Document:

Exhibit 10.42

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS
ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Assignment and Assumption Agreement”)
is dated as of September 30th, 2004 by and between SSL Americas,
Inc., a New Jersey corporation (“Assignor”), and Silipos, Inc., a Delaware
corporation (“Assignee”).  Capitalized
terms not defined herein shall have the meanings given to them in the Agreement
(as defined herein).

 

W I  T  N  E  S
S  E  T  H:

 

WHEREAS,
Assignor is a party to that certain Patent License Agreement by and between
Applied Elastomerics, Inc. and Assignor, dated November 30, 2001, and as
amended November 30, 2001 (the “License Agreement”); and

 

WHEREAS, in
connection with that certain Stock Purchase Agreement dated September 22, 2004
(the “Agreement”), Assignee has agreed to assume, effective as of the Closing,
and from and after the Closing Date, Assignee shall be responsible for all of
the obligations and duties of Assignor arising from and in connection with the
terms of the License Agreement.

 

NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
do hereby agree as follows:

 

1.             Assignment.  Pursuant to, and in connection with, the
Agreement, Assignor hereby assigns, transfers and sets over to Assignee, all of
Assignor’s rights, title and interest in, to and under the License Agreement.

 

2.             Assumption.  Pursuant to, and in connection with, the
Agreement, Assignee hereby assumes all of the obligations and duties of
Assignor arising from and after the date hereof under the terms and conditions
of the License Agreement; provided, that Assignee expressly does not assume and
is not responsible for any breach, act or omission of Assignor under, or any
liability or obligation arising under, the License Agreement prior to the date
hereof.

 

3.             Ratification.  All other terms and conditions of the License
Agreement shall remain in full force and effect.

 

4.             Successors and Assigns.  This Assignment and Assumption Agreement
shall be binding upon and shall inure to the benefit of all the successors and
assigns, respectively, of Assignor, and Assignee.

 

5.             Governing Law.  This Assignment and Assumption Agreement
shall be governed by the laws of the State of Delaware without regard to
conflict of law provisions of any jurisdiction.

 

 

6.             Counterparts.  This Assignment and Assumption Agreement may
be executed in one or more counterparts, each of which when executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument, notwithstanding that the parties hereto are not
signatories to the same counterpart.

 

[Signature Page Follows]

 

 

IN WITNESS
WHEREOF, the parties hereto have set their hands and seals the day and year
first above written.

 

	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SSL
  AMERICAS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert
  Kaiser

  
	
   

  	
  Name:

  	
   

  	
  Robert
  Kaiser

  
	
   

  	
  Title:

  	
   

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SILIPOS,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert
  Kaiser

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   Robert Kaiser

  
	
   

  	
  Title:

  	
   

  	
   Vice PresidentExhibit 10.43

 

 

lICENSE
aGREEMENT

 

This License Agreement (the “Agreement”) is made
effective as of January 1, 1997 by and between SILIPOS INC. (“Licensee”) and
GERALD P. ZOOK (“Licensor”).

 

R E C I T A L S:

 

A.            Licensor
represents that he is the owner of the entire right, title and interest in and
to (1) an invention entitled “Foot Protector Incorporating a Viscoelastic Gel,”
which is disclosed and claimed in United States Patent No. 5,497,789, which issued
on March 12, 1996; (2) an invention entitled “Viscoelastic Gel Foot Padding and
Medicating Device,” which is disclosed and claimed in United States Patent No. 5,098,421,
which issued on March 24, 1992; and (3) an invention entitled “Affixable Padding
Material Using Gelatinous Viscoelastic Polymer,” which is disclosed and claimed
in United States Patent No 4,842,931, which issued on June 27, 1989.

 

B.            Licensor
represents that he is the owner of the entire right, title and interest in and
to (I) an invention entitled “Topical Drug Delivery System,” which is disclosed
and claimed in United States Patent No. 5,415,866, which issued on May 16,
1995; (2) an invention entitled “Topical Medicating Device,” which is disclosed
and claimed in United States Patent No. 5,330,452, which issued on July 19,
1994; (3) an invention entitled “Medicating Device for Nails and Adjacent
Tissue,” which is disclosed and claimed in United States Patent No. 5,181,914,
which issued on January 26, 1993; and (4) an invention entitled “Drug Delivery
System for the Removal of Dermal Lesions,” which is disclosed and claimed in
United States Patent No. 5,167,649, which issued on December 1, 1992.

 

C.            Licensee
wishes to obtain from Licensor and Licensor wishes to grant to Licensee:

 

1.             A
license under United States Patents No. 5,497,789; 5,098,421; 4,842,931;
5,415,866; 5,330,452; 5,181,914; and 5,167,649 (hereinafter referred to as the “Zook
Patents”) and

 

2.             A
license for all future patents on which Licensor is an inventor or co-inventor,
subject to the limitations herein contained.

 

D.            Licensee
desires that Licensor not compete with Licensee in certain fields of use, as
defined hereinbelow.

 

	
   

  	
  CERTIFIED TRUE COPY

  
	
   

  	
   

  
	
   

  	
  /s/ Wayne S. Harger

  
	
   

  	
  BY WAYNE S. HARGER

  
	
   

  	
  NOTARY PUBLIC, OREGON

  

 

 

E.             Licensee
wishes to sell and manufacture products covered by the Zook Patents, and

 

F.             The
parties desire to settle that certain lawsuit filed by Licensor against Licensee
and exchange mutual releases.

 

AGREEMENT

 

Now, therefore, based upon the mutual consideration by
each to be derived, the sufficiency of which is hereby acknowledged, the parties
agree as follows:

 

1.             Recitals.  The recital paragraphs hereinabove are
incorporated herein and conclusively deemed true.

 

2.             Definitions.  Whenever they are used in this Agreement, the
following capitalized terms shall have the meanings defined in Section 2, as
follows:

 

2.1           “Effective
Date” means January 1, 1997.

 

2.2           “Elastomer
Products” mean all products sold by Silipos, on or after the Effective
Date, made with any elastomer covered by United States Patent No. 4,369,284 or
United States Patent No. 4,618,213 or with any similar mineral oil-based material.  Products made or sold by Silipos that are
silicone-based or derivatives are not within the category “Elastomer Products.”

 

2.3           “Exclusive
License” means the exclusive License granted to Licensee by Licensor
pursuant to Section 3.1 of this Agreement.

 

2.4           “Existing
Silipos Products” means all products (except silicone-based products or
derivatives) sold by Silipos as of the Effective Date, all of which products Silipos
represents are listed on Schedule 1 attached hereto and made a part hereof.

 

2.5           “Field
of Use” means any of the following areas of intended use for which products
excluding Medicated Devices may be sold or offered for sale by Licensee:  padding, friction, pressure, abrasion, sheer,
shock reduction, skin protection, skin moisturization, and scar management.

 

2.6           “Future
Silipos Products” means any products of a type first sold by Silipos after
the Effective Date of this Agreement.

 

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2.7           “Initial
Term” means the time period from the Effective Date through June 14, 2005.

 

2.8           “Medicated
Device Patents” means, collectively, United States Patents No. 5,167,649,
5,181,914, 5,330,452, and 5,415,866 and any reissues or extensions thereof and
any continuations, continuations-in-part, or divisional applications and any corresponding
Licensor foreign patents and foreign patent applications describing or claiming
any of the inventions recited in any of the foregoing existing or future patents.

 

2.9           “Medicated
Devices” are devices which contain medicinal agents.

 

2.10         “Net
Sales Price” means Silipos’ invoice sales price (in U.S.  dollars) for a Silipos Product (and not for
any other component or product) and excludes sales, excise, use, and V.A.T.  taxes; freight; returns; import duties; and
customary trade discounts.

 

2.11         “Non-Exclusive
License” means the non-exclusive license granted to Licensee by Licensor
pursuant to Section 3.2 of this Agreement.

 

2.12         “Non-Medicated
Device Patents” means, collectively, 
United States Patents No. 5,497,789; 5,093,421; and 4,842,931 and any
reissues or extensions thereof and any continuations, continuations-in-part, or
divisional applications and any corresponding Licensor foreign patents and
foreign patent applications describing or claiming any of the inventions
recited in any of the foregoing existing or future patents.

 

2.13         “Silipos
Products” means, collectively, the Existing Silipos Products and Future
Silipos Products.

 

2.14         “Valid
and enforceable” in reference to any patent claim means that the patent
claim has not been declared invalid or unenforceable by a final, non-appealable
decision of a court, agency, or tribunal of competent jurisdiction.

 

2.15         “Zook
Patents” means, collectively, the Medicated Device Patents and the
Non-Medicated Device Patents.

 

3.             License
Grant.

 

3.1           Exclusive
License.  Subject to the terms and
conditions of this Agreement.  Licensor
hereby grants to Licensee an exclusive license, with right to grant
sublicenses, under each of the Non-Medicated Device Patents to make, have

 

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made, use, import, offer to sell, sell and/or otherwise transfer,
within the Field of Use, Silipos Products covered by any of the Non-Medicated
Device Patents and within the Field of Use to otherwise practice the inventions
covered by any of the Non-Medicated Device Patents.  Licensor acknowledges that Licensee has the
right to make, have made, use, import, offer to sell, and sell anywhere in the
world Silipos Products within the Field of Use. 
Licensee may authorize others to distribute Silipos Products
manufactured by or for the order of Licensee. 
Licensor further hereby grants to Licensee’s distributors, sales
representatives, and customers the right to use Silipos Products purchased
directly or indirectly from Licensee.  Notwithstanding
the foregoing, Licensor shall retain the right to make, have made, use, import,
offer to sell, sell, and/or otherwise transfer Medicated Devices, to the extent
such devices may be covered by one or more patent claims of the Non-Medicated
Device Patents and subject to the non-competition provisions in Section 7 of
this Agreement.

 

3.2           Non-Exclusive
License.  Subject to the terms and
conditions of this Agreement, Licensor hereby grants to Licensee, whether
within or without the Field of Use, a worldwide non-exclusive license, under
each of the Medicated Device Patents, to make, have made, use, import, offer to
sell, sell and/or otherwise transfer Silipos Products that are Medicated
Devices and to otherwise practice the inventions covered by any of such patents
in connection with the manufacture, use, or sale of Silipos Products that are
Medicated Devices, to the extent such Medicated Devices are covered by one or
more valid and enforceable claims of the Zook Patents.

 

3.3           Future
Licenses.  Licensor also agrees to
grant Licensee an exclusive license within the Field of Use under any future
patents on which Licensor is an inventor or co-inventor excluding patents
primarily covering Medicated Devices.  Licensor
also agrees to grant Licensee a worldwide non-exclusive license, whether within
or without the Field of Use, under any future patents on which Licensor is an inventor
or co-inventor primarily covering Medicated Devices or similar products.  Licensor agrees to execute and deliver any
documents that may be necessary to confirm such future licenses and Sections
3.1 and 3.2 of this Agreement, as appropriate, shall thereby be deemed amended
to incorporate such future license.  Licensor’s
obligations to license future patents to Licensee in accordance with this paragraph
shall apply only to patents the application for which was filed on or before
June 14, 2005, provided, however, that any continuation, continuation-in-part,
divisional, or reissue application and any request for reexamination shall be
treated for this purpose as having been filed on or before June 14, 2005 if at
least one application in the U.S.  Patent
and Trademark Office (“PTO”) history of the patent was filed on or before June
14, 2005.

 

3.4           No
Assistance.  Licensor shall be solely
responsible for payment of any and all patent maintenance fees and any other
expenses payable to or associated

 

4

 

with the U.S. Patent and Trademark Office or any foreign equivalent
thereof, but shall have no obligation to furnish any equipment, information, or
advice to Licensee to enable Licensee to exploit the license rights granted
hereunder.

 

4.             Royalty.

 

4.1           Royalty
During Initial Term.  In
consideration of the rights and licenses granted herein under the Zook Patents,
during the Initial Term of this Agreement Licensee shall pay to Licensor in U.S.  dollars in the manner set forth in Section
5.1 of this Agreement a royalty equal to four percent (4%) of the Net Sales Price
for each Silipos Product sold in any sale or other transfer, provided that the specific
Silipos Product sold or otherwise transferred is covered (both as a matter of proper
claim construction and as a matter of the geographic scope of the relevant patent)
by one or more valid and enforceable claims of any of the Zook Patents.  In consideration of know-how provided at and
before June 1990, during the Initial Term Licensee shall pay to Licensor in U.S.  dollars in the manner set forth in Section
5.1 of this Agreement a royalty equal to four percent (4%) of the Net Sales
Price for Elastomer Products sold in any sale or other transfer, whether the
sale or other transfer occurs within or without the United States.  The royalty stated in the second sentence of
this Section 4.1 is not conditioned upon or subject to the enforceability or validity
of United States Patent No. 4,369,284 or United States Patent No. 4,618,213 or
any of the Zook Patents.

 

4.2           Post
Initial Term Royalty.  After
expiration of the Initial Term, with respect to the licenses granted under
Sections 3.1 and 3.2 of this Agreement, Licensee shall pay to Licensor, in the
manner set forth in Section 5.1 of this Agreement, a royalty equal to four
percent (4%) of the Net Sales Price for Silipos Products sold in any
sale or other transfer, provided that the specific Silipos Product sold is
covered (both as a matter of proper claim construction and as a matter of the
geographic scope of the relevant patent) by one or more valid and enforceable
claims of any of the Zook Patents.  This
royalty obligation shall continue with respect to each specific Silipos Product
until expiration of the applicable patent or proper termination of the respective
license granted in this Agreement with respect to such Silipos Product, whichever
comes first.  After the Initial Term,
Licensee shall have no further obligation to pay royalties to Licensor under a
specific Zook Patent with respect to a specific Silipos Product after the date,
if any, on which the Zook Patent or the applicable claims thereof are held
invalid or unenforceable.  The four
percent (4%) royalty obligation with respect to possible future patents of
Licensor shall continue for so long as Licensee makes, has made, uses, imports,
offers to sell, sells, or otherwise transfers devices covered by one or more
claims of the future patent(s), as long as the future patent or patents or the
applicable claims thereof remain valid and enforceable.

 

5

 

4.3           Minimum
Annual Royalty During Initial Term.  Notwithstanding
any other provision in this Agreement, as long as neither party has terminated
this Agreement during the Initial Term, Licensee’s total royalty payments for
each successive twelve (12) month period commencing on the Effective Date shall
be not less than $100,000.00.  If the
cumulative monthly royalty payments under this License Agreement during a
respective twelve (12) month period of the Initial Term have not reached the
agreed minimum sum, Licensee is to pay the difference within thirty (30) days
of the end of the twelve (12) month period in question.  This $100,000.00 minimum annual royalty
provision shall terminate effective June 14, 2005; and for the period of less
than twelve (12) months that ends on June 14, 2005, the minimum annual royalty
shall be that percentage of $100,000.00 determined by dividing the number of
days in the partial twelve (12) month period by three hundred sixty-five (365).

 

4.4           Minimum
Annual Royalty After Initial Term.  As
long as neither party has properly terminated this Agreement, Licensee’s total
royalty payments for the licenses collectively granted herein for each
successive twelve (12) month period commencing after the Initial Term shall be
not less than $112,500.00.  If the cumulative
monthly royalty payments under this License Agreement during a respective
twelve (12) month period after the Initial Term have not reached the agreed minimum
sum, Licensee is to pay the difference within thirty (30) days of the end of the
twelve (12) month period in question.  This
minimum annual royalty provision shall terminate upon the earliest of the
following dates: (a) the date on which U.S. Patent No. 5,497,789 expires; (b)
the date Licensor terminates this Agreement in strict accordance with the
remedies provided in Section 11; and (c) the date when Licensee (after twelve
(12) months prior notice to Licensor) elects to terminate its patent licenses
under the seven patents identified in Recitals A. and B.  In the event of termination of the minimum
annual royalty provided for in this Section 4.4 at a point other than the end
of a twelve (12) month period, the minimum annual royalty shall be that
percentage of $112,500.00 determined by dividing the number of days in the less-than-twelve-month
period by three hundred sixty-five (365).

 

4.5           No
Cumulative Royalty.  Notwithstanding
any other provision contained in this Agreement to the contrary (except the
Minimum Annual Royalty provisions of Sections 4.3 and 4.4 above), Licensor is
to receive (at most) only a single four percent (4%) royalty in connection with
a sale of a Silipos Product by Licensee or a sublicensee, not one four percent
(4%) royalty under one part of this License Agreement and a separate royalty
under some other part of this License Agreement and not one four percent (4%)
royalty under one Zook Patent and another four percent (4%) royalty under
another Zook Patent.

 

6

 

5.             Reporting,
Payment, Records.

 

5.1           Payment.  Within forty (40) days after the end of each
month, Licensee shall report in writing to Licensor the number of Silipos
Products sold or otherwise transferred by Licensee during the month for which
payment is due under the above paragraphs, the Net Sales Price received
therefor, and the royalty payable to Licensor therefor, and shall pay to
Licensor the royalty reported due.  The
form of the record previously supplied by Licensee to Licensor that showed
relevant sales for the month of August 1996, a copy of which is attached hereto
as Attachment 1, is acceptable to Licensor as the form of report required by
this paragraph.  “Net Sales Price
received therefor” is intended to make the timing on Licensee’s obligation to
pay Licensor a royalty coincide with the month of actual receipt of sales
revenue by Licensee.

 

5.2           Records
Audit.  Licensee shall keep accurate
records containing all data reasonably required for the computation and
verification of the amounts to be paid and the information to be reported to
Licensor under this Agreement.  Licensee shall
permit an independent accounting firm designated by Licensor to audit such records
at Licensee’s principal place of business (or such other site as Licensee may reasonably
designate) during normal business hours upon reasonable advance notice to Licensee
and not more frequently than once per year. 
The auditor must sign a nondisclosure agreement in form reasonably
acceptable to Licensee.  If Licensor
elects not to have an independent accounting firm audit such records in any
year, the right to ask for such an audit for such year shall carry forward,
except that no audit may go back further than thirty-six (36) months from the
date of an audit request.  Under no circumstances
shall Licensor request an audit for periods prior to the Effective Date of this
License Agreement.  All costs and
expenses incurred by Licensor for audit of Licensee’s records shall be borne by
Licensor unless the audit discovers errors or omissions more than ten percent
(10%) in Licensee’s favor, in which case the costs and expenses, up to a
maximum of $3,000.00, shall be borne by Licensee.  If such an audit discloses a discrepancy
between the amounts reported and paid by Licensee and what should have been
reported and paid, Licensee shall have the right to its own audit, at Licensee’s
expense, within sixty (60) days after notice from Licensor of the discrepancy.  If the auditors agree on the amount of the
discrepancy, Licensee shall pay the shortfall in full within thirty (30) days
if Licensor has been underpaid and Licensor shall repay the overpayment in full
within thirty (30) days if Licensor has been overpaid.  If the auditors do not agree on the amount of
the discrepancy, the dispute shall be submitted to binding arbitration in
accordance with the arbitration provisions of Section 15.1 of this Agreement.

 

5.3           Reports
of New Products.  By January 15 of each calendar year, starting
with 1998 and continuing until this Agreement terminates, Licensee shall

 

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provide written notice to Licensor of any new products introduced by
Licensee during the previous calendar year that are subject to the provisions
of this Agreement.

 

5.4           Products
Within Scope of Zook Patents.  Licensee
believes that the Existing Silipos Products that are listed (organized by
patent number) on Schedule 2 attached hereto are the only Existing Silipos
Products that are within the scope of one or more of the claims of the
respective Zook Patents listed on Schedule 2. 
On or before June 14, 2004, Licensee may provide a written list to
Licensor, which shall be organized by patent number as in Schedule 2, of any
additional or different Silipos Products that Licensee believes at that time
are within the scope of one or more of the claims of the Zook Patents.  On or before September 13, 2004, Licensor
shall give written notice to Licensee indicating whether Licensor concurs with
Licensee’s list or contends that the list should have different or additional
Silipos Products on it, and Licensor’s list shall state which claim(s) of the
patent(s) in question cover each respective Silipos Product on the list.  If Licensor does not furnish his own list,
Schedule 2 or Licensee’s superseding list (if any) shall be conclusive on both
parties insofar as defining which Silipos Products are covered and not covered
by which Zook Patents, provided that it shall not be conclusive as to Licensor
with respect to any product the existence of which Licensee had never
previously disclosed to Licensor.  Any
disagreement about what Silipos Products are covered by what Zook Patent(s)
shall be resolved by discussion and agreement between the parties or, if
necessary, by binding arbitration in accordance with Section 15.2 of this
Agreement.  The reason for Licensor’s
list (if any) of covered products and claims by which the products are covered
is to inform Licensee before June 14, 2005, which Silipos Products the Licensor
will contend he is entitled to have a royalty continue on after the end of the
Initial Term.  Licensor shall not have
the right, for the period of time with respect to which this License Agreement
is in effect, to contend that any act of manufacture, transfer, use, offering
to sell, sale, or importation with respect to any Silipos Product was an
infringing act (as long as the existence of the Silipos Product in question had
been previously disclosed to Licensee) if Licensor has given no prior written
notice to Licensee in accordance with this Section that Licensor contended that
the specific Silipos Product was covered by a stated claim or claims of a Zook
Patent.

 

6.             Representations
and Warranties.

 

6.1           Authority.  Each of Licensee and Licensor represents and
warrants that the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
on its behalf by all requisite corporate action, that it or he has the full
right, power and authority to enter into this Agreement and to carry out the
terms of this Agreement and that it or he has duly executed and delivered this
Agreement and that this Agreement is a valid and binding obligation of it or
him enforceable in accordance with its terms, except as

 

8

 

enforceability may be limited or otherwise affected by (a) any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar statute, rule, regulation or other law affecting the enforcement of
creditors’ rights and remedies generally or (b) the unavailability of, or any
limitation on the availability of, any particular right or remedy (whether in a
proceeding in equity or at law) because of the discretion of a court or because
of any equitable principle, public policy, procedural requirement or
requirement as to commercial reasonableness, conscionability or good faith.

 

6.2           No
Consent.  Each of Licensee and
Licensor represents and warrants that no approval, consent, authorization,
order, designation or declaration of any court or regulatory authority or
governmental body is required to be obtained by it or him, nor is any filing or
registration required to be made therewith by it or him for the consummation by
it or him of the transactions contemplated under this Agreement.

 

6.3           Ownership.  Licensor warrants that he (a) owns all of the
Zook Patents, free and clear of all liens, encumbrances and assignments; (b)
has the right and power to grant to Licensee the licenses granted herein; (c)
has not made any agreement with another in conflict with the rights granted
herein; (d) has not been put on notice of infringing any third party’s
patent(s); (e) is not aware that any Existing Silipos Product would infringe a
third party’s patent, with the exception that use of an Applied Elastomerics,
Inc. elastomer in a Silipos Product might require a license from John Chen or
Applied Elastomerics, Inc.; (f) has no knowledge that any Zook Patent is
unenforceable; and (g) is unaware of any act or omission, public use, or sale
that would create a bar to patent validity or coverage, even to the Zook
Patents already granted.  Notwithstanding
any provision herein contained, Licensor makes no warranty with respect to the
validity of any present or future Zook Patent.

 

7.             Noncompetition
and Noninterference.  Licensor agrees
not to compete in the future against Licensee anywhere in the world in Licensee’s
Field of Use with products that are the same or substantially similar in
material characteristics (i.e., intended use, appearance, elongation or hardness)
to the Silipos Products.  Licensor’s
obligation not to compete shall terminate at such time as Licensee no longer
has an exclusive license from Licensor under any of the Non-Medicated Device
Patents.  Licensor agrees that Licensor
shall refrain from any and all interference with Licensee and the conduct by
Licensee of its business and shall not refer to Silipos in any communication
with any trade organization or publication applicable to any Silipos Product or
anyone doing business with Silipos, including without limitation a vendor,
customer, or competitor of Silipos, where the effect of such reference is to
disparage Silipos or any Silipos Product, provided, however, that nothing in
this paragraph is intended to limit the pursuit by Licensor of any legal or
equitable remedy available to Licensor as a result of the occurrence of any
default by Licensee under this Agreement. 
If Licensor has any issue or concern (other than an imminent threat to

 

9

 

health) about Licensee or any of Licensee’s products that Licensor
wants to take up with the U.S.  Food and
Drug Administration (“FDA”), Licensor will give Licensee notice of the issue or
concern at least 60 days before contacting the FDA, unless more prompt notice
or reporting to the FDA is required by law. 
Licensee agrees not to disparage Licensor or any of the Zook Patents.

 

8.             Infringement.  If Licensee becomes aware of infringement of
any of the Zook Patents by a third party, Licensee may notify Licensor in
writing and Licensor shall decide within sixty (60) days thereafter whether
Licensor will take steps to end the infringement and at the time of the
decision notify Licensee of what decision Licensor reached.  Initially Licensor shall retain the sole right,
but not the obligation, at its sole discretion, to prosecute infringement of
any of the Zook Patents licensed to Licensee under this Agreement.  Prior to initiating any such proceeding,
Licensor will inform Licensee and will keep Licensee reasonably advised of
developments in the proceeding.  Thereafter,
if Licensor does not assert an infringement claim, Licensee shall have the
right, at its sole discretion, to assert an infringement claim or counterclaim
against an infringer and to require Licensor to join with Licensee as a party
in asserting such claim or counterclaim. 
Until June 14, 2005, the attorneys’ fees and other expenses of any such
litigation which Licensee undertakes shall be paid by Licensee and Licensor in
shares of 96% and 4%, respectively,
and any proceeds of such infringement litigation shall be divided between them
on the same 96%-4% basis.  For
infringement litigation commenced by Licensee after June 14, 2005, to which
Licensor is a party, the expenses and the proceeds shall be split on a 50-50
basis. 
Any litigation expenses or litigation proceeds that arise
after June 14, 2005, shall be shared on the basis that applied between the
parties when the underlying litigation began. 
If Licensee becomes involved in any proceeding involving any of the Zook
Patents, Licensor agrees, notwithstanding Section 3.4, to cooperate fully with
Licensee, at Licensor’s expense, insofar as providing documents, testimony,
expertise, and any other nonfinancial assistance reasonably requested.  Licensee shall have no obligation to assert
or join with Licensor in asserting infringement against any person or entity,
whether the alleged infringement is inside or outside the Field of Use.  If Licensor becomes involved in any
proceeding involving any of the Zook Patents, Licensee agrees to cooperate
fully with Licensor, at Licensee’s expense, insofar as providing documents,
testimony, expertise, and any other nonfinancial assistance reasonably
requested.

 

9.             Other
Patent-Related Litigation.  If any
person or entity shall assert in a pleading against Licensee that any of the
Zook Patents is invalid or unenforceable, Licensee shall have the right to
tender to Licensor the defense against those claims.  If Licensor declines to defend against that
claim or those claims, Licensee shall have no obligation to defend against that
claim or those claims.

 

10

 

10.           Limitation
of Liability: IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR ANY PERFORMANCE HEREUNDER, EVEN IF SUCH PARTY HAS ADVANCE NOTICE
OF THE POSSIBILITY OF SUCH DAMAGES.

 

11.           Default
and Remedies.

 

11.1         Licensee
shall be in default if Licensee fails to pay monies as required in this
Agreement, including:

 

11.1.1      Failure
to pay the monthly royalty payments, when due, as defined in Section 5.1 above.  In the event of default as defined in this
paragraph, Licensor shall have the following remedies upon written notice to
Licensee specifying the nature of such default and Licensee’s failure to cure
said default within thirty (30) days thereof: i) terminate all licenses granted
by Licensor to Licensee and ii) bring an arbitration proceeding for damages.  In the event of a default as defined in this paragraph,
Licensee shall pay a late fee equal to three percent (3%) of the principal amount
of the monies that have not been paid within the forty (40) day period provided
in Section 5.1, even if the default is cured by Licensee within the thirty (30)
day cure period allowed.

 

11.1.2      Failure
to pay any applicable minimum annual royalty payment, when due, as defined in
Section 4.3 or Section 4.4 above.  In the
event of default as defined in this paragraph, Licensor shall have the
following remedies upon written notice to Licensee specifying the nature of
such default and Licensee’s failure to cure said default within sixty (60) days
thereof: i) terminate all licenses granted by Licensor to Licensee and ii)
bring an arbitration proceeding for damages. 
In the event of a default as defined in this paragraph, Licensee shall
pay a late fee equal to three percent (3%) of the principal amount of the
monies that have not been paid within the required period, even if the default
is cured by Licensee within the sixty (60) day cure period allowed, provided,
however, that in the event that any audit of the records of Licensee discloses
an underpayment of royalties, the three percent (3%) late fee shall not apply,
unless the underpayment is not corrected within sixty (60) days after it is finally
determined (by agreement or by arbitration) that there was in fact an underpayment.

 

11.1.3      Failure
to pay the arrearage according to the terms of the Promissory Note attached as
Exhibit A hereto within any applicable grace period.  In the event of default as defined in this
paragraph, Licensor shall have the following remedies: i) the right to assert
all remedies contained in the Promissory Note, including but not limited to the
right to accelerate the balance owing; ii) the right to

 

11

 

terminate, upon sixty (60) days’ prior written notice to Licensee and
the failure to cure said default within the sixty (60) day period, all licenses
granted by Licensor to Licensee; and iii) the right to bring an arbitration
proceeding for damages and collect, in addition to other sums due, a late fee
equal to three percent (3%) of the principal amount of the monies that were not
paid within the required time.

 

11.2         Licensee
shall be in default if Licensee fails to account or permit audit of accounting
as required by this Agreement, including:

 

11.2.1      Failure
to provide a timely monthly accounting of sales subject to this Agreement, in
the form required.  In the event of default
as defined in this paragraph and failure to cure such default within sixty (60)
days after receipt by Licensee of written notice specifying the nature of such
default, Licensor shall have the following remedy: the right to collect a late
reporting fee equal to the greater of either (a) $100 or (b) three percent (3%)
of any unpaid royalty on the sales during the month subject to accounting for
which the report was not provided as required.

 

11.2.2      Failure
to permit audit upon request in accordance with the provisions of this
Agreement.  In the event of default as
defined in this paragraph, Licensor shall have the following remedies: i) the
right to terminate, upon sixty (60) days’ prior written notice to Licensee and
the failure to cure said default within the sixty (60) day period, all licenses
granted by Licensor to Licensee; and ii) the right to bring an arbitration
proceeding to compel an audit.  Notwithstanding
the foregoing, if there is a good faith dispute about Licensor’s right to audit
or any aspect of the exercise of that right, the dispute shall be resolved, by
arbitration if necessary, before Licensee’s right to cure by permitting the
requested audit shall have expired.

 

11.3         Upon
the failure of Licensee to perform any of the other terms, promises, or
covenants of this Agreement and upon the expiration of sixty (60) days after
written notice of such failure specifying the nature thereof is given to
Licensee by Licensor and Licensee has failed to substantially cure the same, or
if by reason of its nature the failure can be remedied but not within such
sixty (60) day period, the Licensee fails to proceed with reasonable diligence
after receipt of such notice to cure the failure or fails to continue with
reasonable diligence its efforts to cure the failure, Licensee shall be in
default.  In the event of default as
defined in this paragraph, Licensor shall have the following remedies: the
right to bring an arbitration proceeding to collect damages or to compel
compliance by Licensee with the terms, promises, or covenants that Licensee has
failed to perform.

 

11.4         Upon
the failure of Licensor to perform any of the terms, promises, or covenants of
this Agreement and upon the expiration of sixty (60) days after written notice
of such failure specifying the nature thereof is given to Licensor by Licensee

 

12

 

and Licensor has failed to substantially cure the same, or if by reason
of its nature the failure can be remedied but not within such sixty (60) day period,
the Licensor fails to proceed with reasonable diligence after receipt of such
notice to cure the failure or fails to continue with reasonable diligence his
efforts to cure the failure, Licensor shall be in default.  In the event of default as defined in this
paragraph, Licensee shall have the following remedies: the right to bring an
arbitration proceeding to collect damages or to compel compliance by Licensor
with the terms, promises, or covenants that Licensor has failed to perform.

 

11.5         In
the event that Licensor rightfully exercises the default remedy of terminating
the licenses granted in this License Agreement, the parties agree:

 

11.5.1      The
termination shall terminate any and all interests and claims of Licensee by
virtue of this Agreement, whether such interest or claim is existing or
prospective.  Such termination shall, at
the election of Licensor, also terminate any sublicense or assignment made by
Licensee, whether or not Licensor has consented to such sublicense or
assignment.

 

11.5.2      All
obligations and indebtedness of Licensee to Licensor arising out of this
Agreement prior to the date of such termination shall survive such termination.

 

11.5.3      Licensor
may grant licenses to third parties for any term, longer or shorter than the
term of this Agreement, upon any reasonable terms and conditions.  However, Licensor shall have no obligation to
grant licenses.

 

11.5.4      Licensor
shall be entitled to collect as damages the minimum $100,000.00 per year
royalty payment specified in Section 4.3 for as many years prior to June 14,
2005 as this Agreement has been in force, to the extent those minimum annual
payments have not been made; and Licensor shall be entitled to collect as damages
the minimum $112,500.00 per year royalty payment specified in Section 4.4 for
as many years after June 14, 2005, as this Agreement has been in force, to the extent
those minimum annual payments have not been made.

 

11.6         Phase-In.  Because this Agreement was signed in February
1997, weeks after the Effective Date, notwithstanding any time limits stated
elsewhere in this Agreement, for the first quarter of 1997 Licensor shall have
a grace period of sixty (60) additional days above and beyond all time limits
that would otherwise apply, provided, however, that the foregoing super grace
period shall not relax Licensee’s obligations as far as timely payment of the
Promissory Note attached as Exhibit A.

 

13

 

12.           Implied
Duties.  Licensor and Licensee agree
to deal fairly and in good faith with each other in the performance of this
Agreement.  Licensor agrees that Licensee
does not owe Licensee any “best efforts” duty or other duty to maximize the
sale or other distribution of Silipos Products, whether covered by Zook Patents
or made with visco-elastic material.  In
particular, Licensor shall have no right to complain in any respect whatsoever,
other than to claim breach of an express provision of this License Agreement,
about how Licensee is marketing any Silipos Products on which Licensor is
entitled to royalties, because the parties have agreed on a minimum annual
royalty provision, as stated above, in lieu of trying to define what implied
duties Licensee might have to Licensor.  If
there is a good faith dispute about either party’s rights or obligations under
the duty of good faith and fair dealing, the dispute shall be resolved, by
arbitration if necessary, before Licensor’s right to terminate this Agreement shall exist or Licensee’s right to
cure shall expire.

 

13.           Term,
Termination.

 

13.1         Term.  This Agreement is effective as of the
Effective Date and shall expire in accordance with the provisions stated
elsewhere in this Agreement.

 

13.2         Termination
By Licensor.  This Agreement and the
licenses granted hereunder may be terminated by Licensor only in strict
accordance with the Licensor’s remedies stated herein.

 

13.3         Termination
By Licensee.  Licensee shall have the
right upon twelve (12) months’ prior written notice to terminate any or all of
the licenses granted under Sections 3.1, 3.2, or 3.3 of this Agreement,
provided, however, that no such termination may be effective before June 14,
2005; and, after any such termination becomes effective, Licensee shall have no
further obligation to Licensor with respect to such terminated license or
licenses except as to any monies accrued but unpaid  prior to the effective date of such termination.  Licensee agrees to pay royalties to Licensor
during such twelve (12) month period as provided in this Agreement.

 

13.4         Effect
of Termination.  Upon the termination
of this Agreement by Licensor as a permitted remedy for default by the
Licensee, Licensee shall notify Licensor of the inventory of Silipos Products
that it has on hand for which a royalty would be payable upon the sale or other
disposition thereof under the provisions of this Agreement, and Licensee shall
then have a twelve (12) month license to sell that inventory, provided that
Licensee pays royalties for those Silipos Products and renders reports to
Licensor for those Silipos Products as provided for in this Agreement.  The terms of this Agreement that by their
context are meant to survive termination of this Agreement shall so survive.  Licensee shall be required to destroy any
inventory that

 

14

 

remains after the expiration of this post-termination license, if the
sale of such remaining inventory would be unlawful without a license from
Licensor.

 

13.5         Retention
Period for Books and Records.  Licensee
shall retain all books and records that would be used to account for the
royalty payments due to Licensor until such books and records are at least
three years old.

 

14.           Confidentiality.  Licensor and Licensee can disclose that “Silipos
has licensed Dr. Zook’s patents.”  Licensee and Licensor otherwise agree to keep
the terms of this License Agreement strictly confidential and not disclose the
terms to anyone, including Mr. John Chen and Applied Elastomerics, Inc., except
to the extent either party is or may be required by law to disclose any
provision, in which case the disclosure shall be no more extensive than
required.  Notwithstanding the foregoing,
Licensor can share with the persons with whom or the entities with which he is working
with respect to Medicated Devices the portions of the License Agreement that will
be of concern to them, as long as they sign in advance and provide to Silipos a
nondisclosure agreement, in form reasonably acceptable to Silipos, for any
information provided to them.

 

15.           Arbitration.

 

15.1         Arbitration
Not Involving the Scope of a Zook Patent. 
Any dispute arising out of or related to this Agreement, whether
sounding in tort or contract or otherwise (including but not limited to any
claim of misrepresentation, concealment, negligence, fraud, breach of implied
duty, etc.), which is not settled by amicable agreement of the parties shall be
determined by binding arbitration.  The
arbitration shall be held in the state of New York in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, to the
extent those rules are not inconsistent with anything in this Agreement.  The decision of the arbitrator or arbitrators
shall be final and binding, and judgment on the award may be entered in any
court having jurisdiction.  Nothing in
this Agreement to arbitrate shall prohibit either party from seeking injunctive
relief, including a temporary restraining order or a preliminary injunction, in
a court of competent jurisdiction.

 

15.2         Arbitration
Involving Issue of Scope of One or More Zook Patents.  Any arbitration convened pursuant to Section
5.4 shall be governed by Section 15.1 except as amended by this Section 15.2.  The arbitration shall be conducted in the state
of New York with three patent lawyers as the arbitrators.  The decision of two or more arbitrators will
be the decision of the panel.  The
expenses of the arbitrators and any fees paid or payable to the American
Arbitration Association shall be split equally between Licensor and Licensee.  Regardless of the outcome of the arbitration,
the parties shall each bear their own legal, travel, expert witness, and other
expenses

 

15

 

for the arbitration and for the confirmation of the award in court and
on any appeal thereof.  The right to seek
injunctive relief in a court of competent jurisdiction shall not apply to the
detriment of the parties’ agreement to arbitrate issues of patent coverage.

 

16.           Legal
Expenses.  In the event any
arbitration proceeding is commenced pursuant to Section 15.1 to interpret or
enforce any provision of this Agreement or adjudicate any claim of breach of
this Agreement, the prevailing party in such arbitration proceeding shall be
entitled to recover a reasonable attorneys’ fee in connection with such
arbitration proceeding and for the confirmation of the award in court and on
any appeal thereof.  The fee in
connection with such arbitration proceeding is to be set by the arbitrator or
arbitrators, and the fee in connection with any court confirmation of the award
is to be set by the court or courts, in addition to costs and disbursements
allowed by law.

 

17.           Waiver.
 The failure of either party to enforce
at any time any provision of this Agreement shall not be construed as a waiver
of such provision or the right thereafter to enforce each and every provision.  No waiver by either party, either express or
implied, of any breach of any of the provisions of this Agreement shall be
construed as a waiver of any other breach of such term or condition or of any
other term or condition.

 

18.           Severability.  If any provision of this Agreement shall be
held by an arbitrator or a court of competent jurisdiction to be invalid or
unenforceable in any respect for any reason and the determination is no longer
subject to judicial review or appeal, the validity and enforceability of any
such provision in any other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.

 

19.           Governing
Law.  This Agreement and the rights
of the parties hereunder shall be governed by and construed in accordance with
the laws of the State of New York exclusive of choice of law rules.

 

20.           Release.  Licensor hereby releases Licensee and its
distributors, customers, and suppliers from any and all liability resulting
from the manufacture, use, sale, or offer to sell of Existing Silipos Products
which may have infringed any of the Zook Patents prior to the Effective Date.

 

21.           Notices.  All notices required or authorized by this
Agreement shall be given in writing delivered by hand or certified mail,
postage and fees prepaid, to a party at the address indicated below or to such
other address as a party may specify by notice in accordance with this section.  All notices shall be effective upon receipt.

 

16

 

	
  Licensee:

  	
   

  	
  Licensor:

  
	
   

  	
   

  	
   

  
	
  Mr.  Joel
  Bickel

  	
   

  	
  Gerald P. Zook

  
	
  Silipos Inc.

  	
   

  	
  c/o Bruce C. Moore

  
	
  366 Madison Avenue

  	
   

  	
  P.O.  Box
  11833

  
	
  New York, NY 10017

  	
   

  	
  Eugene, OR 97440

  

 

22.           Assignment.

 

22.1         The
rights granted Licensee under this Agreement may not be assigned without the
prior written consent of Licensor.  Licensor
shall not unreasonably withhold consent. 
The test for “reasonableness” as used in this Section shall be an
objective test that considers the following attributes: (a) the proposed assignee’s
financial condition as compared to the financial condition of Licensee and (b)
the proposed assignee’s ability to undertake and perform the business
activities that Licensee performs in marketing and selling products which are
subject to royalties under this Agreement. 
Nothing in this Section 22.1 shall entitle Licensor to seek or demand,
as a condition for Licensor’s consent, a share of any consideration to be paid to
Licensee in a sale or assignment.

 

22.2         Any
assignment or transfer of the rights granted to Licensee under this Agreement
shall be subject to the rights of Licensor under this Agreement; and any assignee
or transferee shall be bound to all the terms, conditions and obligations of this
Agreement; and Licensor shall remain obligated to Licensee for the performance of
all terms, conditions, and covenants of Licensor in this Agreement.

 

22.3         Any
assignment or transfer of any of the Zook Patents by Licensor shall be subject to the rights of Licensee under this
Agreement.

 

22.4         Each
party will promptly notify the other of any actual or proposed assignment or
transfer of rights under this Agreement. 
If a proposed assignee requests confidentiality, Licensor shall agree to
any reasonable confidentiality provisions submitted by Licensee or the
prospective assignee.

 

23.           Sublicenses.  Any sublicense that is granted by Licensee
pursuant to this Agreement shall obligate the sublicensee to provide Licensee
with information sufficient to enable Licensee to provide Licensor with reports
and payments equivalent to what Licensee would have provided if Licensee had
done the business that the sublicensee did, provided, however, that Licensee
shall have an additional thirty (30) days to account to Licensor for reporting
and royalty payment purposes for any business done by the sublicensee pursuant
to the sublicense.

 

17

 

24.           Product
Marking.  Licensee agrees to mark all
products made or sold pursuant to any license granted by this Agreement with
the word “Patent” or “Pat.” together with the number(s) of the applicable
licensed Zook Patent(s) in the manner prescribed in 35 U.S.C. § 287.  In addition, all promotional, packaging, and advertising
material shall include appropriate patent notice(s).  Notwithstanding the preceding two sentences,
Licensee shall have the right to use up its existing packaging material and
promotional literature and to sell its inventory existing on the Effective Date
of this Agreement.

 

25.           Binding
Effect.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their heirs,
administrators, successors, and assigns and shall also be binding upon
subsidiaries and affiliates of the parties.

 

26.           Discontinued
Products.  Licensee agrees to promptly
notify Licensor if Licensee discontinues the manufacture or sale of any product
on which Licensor previously received a royalty.

 

27.           Products
Liability Insurance.  Silipos
represents that as of the Effective Date of this Agreement it carries products
liability insurance in amounts it believes to be adequate.  Silipos will periodically review its products
liability insurance coverage and make such coverage decisions (including the
decision to purchase no such insurance) as it deems in its best interests.  Silipos agrees to hold Dr. Zook harmless from
any products liability claim made against Dr. Zook for a product sold by
Silipos, but this hold-harmless shall be effective only to the extent that
Silipos has products liability insurance that would apply to the claim in
question and then only to the extent (if any) that such insurance would permit
Silipos to have entered into this provision with Dr. Zook and to the extent (if
any) that the insurance funds the conditional hold-harmless obligation.  Notwithstanding the foregoing, if Silipos
decides not to purchase products liability insurance for a given year and a
products liability claim for a product sold by Silipos is made against Dr. Zook
that would have been covered by such insurance if it had been purchased,
Silipos shall be obligated to hold Dr. Zook harmless from the products
liability claim, without regard to what the limit(s) would have been on the
insurance if it had been purchased.

 

28.           Entire
Agreement.  This Agreement contains
the entire agreement between the parties relating to the subject matter.  All prior agreements and all prior negotiations
relating to the same subject are hereby superseded.  This Agreement may

 

18

 

not be modified except by a written document signed by an authorized
representative of each party.

 

	
  silipos inc.

  	
   

  	
  gerald p. zook

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  [ILLEGIBLE]

  	
   

  	
  By:

  	
    /s/ Gerald
  P. Zook

  	
   

  	 

	
  Title:

  	
  President/CEO

  	
   

  	
  Title:

  	
  D.P.M., R. Ph.

  	
   

  	 

	
  Date:

  	
  [ILLEGIBLE]

  	
   

  	
  Date:

  	
  7-12-1997

  	
   

  	 

								

 

19

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