Patent License Agreement - PharmaStem Therapeutics Inc. and Cord Partners Inc.
PATENT LICENSE AGREEMENT
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This is a Patent License Agreement (the "Agreement"), entered into as of January
1, 2004, between PharmaStem Therapeutics, Inc., a Delaware corporation having an
address of 700 Building, 435 Devon Park Drive, Wayne, PA 19087-1990
("PharmaStem" or "Licensor"), and Cord Partners, Inc., ("Cord Partners" or
"Licensee"), a Florida corporation having an address of 10940 Wilshire
Boulevard, 6th Floor, Los Angeles, CA 90024.
Background. PharmaStem owns patents which relate to the storage, expansion, and
use of human stem cells. Cord Partners is in the business of storing, expanding,
and using hematopoietic stem cells and desires a license under PharmaStem's
patent portfolio. The parties hereto are entering into this Agreement for the
purpose of setting forth the terms and conditions of the license.
NOW, THEREFORE, in consideration of the promises and covenants contained herein,
the parties agree as follows:
TERMS AND CONDITIONS
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1. Definitions. The terms defined below shall have the meanings defined
herein, when used in capital letters:
a. "Collection" or "Collected" means accumulation of or
accumulated Cord Blood in a container.
b. "Cord Blood" means blood or any blood components (including
without limitation stem cells) collected from a human
umbilical cord and/or placenta.
c. "Cryopreservative" means an agent capable of preserving at
very low temperatures.
d. "Cryopreserve" means to preserve a material, such as Cord
Blood or Stem Cells, by freezing.
e. "Cryopreserved Blood" means (i) frozen Cord Blood, (ii) frozen
and thawed Cord Blood or (iii) any other composition which
would, but for this Agreement, infringe one or more claims of
the Licensed Patents, in all three instances with or without a
Cryopreservative.
f. "Effective Date" means the date noted in the first line of
this Agreement.
g. "Expanded Stem Cells" means Stem Cells, expanded from
Cryopreserved Blood, or Cryopreserved after expansion.
h. "Lawsuit" means PharmaStem Therapeutics, Inc. v. ViaCell, Inc.
et al., United States District Court for the District of
Delaware, Civ. No. 02-148 GMS.
i. "Licensed Patents" means U.S. Patents Nos. 5,004,681,
5,192,553, 6,461,645, 6,569,427 and 6,605,275 and all patents
that are related to any or all of those patents through
priority or otherwise, directly or indirectly, including but
not limited to, continuations, continuations in part,
divisions, reissues and reexaminations thereof, and shall
further include any other
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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patents owned or licensable by PharmaStem, with an effective
filing date prior to the Effective Date, that relate to
pharmaceutical compositions of human hematopoietic stem cells
derived from umbilical cord or placental blood and the
collection, storage or therapeutic use of the same.
j. "Licensed Process" means any process for the Collection,
storage or use of Cord Blood that would, but for this
Agreement, infringe one or more claims of Licensed Patents.
k. "Modified Stem Cells" means Stem Cells, modified from
Cryopreserved Blood, or Cryopreserved after modification.
l. "Patent Term" means the period ending on the expiration date
of the last-to-expire of the Licensed Patents.
m. "Revenues" means gross revenues paid to Licensee with respect
to the (i) creation, use or storage of any composition or use
of any process that would, but for this Agreement, infringe
one or more claims of the Licensed Patents, (ii) Collection,
storage or and/or use of Specimens, or (iii) creation, storage
or use of Expanded Stem Cells or Modified Stem Cells.
n. "Specimen" means a discrete amount of Cryopreserved Blood
Collected from a human.
o. "Stem Cells" means stem cells derived from Cord Blood.
p. "Storage Revenues" means Revenues based on the storage of
Specimens.
q. "Territory" means the United States of America, its
territories, possessions, and overseas military bases.
2. Release and Dismissal of PharmaStem Therapeutics, Inc. v. Alpha Cord,
Inc. et al., United States District Court for the Northern District of
California, Case No. 04-00564-JSW.
a. In consideration of the mutual covenants, conditions and
agreements contained herein, and subject to the other
provisions of this Agreement, PharmaStem, on behalf of itself,
its assigns, and successors, hereby fully and forever
releases, discharges, and covenants not to sue or otherwise
institute or prosecute any legal, administrative, or other
proceeding against Cord Partners and its representatives,
agents, servants, employees, officers, directors and
shareholders, with respect to any and all liabilities and
claims asserted by PharmaStem in the Lawsuit.
b. In consideration of the mutual covenants, conditions and
agreements contained herein, and subject to the other
provisions of this Agreement, Cord Partners on behalf of
itself, its assigns, and successors, hereby fully and forever
releases, discharges, and covenants not to sue or otherwise
institute or prosecute any legal, administrative, or other
proceeding against PharmaStem and its representatives, agents,
servants, employees, officers, directors and shareholders with
respect to any and all liabilities and counterclaims asserted
by Cord Partners in the Lawsuit.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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c. Upon execution of this Agreement, the parties will file with
the Court a stipulation to dismiss all claims and
counterclaims between the parties in the Lawsuit, with
prejudice, according to the terms of this Agreement. Each
party agrees to bear responsibility for all attorneys' fees,
expenses and costs that it has accrued in relation to the
lawsuit. This Agreement will be submitted to the Court, as an
exhibit to the stipulated dismissal, subject to a motion to
seal the Agreement under the local rules of the Court.
3. License Grant to Licensee.
Licensor hereby grants to Licensee a non-exclusive, non-transferable,
royalty-bearing license under the Licensed Patents in the Territory to:
a. collect, make, have made, store, process, sell and import
Cryopreserved Blood, but not to make, have made, Cryopreserve,
store, process, use, sell, or import Expanded Stem Cells or
Modified Stem Cells;
b. make, have made, Cryopreserve, store, process, use, sell, or
import Expanded Stem Cells or Modified Stem Cells; and
c. in all other respects, perform Licensed Processes.
4. Limitations on License Grant.
a. Licensee shall have no rights under this Agreement to
sublicense Licensed Patents, either directly or indirectly.
b. This Agreement does not enable Licensee to perform for
entities or subcontract to entities that have not entered into
separate license agreements with PharmaStem. However, it
enables Licensee to subcontract services for Collection or
storage of Cryopreserved Blood or creation or storage of
Expanded Stem Cells or Modified Stem Cells for a limited time
only, provided that the subcontractor enters into a separate
license agreement with PharmaStem within ninety (90) days from
the effective date of the subcontracting agreement between
Licensee and its subcontractor.
5. License Fees. In consideration of the licenses granted to Licensee
hereunder, Licensee agrees to make the following payments:
a. Standard Royalties for the License of Subparagraph 3(a). In
consideration of the license of subparagraph 3(a), Licensee
shall pay PharmaStem non-refundable royalty fees as follows:
i. Specimen Collection Fee. Fifteen percent (15%) of all
Revenues generated at or around the time of
Collection, with a minimum cash fee of Two Hundred
Twenty Five Dollars ($225) for each Specimen
Collected during the Patent Term.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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ii. Annual Specimen Storage Fee. Fifteen percent (15%) of
all Revenues generated after the Collection, with a
minimum cash fee of Twenty Five Dollars ($25) for
each Specimen stored per year during the Patent Term.
b. Standard Royalties for the Licenses of Subparagraphs 3(b) and
3(c). In consideration of the licenses of subparagraphs 3(b)
and 3(c), Licensee shall pay to PharmaStem non-refundable
royalty fees as follows:
i. Expanded or Modified Stem Cells. Fifteen percent
(15%) of Revenues generated during the Patent Term
from any product created or service performed
involving Expanded Stem Cells or Modified Stem Cells;
or
ii. Alternative Fees. Fifteen percent (15%) of Revenues
generated from the performance of Licensed Processes
not otherwise subject to royalty under subparagraphs
5(b)(i) or (ii) or 5(c)(i).
6. Payments.
All royalty fees payable under paragraph 5(a)(i) shall accrue
immediately upon the performance of the licensed activity giving rise
to the royalty obligation while all other royalty obligations shall
accrue upon receipt of revenue. All accrued royalties for the calendar
quarter shall be paid by Licensee to PharmaStem in U.S. Dollars within
thirty (30) days after the end of each calendar quarter.
7. Reports.
a. Each payment under paragraph 6 shall be accompanied by a
written report, in the form of Exhibit A, certified by
Licensee to be complete and accurate, setting forth all
information reasonably necessary to calculate payments due
hereunder, including whether Licensee has complied with the
most current procedures established under paragraph 7(b). If
no payment is due in any calendar quarter as a result of the
lack of any activity giving rise to a royalty obligation,
Licensee shall provide a report no later than thirty (30) days
after the end of each calendar quarter.
b. Licensee shall provide PharmaStem with a copy of its
procedures established for the collection of data regarding
royalty fees payable hereunder and the computation and payment
of such royalty fees, (which procedures shall be in form and
substance satisfactory to PharmaStem) and shall review and
update those procedures, if appropriate, at least biannually,
and provide PharmaStem with a copy of those updated
procedures.
8. Audits. Licensee shall keep books and records adequate to determine
accurately the payments due under this Agreement. The books and records
must be retained for at least seven (7) years after the delivery of the
respective royalty reports to which they relate. PharmaStem shall have
the right, no more than once during any calendar year, to have an
independent certified public accountant inspect the relevant records of
Licensee and confer with designated employees of Licensee on thirty
(30) business days notice and during regular business hours to verify
the reports and payments required to be made hereunder.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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The auditor is authorized to provide PharmaStem with a written report,
supported by copies of the applicable Licensee documentation, showing
the results of the audit. Should an underpayment in excess of ten
percent (10%) be discovered, Licensee shall pay the cost of the audit.
In any event, Licensee shall promptly pay any underpayment together
with interest at the annual rate of twelve percent (12%).
9. Insurance. Licensee shall, at all times maintain product liability
insurance in adequate amounts, but in any case not less than Three
Million Dollars ($3,000,000) per occurrence, and commercial general
liability insurance, errors and omissions insurance and any other
insurance policies that are customary for the health care industry,
each in adequate amounts but in any case not less than One Million
Dollars ($1,000,000) per occurrence (hereinafter collectively
"Insurance") with a carrier reasonably acceptable to PharmaStem, naming
PharmaStem as an additional insured, and providing that such Insurance
may not be cancelled without thirty (30) days prior notice to
PharmaStem. Cord Partners shall provide PharmaStem with a certificate
of the carrier, evidencing that insurance, no later than the Effective
Date.
10. Assignment, Successors and Assigns.
a. This Agreement and the licenses granted herein are personal to
Licensee and may not be assigned by Licensee, in whole or in
part, without the prior written consent of PharmaStem. An
Initial Public Offering (IPO) of any class or series of
Licensee stock is not an assignment for purposes of this
Section 10. A transfer of the rights and obligations of
Licensee under this Agreement in connection with any merger or
consolidation of Licensee, a change of control or sale of all
or substantially all of the assets of Licensee, or the assets
used in connection with this Agreement, shall be deemed an
assignment for purposes of this paragraph 9(a) and shall
require the prior written consent of PharmaStem. Any
assignment of this Agreement in violation of this paragraph
shall be void ab initio.
b. In addition to and not in limitation of paragraph 10(a), if
Licensee directly or indirectly, merges with or is acquired by
a third party which, at the time of the merger or acquisition,
is an infringer of one or more Licensed Patents, this
Agreement shall terminate unless the third party negotiates a
license agreement with PharmaStem within sixty (60) days after
the merger or acquisition becomes effective.
c. If Licensee, directly or indirectly, mergers with or is
acquired by a third party which, at the time of the merger or
acquisition, has a license under the Licensed Patents, the
terms of the license agreement with the higher royalty fees
shall apply to the merged or acquired entity and the other
license agreement shall terminate upon completion of the
merger or acquisition.
d. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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11. Term. The term of this Agreement shall commence on the Effective Date
and terminate, as to the license under the Licensed Patents and the
future obligation to pay royalties, at the end of the Patent Term,
unless this Agreement is sooner terminated in accordance with its
terms.
12. Termination.
a. For Cause. This Agreement may be canceled by either party,
upon thirty (30) days prior written notice, if the other party
is in breach of any of its material obligations hereunder,
including without limitation the payment of any royalty fee
due and owing, and the breach is not remedied within such
thirty (30) day notice period.
b. For Challenge. PharmaStem may terminate the Agreement, on
thirty (30) days notice, if Licensee challenges the validity
or enforceability of any of the Licensed Patents in any
judicial or administrative proceeding.
c. Adjudication of Invalidity. This Agreement may be terminated
by Cord Partners upon the entry of a judgment in the Lawsuit
from which no appeal is taken within the statutory time
period, that all of the Licensed Patents are invalid, not
infringed or unenforceable.
d. Failure to Obtain Insurance. PharmaStem may terminate this
Agreement immediately in the event that Licensee fails to
obtain or maintain continuously in effect the Insurance, as
provided in paragraph 9.
13. Effect of Termination. Termination or expiration of this Agreement
shall have no effect on PharmaStem's right to receive reports and
royalty fees, conduct audits and enforce its rights related to
activities prior to the date on which termination or expiration is
effective. All of Licensee's rights and privileges to use the Licensed
Patents shall cease upon the expiration of this Agreement or
termination by either party.
14. Notices. All notices or other communications required or permitted
under this Agreement shall be in writing and shall be delivered by
personal delivery, registered mail return receipt requested, a "Next
Day Air" delivery service or by wire communications (i.e., telex, fax,
etc.), at the address indicated in this Agreement or as otherwise duly
notified.
15. Dispute Resolution.
a. Negotiation of Disputes. In the event of any dispute arising
under this Agreement, senior executives of the parties with
decision making authority shall meet in Philadelphia, PA as
soon as reasonably possible (but no later than sixty (60) days
after notice) and shall enter into good faith negotiations
aimed at resolving the dispute. If they are unable to resolve
the dispute in a mutually satisfactory manner within an
additional sixty (60) days, the matter may be submitted to
mediation/arbitration as provided for in paragraphs 15(c) and
(d) ; provided, however, that if Licensee challenges the
validity of any of the Licensed Patents in connection with any
dispute arising hereunder or otherwise, PharmaStem shall have
the right to terminate this Agreement and pursue litigation of
all issues relating to the Licensed Patents and this
Agreement. For purposes of this Agreement, Licensee's bringing
prior art to the attention of PharmaStem without additional
efforts directed toward obtaining a finding that any claim of
the Licensed Patents is invalid shall not be deemed a
challenge to the validity of the Licensed Patents.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
<PAGE>
b. Mediation of Disputes. At the mutual option and consent of the
parties, the parties may agree to submit any unresolved
dispute to a sole mediator selected by the parties as soon as
reasonably possible (but no later than sixty (60) days after
mutual consent). If not thus resolved, the parties shall
proceed as specified in paragraph 15(c), unless litigation is
pursued by PharmaStem pursuant to paragraph 15(a).
c. Arbitration of Disputes. Subject to paragraph 15(a), any
unresolved disputes arising under or related to this
Agreement, including without limitation, any dispute as to the
validity, enforceability or applicability of any of the
Licensed Patents, shall be submitted to an arbitration
proceeding in Philadelphia, PA. The proceeding shall be
conducted under the then prevailing rules for commercial
arbitration (or, if the matter involves issues of patent
validity, infringement or enforceability, the patent
arbitration rules) of the American Arbitration Association
("AAA"), by a single arbitrator, reasonably acceptable to both
of the parties, who must be an attorney with substantial
business and licensing experience in the field of biological
sciences and, if the matter includes issues of patent law,
must be a patent attorney with at least fifteen (15) years of
legal experience including substantial patent litigation
experience. If the parties are unable to agree on an
arbitrator, an arbitrator with those qualifications shall be
appointed by the AAA from its panel of experts. The arbitrator
shall have the authority to permit limited discovery to the
extent required by a party in order to establish its case. The
decision of the arbitrator shall be final and binding and may
be entered and enforced in any court of competent
jurisdiction. Any monetary award shall be payable in U.S.
dollars, free of any tax, offset or other deduction. Any
determination of the arbitration shall be confidential to the
parties hereto and binding solely on the parties hereto.
d. Fees. The parties shall bear their own costs and attorney fees
during any mediation and arbitration, except that the
arbitrator shall be permitted, in his discretion, to award
costs and reasonable attorneys fees to the prevailing party.
16. Warranties of PharmaStem. PharmaStem warrants that:
a. It is the owner of all right, title and interest in and to the
Licensed Patents; and
b. It has the full power and authority to enter into this
Agreement and grant the license provided for hereunder.
c. To the best of its knowledge, with no investigation having
been made or required to be made, it knows of no third party
patents, which are necessarily infringed by the practice of
the invention as claimed in the Licensed Patents.
17. Warranties of Licensee. Cord Partners represents and warrants to
PharmaStem that
a. It has the full power and authority to enter into this
Agreement.
b. It will not conduct any operations that make use of, and will
not use in any manner or cause or permit any other person to
use in any manner the Cryopreserved Blood, Modified Stem
Cells, Expanded Stem Cells, Licensed Processes or, in any
other way conduct business under the Licensed Patents without
first obtaining the Insurance and thereafter during the term
of this Agreement maintaining the Insurance continuously in
effect.
c. It has collected 238 specimens prior to the Effective Date.
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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18. Product Liability. Licensee shall, at all times during the term of this
Agreement and thereafter, indemnify, defend and hold Licensor, its
directors, officers, employees, affiliates, successors and assigns
harmless against all claims, proceedings, demands and liabilities of
any kind whatsoever, including legal expenses and reasonable attorneys'
fees, arising out of the death of or injury to any person or persons or
out of any damage to property resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of Cord
Blood, Cryopreserved Blood, Expanded Stem Cells or Modified Stem Cells
or any other use of any Licensed Patents by, on behalf of, or under the
direction or authorization of Licensee or resulting from any breach of
any obligation of Licensee hereunder.
19. Miscellaneous.
a. Nothing in this Agreement shall be construed as:
i. A warranty or representation that any product or
process will be free from infringement of patents of
third parties;
ii. Conferring any license or right under any patent
other than the Licensed Patents; or
iii. A warranty or representation as to the validity or
enforceability of the Patents.
b. Because of the nature of the Licensed Patents and the
interrelationship between their subject matter, Licensee
acknowledges that it desires to obtain a license under all of
the Licensed Patents as a group and not individually.
c. Licensee shall include an appropriate patent marking on
products and services licensed hereunder, sufficient to notify
purchasers of the existence of the Licensed Patents. The
notice shall read "Licensed under U.S. Patents 5,004,681,
5,192,553, 6,461,645, 6,569,427 and 6,605,275." As soon as
reasonably possible after receipt of a request from PharmaStem
to modify the notice to add additional newly issued Licensed
Patents, Licensee shall modify the notice.
d. The validity and interpretation of this Agreement shall be
governed by the laws of the State of Delaware, without regard
to conflicts of laws principles. Subject to paragraph 15, the
parties further consent to jurisdiction of the state and
Federal courts sitting in Wilmington, Delaware. Process may be
served on either party by U.S. Mail, postage prepaid,
certified or registered, return receipt requested, and
addressed as indicated in this Agreement or as otherwise
provided by proper notice.
e. This Agreement was negotiated in good faith by the parties as
willing licensor and willing licensee, each of which was
represented by counsel. Accordingly, the rule of construction
that holds that any ambiguities shall be construed against the
drafter shall not apply.
f. Licensee agrees that PharmaStem may disclose orally to other
potential licensees the existence and nature of this
Agreement, the fact that Licensee has taken a license under
the Licensed Patents, and the royalty fee provisions of
paragraphs 5 (b) and (c). The parties agree to the issuance of
the Press Release attached as Exhibit B. The specific payments
and royalties provided for herein shall not be publicly
disclosed by a party without the consent of
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Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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the other party, except that this Agreement may be disclosed
(i) as may be required by law, (ii) in a patent infringement
suit involving any of the Licensed Patents, under a reasonable
protective order; (iii) subject to a reasonable
confidentiality agreement, to prospective buyers of, or
investors in, PharmaStem or Licensee, and (iv) to each party's
outside legal and accounting advisors.
g. This Agreement (including the Exhibits attached hereto), the
Negotiation Agreement dated February 19, 2004 shall be deemed
to contain the complete and final agreement between the
parties, and shall supersede all previous understandings
relating to the subject matter hereof, whether oral or
written. This Agreement may only be modified by a written
agreement signed by duly authorized representatives of the
parties.
h. This Agreement may be executed in two or more counterparts
(including by facsimile), each of which shall be deemed an
original, but all of which taken together shall constitute one
and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.
PHARMASTEM THERAPEUTICS, INC.
AGREED:
BY: Nicholas Didier
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TITLE: President
CORD PARTNERS, INC.
AGREED:
BY: Matthew L. Schissler
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TITLE: Chairman and Chief Executive Officer
Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________
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EXHIBIT A
PATENT LICENSE AGREEMENT,
DATED
JANUARY 1, 2004,
BETWEEN
PHARMASTEM THERAPEUTICS, INC.
AND
CORD PARTNERS, INC.
(THE "LICENSE AGREEMENT")
ROYALTY REPORT
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Royalty Period Covered by this Report ("Royalty Period"):
Number of Specimens collected during the Royalty Period: Computation of royalty
payable:
Number of Specimens stored during the Royalty Period: Computation of royalty
payable:
Number of Specimens Expanded during the Royalty Period:
Gross Revenues from Expanded Specimens:
Royalty payable:
Number of Specimens Modified during the Royalty Period:
Gross Revenues from Modified Specimens:
Royalty payable:
Gross Revenues from Licensed Processes:
Royalty payable:
The undersigned hereby certifies that he (or she, as applicable) (1) has
reviewed the manner in which data has been collected, analyzed and computed to
prepare this report; (2) has consulted with patent counsel about any questions
regarding the interpretation of the License Agreement or Licensed Patents; and
(3) has read this Report carefully and (4) the Report accurately states all
royalty amounts accrued under the License Agreement for the Royalty Period and
the Cash Position.
Terms used in this Royalty Report and defined in the License Agreement are used
as defined.
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Name:
Title:
Date:
Cord Partners: _______________ PharmaStem: _______________
Date: ____________ Date: ______________