MEDAMICUS INC
8-K, EX-10.2, 2000-09-19
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS
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                                  EXHIBIT 10.2


                       DEVELOPMENT AND LICENSING AGREEMENT
                                       FOR
                                SAFETY INTRODUCER
                                     BETWEEN
                             MED-DESIGN CORPORATION
                                       AND
                                 MEDAMICUS, INC.


This Development and Licensing Agreement ("the "Agreement") is entered into and
made effective this 25th day of August, 2000 (the "Effective Date") by and
between:

Med-Design Corporation      and         MedAmicus, Inc.
2810 Bunsen Avenue                      15301 Highway 55 West
Ventura, California  93003              Plymouth, Minnesota  55447

(hereinafter referred to as "MDC")      (hereinafter referred to as "MedAmicus")

RECITALS

         WHEREAS, MedAmicus and MDC wish to enter into an Agreement for the
development of the MedAmicus Safety Introducer(TM) and the licensing of certain
intellectual property owned by MDC.

         WHEREAS, MDC will incorporate MDC's retraction technology for the
needle of the MedAmicus Safety Introducer into the Safety Introducer for use in
introducing pacing leads, infusion ports, dialysis catheters and other pacing
and interventional radiological procedures which require access to the central
venous system.

         NOW THEREFORE, for and in consideration of the mutual covenants and
undertakings contained 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 "MedAmicus Safety Introducer" as used herein shall mean a medical
         device used to ***.

         1.2 "MDC Patent Rights" as used herein shall means patents and patent
         applications relating to MDC's retraction technology and any
         improvements or modifications to MDC's retraction technology, its
         manufacture or use, and any subsequently filed patent applications and
         any patents issuing therefrom that are owned by or assigned to MDC and
         any other patents and patent applications in which MDC has an ownership
         or licensable interest relating to retraction technology, including any
         patents or patent applications on inventions developed by MDC in the
         course of MDC's developing retraction technology for the MedAmicus
         Safety Introducer under this Agreement.

         1.3 The "Product" as used herein shall means the MedAmicus Safety
         Introducer with ***.

         1.4 "The Field" as used herein shall means any use of the Product which
         is not inconsistent with rights conveyed by MDC to Becton, Dickinson &
         Company.

         1.5 The "Project" as used herein shall mean the development of the
         Product.


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<PAGE>


2.       PRODUCT DEVELOPMENT

         MDC and MedAmicus have set forth the primary specifications (the
         "Specifications") of the MedAmicus Safety Introducer, along with an
         estimate of development costs and timetables, attached hereto as
         Exhibit A. Prior to commencing work, appropriate technical personnel
         from each party will evaluate, and all parties will mutually agree
         including both parties patent counsels, to modifications of Exhibit A,
         if necessary. MDC will then develop the Product according to the agreed
         upon Specifications and within the agreed upon time schedule.
         Deviations from that set forth in Exhibit A, which materialize as the
         work progresses, shall be mutually agreed upon in good faith by the
         parties in writing. Approval of changes shall not be unreasonably
         withheld by either party. If material changes in the design are
         requested by MedAmicus, Exhibit A shall be amended to provide for a
         reasonable extension of time to complete the Project.

         It is estimated by MDC that its development costs (the "Costs") of the
         Project shall approximate $300,000, which is subject to reasonable good
         faith adjustment as the Specifications become better defined. MedAmicus
         shall reimburse MDC for 50% of the Costs. Upon mutual agreement that
         there has been successful completion of a milestone, MedAmicus will pay
         MDC an amount as set forth in Exhibit A.

         Upon completion of the development effort, all subsequent
         specifications and drawings of the design shall be provided to
         MedAmicus in a form which will allow MedAmicus to transfer the Product
         into manufacturing and meet the requirements of the Medical Device
         Directive and ISO 46001.

3.       LICENSE

         MDC grants MedAmicus an exclusive, worldwide license under the MDC
         Patent Rights to make, use, sell and have made the Product in the
         Field.

         During the term of this Agreement, MDC hereby grants MedAmicus a
         license to use all trademarks which are or may be owned by MDC in
         connection with the Product under an appropriate royalty-free trademark
         license agreement.

4.       ROYALTIES

         4.1 In consideration for the exclusive license granted hereunder,
         MedAmicus will pay to MDC royalties each year based on each Product
         sold per year worldwide, whether the Product is sold alone in component
         form or the Product is sold in a kit, in accordance with the following
         schedule:

         Product                                 Royalty Rate
         -------                                 ------------
         Sold in component form                  $*** per Product
         Sold in a  kit                          $*** per kit

         The royalty rate set forth in the schedule above may be increased each
         year based on (a) the consumer price index or (b) the percentage
         increase in MedAmicus price charged for the Product and Product in
         component form sold in a kit, whichever is greater.

         4.2      MedAmicus agrees to keep complete and accurate records of its
                  sales of Products and kits and all data necessary for the
                  computation of payments to be made to MDC hereunder. Payments
                  shall be made on or before the last business day of July,
                  October January and April of each year for the sales of the
                  Product and kits during the preceding quarterly periods ending
                  on the last day of June, September, December and March,
                  respectively. Such payments shall be accompanied by a
                  statement showing the total net sales of the Product and kits
                  by MedAmicus, and such other particulars as are necessary for
                  an accurate accounting of the payments made pursuant to this
                  Agreement. Payment of the amount due shall accompany such
                  statement.


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<PAGE>

5.       MINIMUMS

         This Agreement does not contemplate any minimums for MedAmicus to
         retain its exclusive licenses hereunder.

6.       INTELLECTUAL PROPERTY

         6.1 OWNERSHIP

         It is understood by both parties that the MedAmicus Safety Introducer
         is intellectual property owned by MedAmicus. The design concept of the
         MedAmicus Safety Introducer was disclosed to MDC under a
         confidentiality agreement at a meeting of the party's representatives
         on May 31, 2000. MedAmicus shall not acquire any property rights in the
         MDC Patent Rights. The development of the retractions technology
         applied to the MedAmicus Safety Introducer and any patent rights
         relative thereto shall be owned by MDC.

         6.2 MEDAMICUS WARRANTY

         MedAmicus represents that it is, or will be, applying for U.S. patent
         protection on the design of the MedAmicus Safety Introducer, and, at
         its sole discretion, shall determine whether to apply for international
         patent protection.

         6.3 OBLIGATION FOR ENFORCING PATENT RIGHTS

         MedAmicus will, at its discretion, vigorously enforce its patented
         position related to the Product, unless such patent dispute is related
         to MDC's Patent Rights. MedAmicus hereby indemnifies and agrees to hold
         MDC harmless against any costs, claims or damages arising out of patent
         challenges that may be brought regarding the Product, except when such
         challenge is based substantially on the MDC Patent Rights, in which
         case Section 6.4 shall apply.

         6.4 WARRANTY AND OBLIGATION OF MDC

         a)    MDC represents that it is the owner of the MDC Patent Rights and
               has the right and the ability to grant the license described
               herein.

         b)    If MedAmicus is sued in the United States by a third party in an
               action for patent infringement based on the manufacture, use or
               sale of the retraction technology portion of the Product
               represented by MDC Patent Rights, then the following shall apply:

              (1)   If the infringement claim is based on needle retraction
                    features of the Product developed by MDC then MedAmicus may
                    deduct the following from royalties due Med-Design in the
                    United States based on sales of such Product in the United
                    States covered by the third party patent:

              (2)   50% of the cost and expenses (including legal fees) incurred
                    in defense and disposition of the patent infringement
                    action.

              (3)   The deduction shall be made against present and future
                    royalties due for sales in the United States until MedAmicus
                    has recovered such costs and expenses.

         c)   MDC, at its option, shall have the right to join in any such suit
              and defend such suit against MedAmicus, and select counsel to
              defend such suit, at any time during the course of any such suit.

         d)   MDC's liability for infringement involving retraction technology
              by MedAmicus of third party patents shall be limited to the
              deduction from royalties as set forth above due for sales in the
              United States covered by the third party patent.

         e)   In the event either party hereto receives notice of alleged third
              party infringement of any of MDC's Patent Rights, it shall
              promptly notify the other party in writing of such infringement
              and the following shall apply:


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<PAGE>


              (1)  MDC shall have the right, but not the obligation, to bring
                   suit and to control the conduct of such suit against the
                   third party infringer, and to join MedAmicus as a party to
                   such suit, if necessary, in which event MDC shall hold
                   MedAmicus free, clear and harmless from any and all costs
                   and expenses of such litigation. In the event MDC exercises
                   the right to bring suit, MedAmicus shall have the right to
                   receive twenty-five per cent (25%) of the damages recovered
                   after a deduction for all legal expenses by MDC, including
                   attorney's fees, incurred and paid by MDC in such lawsuit,
                   and MDC shall have the right to retain any remaining damages
                   recovered.

              (2)  If MDC does not bring suit against a third party infringer,
                   as herein provided in this subparagraph (c) within nine
                   months after receipt of notice, MedAmicus shall have the
                   right, but shall not be obligated, to bring suit to stop
                   such third party infringement, and to join MDC as a party to
                   such suit, if necessary, in which event MedAmicus shall hold
                   MDC free, clear and harmless from any and all costs and
                   expenses of such litigation, except as set forth in the
                   following sentence. If MedAmicus exercises its right to
                   bring suit against a third party infringer of the MDC Patent
                   Rights, MDC shall have the right to voluntarily join the
                   suit and be represented by its own counsel, at its own
                   expense. In the event MedAmicus exercises the right to bring
                   suit for such alleged infringement, MDC shall have the right
                   to receive twenty-five per cent (25%) of all damages
                   recovered. If MDC does not join the suit by MedAmicus,
                   MedAmicus shall be entitled to deduct the cost of its legal
                   expenses, including attorney's fees, incurred and paid by it
                   in such lawsuit from the recovery of the suit before
                   calculating MDC's portion of the recovery.

7.       LIMITATION OF LIABILITY AND WARRANTY

         7.1 MedAmicus will indemnify MDC and hold it harmless from any claims
         made by customers, physicians or patients related to the malfunction,
         perceived malfunction or product liability of any nature relative to
         the Product.

         7.2 Neither party will be liable to the other for any consequential,
         indirect, punitive, special or incidental damages, whether foreseeable
         or unforeseeable, based upon this Agreement (including but not limited
         to, claims for loss of goodwill, profits, investments, use of money or
         use of products, interruption in use, stoppage of other work or
         impairment of other assets, or labor claims) arising out of breach of
         express or implied warranty, breach of contract misrepresentation,
         negligence, strict liability in tort or otherwise, except as otherwise
         provided above in this paragraph 7.

8.       TERM OF AGREEMENT AND TERMINATION

         8.1 TERM

         This Agreement shall become effective as of the Effective Date and
         shall continue in effect for a period equivalent to the remaining life
         of MedAmicus' or MDC patent rights covering aspects of the Product, and
         so long as the Product is covered by one or more of the MedAmicus' or
         MDC's patent rights, unless terminated earlier by mutual agreement of
         the parties or pursuant to the terms hereof. Upon its expiration, the
         Agreement may be extended, by mutual agreement of the parties in
         writing for additional periods of one year.

         8.2 TERMINATION

         MedAmicus may terminate this Agreement if MDC fails to meet the
         development schedule as set forth in Exhibit A. MedAmicus shall notify
         MDC in writing of its intent to terminate pursuant to this provision,
         and MDC shall have ninety days in which to cure. If MDC has not cured
         within ninety days, MDC shall turn over all drawings, prototypes,
         tooling and any other documents associated with the MedAmicus Safety
         Introducer, and MedAmicus shall make no further payments for
         development work beyond that which has already been paid. MedAmicus
         shall have the option to complete the development of the Product
         itself. If it does so, then MedAmicus shall keep track of all costs
         associated with completing the development and shall deduct from any
         future royalties due to MDC, beginning with the first royalties due,
         the total cost of all expenditures


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<PAGE>


         related to the completion of the development of the Product from the
         time MedAmicus assumes control of the development effort.

         8.3 TERMINABLE EVENTS

         Notwithstanding the termination provisions stated in Sections 8.1 and
         8.2 above, either party shall be entitled to terminate this agreement
         by notice in writing to the other party in the event that any of the
         following occurs to the other party:

         a)   If the other party enters into bankruptcy or debt reorganization
              proceedings.
         b)   If a receiver is appointed over any of the other party's
              property.
         c)   If the other party discontinues business.
         d)   If the other party fails to perform any of its obligations
              hereunder, other than a failure to meet development timetables,
              and such failure continues for thirty days after notice of
              failure is given.

9.       MISCELLANEOUS:

         9.1 NOTICE

         All notices or other communications hereunder shall be in writing and
         shall be hand delivered, faxed, or sent by first class United States
         mail to the following address:

          MDC                                    MEDAMICUS
          ---                                    ---------
          Michael Simpson                        James D. Hartman
          The Med-Design Corporation             MedAmicus, Inc.
          2810 Bunsen Avenue                     15301 Highway 55 West
          Ventura, CA  93003                     Plymouth, MN 55447
          Fax 805-339-0209                       Fax 763-559-7548

         Mailed notice shall be effective two days following the day of mailing;
         however, hand delivery and fax transmissions shall be effective the day
         received.

         9.2 GOVERNING LAW

         This Agreement is made and executed in the State of Pennsylvania, and
         this Agreement shall be constructed and enforced according to the laws
         of the State of Pennsylvania.

         9.3 SEVERABILITY

         The invalidity or unenforceability of any provision of this Agreement
         shall not affect or impair the validity of any other provisions; and
         section titles and captions in this Agreement are for convenience only
         and do not define, limit or construe the contents of such paragraphs.

         9.4 ASSIGNMENT

         This Agreement may not be assigned without the prior written consent
         of the other party.

         9.5 SUCCESSORS

         This Agreement and all of its terms shall be binding upon the
         successors and permitted assigns of both parties.

         9.6 COMPLETE AGREEMENT

         Other than previously signed confidentiality agreements which shall
         remain in full force and effect, this Agreement contains the entire
         understanding among and between the parties and supersedes any prior
         written or oral agreements between them respecting the subject matter
         contained herein.


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<PAGE>


        9.7 ARBITRATION

        The parties shall attempt in good faith to resolve any disputes arising
        out of the Agreement, promptly by negotiations between executives of the
        parties who have authority to settle disputes. After notice of a dispute
        and the dispute being unresolved by executives for two months, any such
        unresolved dispute, controversy or claim arising out of or relating to
        this Agreement, or the breach, validity or termination thereof, shall be
        finally settled by arbitration and either party may submit the dispute
        to arbitration. The arbitration shall be conducted in accordance with
        the Commercial Arbitration Rules of the American Arbitration Association
        in effect at the time of arbitration, except as modified by mutual
        agreement of the parties. The seat of the arbitration shall be (i)
        Minneapolis (if MedAmicus is a named defendant), or (ii) Philadelphia
        (if MDC is a named defendant); provided, however, that the arbitrators
        may hold hearings in such other locations as the arbitrators determine
        to be most convenient and efficient under the circumstances. The
        appointing shall be the American Arbitration Association. Any award
        rendered by the arbitrators shall be in writing and shall be final and
        binding upon the parties, and my include an award of costs, including
        reasonable attorney's fees and disbursements, but shall not include
        punitive or consequential damages. Judgment upon the award rendered may
        be entered in any court having jurisdiction thereof or having
        jurisdiction over the appropriate party or its assets. While any dispute
        is pending hereunder, the parties will continue to perform their
        obligations as set forth herein.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written:



----------------------------------------- --------------------------------------
THE MED-DESIGN CORPORATION                MEDAMICUS, INC.
----------------------------------------- --------------------------------------

----------------------------------------- --------------------------------------
Signature                                 Signature
----------------------------------------- --------------------------------------

----------------------------------------- --------------------------------------
Print Name                                Print Name
----------------------------------------- --------------------------------------

----------------------------------------- --------------------------------------
Title                                     Title
----------------------------------------- --------------------------------------

----------------------------------------- --------------------------------------
Date                                      Date
----------------------------------------- --------------------------------------


                                    EXHIBIT A

MILESTONES AND PAYMENT SCHEULE:

--------------------- ---------------------------------------- -------- --------
                                                                        PAYMENT*
                                                                 DATE      ON
MILESTONE             DESCRIPTION                              (APPROX)   DATE
--------------------- ---------------------------------------- -------- --------
Project Definition    Final agreement by technical personnel      ***     $***
                      on all Specifications, timetable and
                      cost to complete, including review by
                      patent counsels
--------------------- ---------------------------------------- -------- --------
Design Review II      Design output from MDC                      ***     $***
--------------------- ---------------------------------------- -------- --------
Design Review III     Design Verification testing                 ***     $***
--------------------- ---------------------------------------- -------- --------
Technology Transfer   Transfer of all documentation, fixtures,    ***     $***
                      molds, prototypes to MedAmicus
--------------------- ---------------------------------------- -------- --------
     *   Payment schedule based on 50% of estimated Costs


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<PAGE>


EXTERNAL COSTS:

All external costs will be borne by MedAmicus. These costs include, but are not
limited to:
      *  Molds, fixtures and other capital equipment
      *  All external testing, including animal testing
      *  All parts for prototypes
      *  Costs for consultants for manufacturing startup

PRIMARY SPECIFICATIONS:

***


                                    EXHIBIT B

                        Med-Design Intellectual Property

Patent Rights includes the patents and patent applications as identified on the
attached 5 pages, and further includes any substitutions, divisions,
continuations-in-part, or reexaminations or reissues thereof, and any
improvements to the above conceived of or filed on or on behalf of MDC during
the term of this Agreement.


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