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Standard Exclusive License Agreement

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Sectors: Materials and Construction
Governing Law: Wisconsin, View Wisconsin State Laws
Effective Date: September 27, 1999
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Exhibit 10.3

NOTE: The information designated by a bracketed asterisk [*] has been omitted pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission. Agreement No. 99-0247

STANDARD EXCLUSIVE LICENSE AGREEMENT

This Agreement is made effective the 27 th day of September, 1999, by and between Wisconsin Alumni Research Foundation (hereinafter called " WARF" ), a nonstock, nonprofit Wisconsin corporation, and NimbleGen Systems LLC (hereinafter called " NimbleGen" ), a limited liability company organized and existing under the laws of Wisconsin; WHEREAS , WARF owns certain inventions that are described in the " Licensed Patents" defined below, and WARF is willing to grant a license to NimbleGen under any one or all of the Licensed Patents and NimbleGen desires a license under all of them;

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

Section 1. Definitions .

For the purpose of this Agreement, the Appendix A definitions shall apply. Section 2. Grant .

A. License .

WARF hereby grants to NimbleGen an exclusive license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, use and sell Products.

B. Sublicenses . (i) NimbleGen may grant written, nonexclusive or limited term exclusive sublicenses to third parties during the period in which this license is exclusive. Any agreement granting a sublicense shall terminate with the termination of this Agreement and shall state that the sublicense is subject to the termination of this Agreement. NimbleGen shall have the same responsibility for the activities of any sublicensee as if the activities were directly those of NimbleGen.

(ii) In respect to sublicenses granted by NimbleGen under this Section 2B, NimbleGen shall pay to WARF an amount equal to what NimbleGen would have been required to pay to WARF had NimbleGen sold the amount of Products sold by such sublicensee. In addition, if NimbleGen receives any fees, minimum royalties, or other payments in consideration for any rights granted under a sublicense, and such payments are not based directly upon the amount of value of Products sold by the sublicensee, then NimbleGen shall pay WARF twenty-five percent (25%) of such payments in the manner specified in Section 4E. NimbleGen


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shall not receive from sublicensees anything of value in lieu of cash payments in consideration for any sublicense under this Agreement without the express prior written permission of WARF.

C. Inventions . To the extent permitted by applicable law, NimbleGen hereby grants, and shall require its sublicensee(s) to grant, to WARF an option to obtain a nonexclusive, royalty-free, irrevocable, paid-up license, with the right to grant sublicenses, under any and all inventions hereafter made or acquired by NimbleGen (or its sublicensee(s)) to the extent any such inventions are Improvements, but only for research or educational purposes and not for any commercial purpose. " Improvements" shall mean any modification of an invention described in Licensed Patents which, if unlicensed, would infringe one or more claims of the Licensed Patents. NimbleGen shall provide WARF with a written, enabling disclosure of each such invention (such as a U.S. patent application), unambiguously identifying it as an invention governed by this paragraph, as soon as practicable but no later than six (6) months after the filing of a patent application thereon. If WARF does not exercise its option to receive a license thereunder within sixty (60) days of the date of the disclosure, its option under this paragraph shall be deemed terminated (but only with respect to the invention so disclosed).

Section 3. Development . NimbleGen agrees to and warrants that: it has, or will obtain, the expertise necessary to independently evaluate the inventions of the Licensed Patents; it will establish and actively and diligently pursue the development plan (see Appendix E) to the end that the inventions of the Licensed Patents will be utilized to provide Products for sale in the commercial market; and within one month following the end of each semi-annual period ending on June 30 and December 31 and until the Date of First Commercial Sale of Products, it will supply WARF with a written Development Report. All development activities and strategies and all aspects of Products design and decisions to market and the like are entirely at the discretion of NimbleGen, and NimbleGen shall rely entirely on its own expertise with respect thereto. WARF' s review of NimbleGen' s development plan is solely to verify the existence of NimbleGen' s commitment to development activity and to assure compliance with NimbleGen' s obligations to utilize the inventions of the Licensed Patents to commercialize Products for the marketplace, as set forth above.

Section 4. Consideration .

A. License Fee .

NimbleGen agrees to provide WARF with a ten percent (10%) share of the outstanding Equity Interests (as the term is defined in the Equity Agreement) in NimbleGen in accordance with the terms of the Equity Agreement.

B. Royalty .

In addition to the Section 4A License Fee, NimbleGen agrees to pay to WARF as " earned royalties" a royalty calculated as a percentage of the Selling Price of Products in accordance with the terms and conditions of this Agreement. The royalty is deemed


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earned as of the earlier of the date the Product is actually sold and paid for, the date an invoice is sent by NimbleGen or its sublicensee(s), or the date a Product is transferred to a third party for any promotional reasons. The royalty shall remain fixed while this Agreement is in effect at the rate of [*] of the Selling Price of Products. C. Minimum Royalty .

NimbleGen further agrees to pay to WARF a minimum royalty of $25,000 per calendar year or part thereof during which this Agreement is in effect starting in calendar year 2002, against which any earned royalty paid for the same calendar year will be credited. The minimum royalty for a given year shall be due at the time payments are due for the calendar quarter ending on December 31. It is understood that the minimum royalties will apply on a calendar year basis, and that sales of Products requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual minimum royalty due WARF for any given calendar year.

D. Patent Fees and Costs .

(i) NimbleGen also agrees to reimburse WARF for all reasonable costs associated with filing, prosecuting and maintaining the Licensed Patents in the Licensed Territory. On or before , , NimbleGen shall provide WARF with a list of countries in which NimbleGen desires patent protection, and WARF shall file patent applications and pursue prosecution of patents in such countries as well as the patent applications listed in Appendix B. WARF reserves the right to file patent applications and to pursue prosecution of such patents in additional countries at its own expense. WARF will provide NimbleGen with an invoice of the costs associated with the Licensed Patents in the Licensed Territory annually beginning on August 31, 2001. NimbleGen shall reimburse WARF within thirty (30) days of the date of such invoice. NimbleGen shall pay all costs incurred in such patent prosecution through the date of termination of the Agreement regardless of whether NimbleGen actually succeeds in selling a Product.

(ii) WARF has the right to control the filing, prosecution and maintenance of the Licensed Patents with NimbleGen having the right to review and comment on such patent prosecution in the Licensed Territory. WARF agrees to furnish NimbleGen with copies of any documentation to be submitted in connection with the filing or prosecution of any of the Licensed Patents reasonably in advance of such submission so as to give sufficient time for review and to incorporate reasonable modifications in such documentation proposed by NimbleGen which are not materially adverse to WARF. WARF also agrees to promptly furnish NimbleGen with copies of any written communications received from the authorities handling such prosecutions. WARF will prosecute and validate all international, regional-phase and national patent applications it files, until WARF reasonably determines that the continued prosecution is unlikely to result in the issuance of a patent in the relevant region or country, or that continued maintenance of such patent applications, or any Licensed patent, is not merited. If WARF determines not to continue prosecution or maintenance of any patent, NimbleGen will have the right to do so at its expense, and WARF will give NimbleGen notice of such determination in reasonable time to permit NimbleGen to meet any deadline with respect to such prosecution or maintenance.


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E. Accounting Payments . (i) Amounts owing to WARF under Sections 2B or 4B shall be paid on a semi-annual basis, with such amounts due and received by WARF on or before the sixtieth day following the end of the semi-annual period ending June 30 or December 31 in which such amounts were earned. The balance of any amounts which remain unpaid more than sixty (60) days after they are due to WARF shall accrue interest until paid at the rate of the lesser of one percent (1%) per month or the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays.

(ii) Except as otherwise directed, all amounts owing to WARF under this Agreement shall be paid in U.S. dollars to WARF at the address provided in Section 16(a). All royalties owing with respect to Selling Prices stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation Value of Foreign Currencies on the day preceding the payment.

(iii) A full accounting showing how any amounts owing to WARF under Section 2B and 4B have been calculated shall be submitted to WARF on the date of each such payment. Such accounting shall be on a per country and product line, model or trade name basis and shall be summarized on the form shown in Appendix C of this Agreement. In the event no payment is owed to WARF, a statement setting forth that fact shall be supplied to WARF.

Section 5. Certain Warranties of WARF .

A. WARF warrants that except as otherwise provided under Section 14 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to NimbleGen in this Agreement. However, nothing in this Agreement shall be construed as: (i) a warranty or representation by WARF as to the validity or scope of any of the Licensed Patents; (ii) a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties; or

(iii) an obligation to furnish any know-how not provided in the Licensed Patents or any services other than those specified in this Agreement.

B. WARF MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY NIMBLEGEN, ITS SUBLICENSEES, OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.


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Section 6. Recordkeeping . A. NimbleGen and its sublicensee(s) shall keep books and recor
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