Prediction Sciences’ expenses in connection with
the study of the Insight®Dx Breast Cancer Profile technology on clinical
specimens from the CBCTR.  Clarient shall
have no obligation to reimburse Prediction Sciences’ expenses in excess of that
amount.  Prediction Sciences retains
ownership of all specimens and clinical data from the CBCTR.

 

b.  Payment for New CBCTR TMAs.   Within 15 business days of Prediction
Sciences submitting an invoice, together with a confirmation of purchase,
Clarient shall pay Prediction Sciences an amount not to exceed one hundred
thirty thousand dollars ($130,000) for the immediate purchase of CBCTR breast
cancer TMA datasets in order to perform additional studies to aid in the
marketing of the InsightDx Breast Cancer Profile.  Clarient shall have no
obligation to pay the NCI or Prediction Sciences for such datasets in excess of
that amount.  Prediction Sciences retains ownership of all specimens and
clinical data from the CBCTR and Clarient shall have a right to use such
clinical data for all purposes permitted under the License Agreement.

 

2.                                       Section 3.1.  The reference in Section 3.1 to “up to 350,000
shares of Clarient’s common stock” shall be changed to “up to 400,000 shares of
Clarient’s common stock.”

 

 

3.                                       EXHIBIT
B.  Exhibit B is amended to
remove [***] from the list of IHC markers and the list of “Non-Standard Markers
until further notice to be agreed upon by Clarient and Prediction Sciences.”

 

4.                                       EXHIBIT
C.  Milestone # 5 in Exhibit C
shall be amended to read in its entirety as follows:

 

“Milestone
#5 — [***] shares

Milestone
#5 is subdivided into five tranches, as follows:

 

A.                                   Milestone
#5A.  Within [***] of [***], Clarient
shall issue to Prediction Sciences [***] ([***]) shares of Clarient’s common
stock.

 

B.                                     Milestone
#5B.  Within [***] of [***], Clarient
shall issue to Prediction Sciences [***] ([***]) shares of Clarient’s common
stock.

 

i.
[***].

 

C.                                     Milestone
#5C.  Within [***] of [***], Clarient
shall issue to Prediction Sciences [***] ([***]) shares of Clarient’s common
stock.

 

i. [***].

 

ii.
[***].

 

D.                                    Milestone
#5D.  Within [***] of [***], Clarient
shall issue to Prediction Sciences [***] ([***]) shares of Clarient’s common
stock.

 

i.
[***].

 

ii.
[***].

 

E.                                      Milestone
#5E.  Within [***] of [***], Clarient
shall issue to Prediction Sciences [***] ([***]) shares of Clarient’s common
stock.”

 

i.
[***].

 

*** CONFIDENTIAL PORTIONS
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

 

5.                                       EXHIBIT
C.  Exhibit C is amended as
follows:

 

All references to “registered”
in the descriptions of Clarient’s common stock shall be deleted.

 

The following is added to
Exhibit C:

 

“Registration Rights

 

In the event that at any
time after the Amendment Date, Clarient files a registration statement under
the Securities Act of 1933, as amended, Clarient shall use  commercially reasonable efforts to include
such shares so that Prediction Sciences may freely sell them under such
registration statement.  Clarient agrees
to include the shares in the S-3 Registration Statement currently intended to
be effective in December, 2009.

 

However, Clarient shall
not be obligated to include shares:

 

1.         in a registration statement relating solely to
employee equity based benefit plans, the distribution of securities of Clarient
in a merger or acquisition, or a registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of such Prediction Sciences’
shares;

 

2.         in a registration statement for a firmly underwritten
offering, unless (a) the underwriters consent to the inclusion of such
shares, and (b) Prediction Science enters into customary agreements with
such underwriters; or

 

3.         which may be sold by Prediction Sciences, without
volume restriction, under Rule 144, or another exemption from
registration.”

 

6.                                       EXHIBIT
D, Item C.  Exhibit D,
Item C entitled “Adjustment to Basic Royalty Based on Multi-Variant CPT Code,
shall be amended to read in its entirety as follows:

 

“Medicare
and Similar Government Reimbursements”

 

Medicare,
Medicaid, VA and similar government reimbursed fees for tests including the
Prediction Sciences Algorithm shall be treated as follows:

 

All
royalties for the tests for the markers, where royalties are earned under Exhibit D.
Item B, will be based on Net Sales at [***]. [***].  The base
amount for the Basic Royalty calculation for all [***] markers is thus $[***] (the “Medicare
Expect Amount”), if all IHC markers have computed-assisted scoring).  In no event will Clarient be required to pay
royalties on more than the Net Sales actually collected.  Clarient shall monitor such Medicare Fee
Schedule.

 

*** CONFIDENTIAL PORTIONS
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

 

All
Net Sales greater than the Medicare Expect Amount for the Basic Royalty
calculation, i.e. from additional reimbursement code(s) for the use of the
Prediction Sciences Algorithm, will be distributed [***]% to Prediction
Sciences and [***]% to Clarient.

 

All Other Payments

 

Fees
for tests from other than Medicare, Medicaid, VA and similar governmental third
party payors, including the Prediction Sciences Algorithm shall be treated as
follows:

 

All
royalties for the tests for the markers, where royalties are earned under Exhibit D,
Item B, will be based on Net Sales at [***] (the “Third Party Payor Expect
Amount”).   [By way of example, the Third
Party Payor Expect Amount as of the Amendment Date is $[***]].

 

All
Net Sales greater than the Third Party Payor Expect Amount for the Basic
Royalty calculation, i.e. from additional reimbursement code(s) for the
use of the Prediction Sciences Algorithm, will be distributed [***]% to
Prediction Sciences and [***]% to Clarient.

 

If
a private payor agreement or payment needs to be made at a discount from the “retail
price” to gain the business, as a result of specific negotiations with a
customer and not as a result of reaction to market conditions, which results in
a Net Sales amount less than the “retail price” of the test, both the Third
Party Payor Expect Amount and the incremental amount above the Third Party
Payor Expect Amount for the use of the Prediction Sciences Algorithm will be
discounted by the same proportion. The “retail price” for the full panel of
seven markers plus the algorithm for such allocation shall be deemed to be not
less than $[***].

 

In
no event will Clarient be required to pay royalties on more than the Net Sales
actually collected.  Clarient will keep
Prediction Sciences informed of any decreases in the “retail price” due to
reaction of market conditions.

 

Clarient
shall monitor the Medicare reimbursement amounts for stacked codes and include
such determinations in its quarterly royalty reports under Section 3.2.

 

7.                                       Clarient and
Prediction Sciences hereby acknowledge that all parties have complied with all
terms and provisions of the Agreement to be performed prior to the date of this
Amendment.  In all other respects, the
Agreement is hereby ratified and confirmed and shall continue in full force and
effect in accordance with its terms.

 

8.                                       All capitalized
terms not defined herein shall have the meaning set forth in the License
Agreement.

 

*** CONFIDENTIAL PORTIONS
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

 

IN WITNESS WHEREOF, the parties hereto, through
their authorized officers, have executed this Amendment of the date first
written above.

 

	
  CLARIENT,
  INC.

  	
   

  	
  PREDICTION
  SCIENCES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/David
  J. Daly

  	
   

  	
  By:

  	
  /s/
  Cornelius Diamond

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  David
  J. Daly

  	
   

  	
  Name:

  	
  Cornelius
  Diamond

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  SVP
  of Commercial Ops.

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
  Date:

  	
  October 5,
  2009

  
	
  Date:

  	
  October 5,
  2009

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