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EXHIBIT 10.2
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made as of June 2, 2000 among
Somanetics Corporation, a Michigan corporation ("Somanetics"), CORrestore, LLC,
a California limited liability company ("CORrestore"), ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇, M.D., one of the two members of CORrestore ("▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇"),
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D., one of the two members of CORrestore ("▇▇.
▇▇▇▇▇▇▇▇"). ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇ are sometimes collectively
referred to in this Agreement as the "Members" and individually as a "Member".
R E C I T A L S
A. CORrestore and the Members have developed procedures, technology, a
patch and accessories for surgical anterior ventricular restoration ("SAVR") in
which the chest is opened (to any extent) to rebuild, reconstruct or remodel the
anterior ventricular wall, all as more specifically defined and described in
United States Patent No. 6,024,096 (the "Patent").
B. CORrestore and the Members desire to grant to Somanetics, and Somanetics
desires to obtain as licensee, an exclusive license to the rights of CORrestore
and the Members under the Patent and to certain other rights of CORrestore and
the Members with respect to the manufacture, making, use and sale of the
procedures, technology, patch and accessories upon the terms, and subject to the
conditions, contained in this Agreement.
C. Somanetics, CORrestore and the Members desire to cooperate with one
another in certain activities related to the subject matter of this Agreement.
THEREFORE, for and in consideration of the mutual covenants and obligations
described below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. LICENSES.
1.1 Patent License. Subject to the terms and conditions of this Agreement,
CORrestore and the Members grant Somanetics an exclusive, worldwide,
royalty-bearing right and license, with a right to sub-license, to the rights of
CORrestore and the Members under the Patent for the period beginning with the
date of this Agreement and ending upon termination of this license pursuant to
Section 1.11 (the "Patent License"). The Patent License may be assigned or
transferred only (1) with CORrestore's and the Members' consent, or (2) in
connection with a "Transaction" as defined in Section 1.11.1.
1.2 Proprietary Information License. Subject to the terms and conditions of
this Agreement, CORrestore and the Members grant Somanetics an exclusive,
worldwide, royalty-bearing right and license, with a right to sub-license, to
use and employ the knowledge, information, trade secrets, know-how, intellectual
property, copyrights, "Developments" (subject to, and as defined in, Section
1.5) and related proprietary and other rights of CORrestore and the Members
relating to the procedures, technology and "Products" (as defined in Section
1.3) for
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SAVR in which the chest is opened (to any extent) to rebuild, reconstruct or
remodel the anterior ventricular wall, including, without limitation, how to use
the subject matter of the Patent (collectively, the "Proprietary Information")
for the period beginning with the date of this Agreement and ending upon
termination of this license pursuant to Section 1.11 (the "Proprietary
Information License"). The Proprietary Information License may be assigned or
transferred only (1) with CORrestore's and the Members' consent, or (2) in
connection with a "Transaction" as defined in Section 1.11.1 Within 30 days
following any termination of the Proprietary Information License, Somanetics
shall return to CORrestore and the Members the Proprietary Information and all
documents and materials relating thereto.
1.3 "Products". For purposes of this Agreement, "Products" means a
diaphragm or patch and improvements thereto for SAVR (the "Patch") and all Patch
products and accessories (such as holders, strips of pericardium, sizers,
sutures and improvements thereto) and kits sold for use in a surgical procedure
in which the chest is opened (to any extent) to rebuild, reconstruct or remodel
the anterior ventricular wall (the "Procedure"), all as more specifically
defined and described in the Patent, and the Procedure itself.
1.4 CORrestore, Buckberg and Athanasuleas Name License.
1.4.1 License to Use Names. Subject to the terms and conditions of
this Agreement, CORrestore and the Members grant Somanetics an exclusive,
worldwide, royalty-bearing right and license, with a right to sub-license,
to use the names CORrestore, Buckberg, Athanasuleas or any combination of
them (the "Names") (1) on all Products, (2) as trademarks, or as part of a
trademark, with respect to any of the Products, and/or (3) in connection
with any labeling, advertising, promotion, sales literature, publication or
similar marketing tools relating to any of the Products, subject to the
terms and conditions of this Agreement for the period beginning with the
date of this Agreement and ending upon termination of this license pursuant
to Section 1.11 (the "Name License"). The Name License may be assigned or
transferred only (1) with CORrestore's and the Members' consent, or (2) in
connection with a "Transaction" as defined in Section 1.11.1 This Name
License, includes the right to use any of the Names either alone or in
conjunction with Somanetics' name or any other name. CORrestore and the
Members reserve all rights, and do not grant Somanetics any license, to use
the names CORrestore, Buckberg, Athanasuleas or any combination thereof on
or associated with any products or services other than the Products.
Somanetics agrees to maintain and respect the copyright notices of
CORrestore and the Members with respect to the Products, and shall not
remove, obscure or deface any such copyright, trademark or similar ▇▇▇▇ or
notice on any materials related to the Products, including, without
limitation, packaging, documentation, manual, promotional material, or the
like.
1.4.2 Trademark Registration. Somanetics may, in its sole discretion,
attempt to register in the name of, and owned by, CORrestore and the
Members any or all of the Names as trademarks, or as part of a trademark,
with respect to any of the Products, and any such trademark shall be
subject to the Name License set forth in Section 1.4.1. Any legal fees and
costs associated with Somanetics' attempts to register any of the Names as
trademarks, or as part of a trademark, shall be born by Somanetics. Any
failure of Somanetics to obtain such registration shall not be deemed a
breach of this Agreement or
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to result in any detriment to either of the Members or to CORrestore. If
Somanetics has not obtained such registration within four months of the
date of this Agreement, then CORrestore and the Members reserve the right
to seek such registration, and any such trademark registered by CORrestore
and the Members shall be subject to the Name License set forth in Section
1.4.1, unless the parties expressly agree otherwise in writing.
1.4.3 Pre-Clearance of Name Use. Somanetics shall submit to CORrestore
and the Members for its and their review the final design of any Product
that bears any of the Names before its first sale and before the first
advertising or public disclosure of such Product. Somanetics shall also
submit to CORrestore the contents of any labeling, advertising, promotion,
sales literature, publication or similar marketing tools relating to any of
the Products that contains one or more of the Names before it is first
publicly distributed. Somanetics must obtain written confirmation of
CORrestore's and the Members' receipt of such submission, such an a
signature on an express courier's receipt or a certified mail receipt. If,
within 20 days after CORrestore receives such submission, Somanetics does
not receive a written notice from CORrestore objecting to the proposed use
of such Names, CORrestore and the Members shall be deemed to have consented
to such proposed use and Somanetics shall be authorized to use such Names
substantially as submitted. If, within 20 days after CORrestore receives
such submission, Somanetics receives a written notice from CORrestore
objecting to the proposed use of such Names, Somanetics shall not be
permitted to use such Names as submitted to CORrestore, unless (1) the
parties resolve any such objections, or (2) Somanetics re-submits a
different proposed use of such Names to CORrestore and, within 20 days
after such submission, Somanetics does not receive a written notice from
CORrestore objecting to the proposed use of such Names. Any violation of
the preceding sentence shall be a material breach of this Agreement.
Somanetics may sell and advertise Products without using any of the Names,
if it so desires.
1.4.4 Retention of Trademark Control. The Name License is conditioned
upon Somanetics' compliance with the reasonable guidelines of CORrestore
and the Members with respect to trademarks as CORrestore and the Members
provide such guidelines to Somanetics from time to time. If CORrestore or a
Member notifies Somanetics that the use of one or more Names is
inconsistent with such guidelines, Somanetics will not publish or otherwise
use such Name or Names until their use has been modified to CORrestore's or
such Member's reasonable satisfaction. Somanetics agrees to maintain the
quality of the products that are associated with the Names to a level
reasonably required by CORrestore and the Members. All rights to use the
Names shall immediately terminate upon termination of the Name License for
any reason.
1.5 Product Developments Subject to Licenses.
1.5.1 Disclosure of Developments. CORrestore and the Members shall
provide Somanetics with prompt written notice of any developments or
improvements relating to the Products ("Developments") and such other
information related to Developments as Somanetics shall reasonably request.
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1.5.2 Election to Accept Developments. Somanetics shall have a period
of 90 days (the "Review Period") commencing on the date Somanetics receives
the written notice of the Developments (identified as such) pursuant to
Section 1.5.1 to decide whether to accept such Developments. If Somanetics
accepts such Developments, Somanetics shall provide a written notification
to CORrestore (a "Notification of Interest") that it accepts such
Developments. The Notification of Interest shall be provided to CORrestore
on or before the end of the Review Period (or, if mailed to CORrestore,
shall be postmarked on or before the end of the Review Period). Upon
Somanetics' provision of such Notification of Interest to CORrestore, such
Developments shall be deemed to be subject to the Patent License, the
Proprietary Information License and the Name License (collectively, the
"Licenses"). If Somanetics does not provide to CORrestore a Notification of
Interest on or before the end of the Review Period in respect of such
Developments, then, subject to Section 1.5.3, CORrestore and the Members
shall be released from any further obligation to Somanetics under this
Section 1.5 in respect to such Developments, and may disclose such
Developments to other persons and enter into any agreement with any other
person in respect thereof.
1.5.3 CORrestore and the Members' Assistance. During the Review
Period, if Somanetics so requests, CORrestore and the Members shall meet
with Somanetics to discuss the efficacy of the Developments. Such
discussion shall take place at the offices of Somanetics located in Troy,
Michigan, or in Birmingham, Alabama, or in Los Angeles, California. Whether
or not Somanetics so requests a meeting with CORrestore and the Members or
such a meeting occurs, the Review Period shall not be extended (unless
CORrestore agrees to an extension in writing).
1.5.4 Development of Product. If Somanetics accepts a Development, it
shall (1) submit to CORrestore a prototype of a product that incorporates
the Developments within 90 days from the date the Notification of Interest
was provided to CORrestore, (2) begin marketing the product that
incorporates the Developments or begin the testing or applications
necessary to obtain regulatory approval of the product that incorporates
the Developments within 180 days from the date the Notification of Interest
was provided to CORrestore, (3) if necessary, submit a 510(k) clearance
application or an IDE application to the FDA within one year plus 180 days
after the date the Notification of Interest was provided to CORrestore (or
such longer period as the parties mutually agree in writing), and (4) if
FDA clearance or approval is necessary, begin marketing activities and
sales in the United States within 30 days after it receives 510(k)
clearance or approval of a PMA application from the FDA to market the
Development in the United States. If Somanetics fails to meet any of the
deadlines in the preceding sentence, then, unless CORrestore notifies
Somanetics in writing otherwise, the Proprietary Information License and
the Name License shall become non-exclusive with respect to such
Development. Somanetics may elect to manufacture, market and sell
independently a product based upon such Developments regardless of whether
the Proprietary Information License and Name License become non-exclusive
with respect thereto. If Somanetics elects to do so after the Proprietary
Information License and Name License become non-exclusive and CORrestore or
any other authorized entity has undertaken to make, use and sell a product
based on such Developments or to license or sublicense such rights to
another person, the
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royalty Somanetics would otherwise be required to pay pursuant to Section
4.1 with respect to such product shall be 40% of the amount provided in
Section 4.1.
1.6 Ownership of Product Developments. Any developments, inventions or
discoveries after the date of this Agreement relating to the Products that are
conceived solely by one or more employees or agents of CORrestore, either of the
Members or any combination of them shall be owned by CORrestore, one or more of
the Members or a combination of them, as applicable, and shall be subject to the
Licenses. Any developments, inventions or discoveries after the date of this
Agreement relating to the Products that are jointly conceived by one or more
employees or agents of Somanetics, on the one hand, and one or more employees or
agents CORrestore, either of the Members or any combination of them, on the
other hand, shall be jointly owned by Somanetics, on the one hand, and
CORrestore, one or more of the Members or a combination of them, as applicable,
on the other hand, without any obligation to account for profits outside of the
provisions of this Agreement, and CORrestore's ownership shall be subject to the
Licenses. Any developments after the date of this Agreement relating to the
Products that are conceived solely by one or more employees or agents of
Somanetics shall be owned by Somanetics. Any Developments or enhancements or
improvements to the Products, developed or owned, in whole or in part, by
Somanetics shall be assigned to CORrestore to maintain all ownership of such
items in a single entity and owner and shall be subject to the Licenses.
1.7 Sublicenses. Any sublicense by Somanetics of any of the Licenses must
terminate no later than the date the related license terminates, and any such
sublicense shall so state. No sublicense by Somanetics of any of the Licenses
may grant the sublicensee greater rights than Somanetics has under the Licenses,
and any such sublicense shall be subject to at least the same terms, conditions
and restrictions that apply to Somanetics under its applicable License.
Somanetics shall provide CORrestore and the Members with a copy of any
sublicense of any of the Licenses within 30 days after the sublicense is
executed by the parties to the sublicense.
1.8 Agreements Not to ▇▇▇. During the term of this Agreement CORrestore and
the Members agree not to claim that Somanetics lacks the rights of CORrestore
and the Members with respect to the Patent, the Proprietary Information, the
Products and the rights licensed under the Licenses, as granted herein.
Somanetics agrees not to challenge the validity of the Patent or of any of the
trademarks, copyrights or other intellectual property licensed to it under this
Agreement. The foregoing provisions do not otherwise prevent the parties from
making any claims or pursuing any remedies otherwise available under this
Agreement, at law, and in equity, for breach of this Agreement.
1.9 Manufacturing Sources. Unless otherwise agreed in writing by Somanetics
and CORrestore, during the term of the Licenses, Somanetics shall engage St.
Jude Medical, ▇▇▇▇▇▇▇ Life Sciences, Inc., Medtronic, Bio Vascular, Shelhigh, PM
Devices, Inc., one of their affiliates or any combination of the foregoing
(collectively, the "Manufacturers"), to manufacture the Products.
1.10 No Assumption of Liabilities. Except as otherwise specifically
provided in this Agreement, none of the parties is assuming any liabilities or
obligations of any other party,
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including, without limitation, any obligations for any further development of
any of the Products or any funding or assistance in connection with any further
development of the Products.
1.11 Termination of Licenses. On termination of expiration of the Licenses,
Somanetics shall, at its expense, return to CORrestore all documents, products
and materials relating to such Licenses.
1.11.1 Somanetics' Termination in Connection with a Transaction.
Somanetics may terminate all (or otherwise none) of the Licenses at any
time in its sole discretion on or within 120 days after the date it signs a
definitive agreement for a transaction in which Somanetics (1) merges with
any other entity, or (2) transfers all or substantially all of its
properties and assets to any other entity, or (3) effects a statutory share
exchange, capital reorganization or reclassification, in each case only if
holders of Somanetics Common Shares immediately before the transaction hold
less than 50% of the surviving entity's (or its ultimate parent's)
outstanding voting securities immediately after the transaction (each, a
"Transaction"). If Somanetics terminates the Licenses pursuant to this
Section 1.11.1, then Somanetics will pay to CORrestore and the Members the
sum of One Million U.S. Dollars ($1,000,000.00). The foregoing amount,
which Somanetics agrees is reasonable, shall be deemed liquidated damages
and not a penalty, the damage for such termination being difficult or
impossible to determine in advance and such amount being a reasonable
pre-estimate of the anticipated loss; and shall not be construed to limit,
diminish or prejudice any other right or remedy of CORrestore or the
Members hereunder.
1.11.2 CORrestore's Termination in Connection with a Transaction.
CORrestore and the Members may terminate all (or otherwise none) of the
Licenses in its and their sole discretion at any time within 120 days after
the date Somanetics consummates a Transaction if (1) the Transaction is
consummated within 24 months after the date of this Agreement, and (2) the
consideration received by Somanetics' shareholders in the transaction has a
fair market value (as determined in good faith by Somanetics' Board of
Directors) that is less than $10.00 per Somanetics Common Share.
1.11.3 CORrestore's Termination For Change in CEO. CORrestore and the
Members may terminate all (or otherwise none) of the Licenses in its and
their sole discretion at any time within 120 days after the date ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ceases to be the Chief Executive Officer of Somanetics or ceases to
be responsible for Somanetics' activities relating to the Licenses (the
"Event") if the Event occurs within 60 months after the date of this
Agreement.
1.11.4 Somanetics' Termination for Material Breach. If CORrestore or
either of the Members materially breaches any of its or his covenants under
Section 1, 2, 7.1.3, 7.1.4, 7.1.5, 7.1.6, or 7.1.7 and such material breach
is not cured within 90 days after Somanetics provides CORrestore and the
Members with written notice of the material breach and the actions required
to cure such material breach, Somanetics may terminate all (or otherwise
none) of the Licenses in its sole discretion at any time within 120 days
after the expiration of such 90-day period.
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1.11.5 CORrestore's Termination for Material Breach. If Somanetics
materially breaches any of its covenants under Section 1.4, 1.8, 1.9, 4.1,
4.2, 4.3 or 4.4, and such material breach is not cured within 90 days (30
days with respect to payment obligations) after CORrestore provides
Somanetics with written notice of the material breach and the actions
required to cure such material breach, CORrestore may terminate all (or
otherwise none) of the Licenses in its sole discretion at any time within
120 days after the expiration of such 90-day period.
1.11.6 CORrestore's Termination for Failure to Obtain Shareholder
Approval. CORrestore may also terminate all (or otherwise none) of the
Licenses as provided in Section 4.3.
1.11.7 CORrestore's Termination for Delisting. If Somanetics' Common
Shares are delisted from The Nasdaq Stock Market and the Common Shares are
not re-listed on The Nasdaq Stock Market within 90 days after such
delisting, CORrestore may terminate all (or otherwise none) of the Licenses
in its sole discretion at any time within 120 days after the expiration of
such 90-day period.
1.11.8 CORrestore's Termination for Bankruptcy. If Somanetics makes an
assignment for the benefit of its creditors or voluntarily commences any
bankruptcy, receivership, insolvency or liquidation proceedings in a court
of competent jurisdiction and such assignment or commencement is not
reversed or otherwise terminated within 90 days after such event occurs,
CORrestore may terminate all (or otherwise none) of the Licenses in its
sole discretion at any time within 120 days after the expiration of such
90-day period.
1.11.9 CORrestore's Termination of Worldwide Territory. CORrestore may
also reduce the geographic scope of the Licenses as provided in Section
3.3.
1.11.10 CORrestore's Termination of Exclusivity. CORrestore may also
reduce the exclusivity of the Licenses as provided in Section 1.5 or 3.1.
2. REGULATORY APPROVAL, MARKETING AND CONSULTING ACTIVITIES.
2.1 Assist in Designing and Executing Clinical Tests. CORrestore and the
Members shall make themselves reasonably available to assist Somanetics in
designing and executing preliminary and definitive clinical tests as requested
by Somanetics and necessary to demonstrate the safety and efficacy of the
Products or to obtain regulatory approvals (including in connection with any
application for clearance under Section 510(k) of the Federal Food, Drug and
Cosmetics Act or for approval of a pre-market approval ("PMA") application from
the United States Food and Drug Administration ("FDA") to market and sell or
license the Products in the United States and CE certification of the Products
in Europe) for commercial sales and licenses of the Products, and to assist
Somanetics in identifying and engaging independent researchers to conduct such
tests.
2.2 Assist in Obtaining Regulatory Approvals and Intellectual Property
Protection. CORrestore and the Members shall make themselves reasonably
available to assist Somanetics in preparing and defending any applications for
regulatory (or self-regulatory) approvals necessary
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for marketing and selling the Products, including any application for clearance
under Section 510(k) of the Federal Food, Drug and Cosmetics Act or for approval
of a PMA application from the FDA to market the Products in the United States
and CE certification of the Products in Europe. Also, CORrestore and the Members
shall make themselves reasonably available to prepare and file, or to assist
Somanetics in preparing and filing, patent and other intellectual property
applications and registrations as Somanetics deems appropriate. Somanetics will
bear all costs and expenses of prosecuting patent and other intellectual
property applications and registrations that are incurred on or after the date
of this Agreement. CORrestore and the Members shall bear all such costs and
expenses incurred before the date of this Agreement.
2.3 Training. CORrestore and the Members shall make themselves reasonably
available to train Somanetics personnel and Somanetics customers and potential
customers in the use of the Products.
2.4 General Consulting. CORrestore and the Members will provide ongoing (1)
technical and general consulting and advice, (2) assistance with product
designs, and (3) consultation requested by Somanetics in connection with its
510(k) clearance or approval of a PMA application, and CE certification
applications and its marketing efforts, including pursuit of insurance
reimbursement, relating to the Procedures and the Products, all at the request
of Somanetics. Such consulting, advice and assistance shall be in connection
with sales and training with respect to, improvements to, or further
developments or enhancements of, such products, support for such products and
product development efforts with respect to such products. Examples of subjects
of such consulting, advice and assistance include proposed product enhancements,
problem solving, research and development planning for Somanetics, sales
assistance demonstrating the Procedures and the safety and effectiveness of the
Procedures, Products and advice and assistance regarding interaction with,
reports to, and responses to, the FDA. At the request of Somanetics, CORrestore
and the Members shall also evaluate papers regarding such products or competing
products, Somanetics, CORrestore, Members' or third party patents relating to
such products and the products themselves, including complaints regarding
alleged defects in such products.
2.5 Time Requirements. All training, consulting and related services
furnished by CORrestore pursuant to this Section 2 shall be for up to 10 days
during each of Somanetics' fiscal years during the term of the Licenses;
provided that the Members may provide extra days in addition to such amount,
subject to their availability, upon reasonable request.
3. TIMING AND EXPENSES.
3.1 Project Schedule. The parties shall use their reasonable commercial
efforts to achieve the milestones listed in the Project Schedule attached as
Exhibit A within the time periods set forth in the Project Schedule, attached as
Exhibit A. The Project Schedule also includes Somanetics' estimated costs of
achieving each of the milestones listed on the Project Schedule. Somanetics
shall begin marketing activities and sales in the United States within 30 days
after it receives 510(k) clearance or approval of a PMA application from the FDA
to market the applicable Products in the United States. If Somanetics fails to
meet the deadline in the preceding sentence, then, unless CORrestore notifies
Somanetics in writing otherwise, the Licenses shall become non-exclusive with
respect to the applicable Products. Somanetics will
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use its reasonable efforts to promote, market and sell the Products during the
term of this Agreement. The attached Exhibit D is the parties' current guess as
to the possible forecast and budget summary for the Products over the next five
years based on the key assumptions set forth in Exhibit D. The preceding
sentence and the information contained in Exhibit D are not binding on the
parties and do not create any obligations or liabilities of any party.
3.2 Expenses. Somanetics will pay all reasonable out-of-pocket expenses
that are paid to third parties (1) for the clinical testing of the Products, (2)
in connection with the consulting services provided by CORrestore or either of
the Members pursuant to this Agreement, including first-class airfare, or (3)
with respect to the Patent or future patent applications or claims or
registrations relating to the Proprietary Information or the Names, to the
extent the foregoing are incurred on or after the date of this Agreement and are
approved by Somanetics. Somanetics shall not be obligated to compensate any of
the parties to this Agreement or any of their employees for their time spent
performing this Agreement, except as otherwise provided in Section 4.
3.3 International Distribution. Somanetics has one year from the date of
filing a 510(k) clearance application or PMA approval application with the FDA
with respect to Products to begin marketing such Products or to commence the
process to obtain necessary regulatory approval of commercial sales of such
Products in the following markets: Europe, Canada, Asia, Australia, New Zealand,
the Middle East, Africa, South America, and Central America. The countries
included are described in CORrestore's international patent application
submitted after, and related to, the Patent. Somanetics will keep CORrestore
advised of developments in foreign markets every six months, including a
description of its sales capability in these areas. CORrestore's sole and
exclusive remedy for any breach by Somanetics of this Section 3.3, shall be to
reduce the geographic scope of the Licenses to exclude the countries with
respect to which this Section 3.3 has been breached, if, and only if, Somanetics
fails to cure such breach within 90 days after it receives written notice of
such breach from CORrestore.
3.4 Meetings to Discuss Progress. The parties shall meet in person or by
telephone at least once each month to discuss the progress in achieving the
scheduled milestones until they are all completed or the Licenses are
terminated. During this period, Somanetics shall submit a written report to
CORrestore and the Members at least once each fiscal quarter of Somanetics
comparing the expected and actual progress and explaining any variances.
4. CONSIDERATION.
4.1 Royalty.
4.1.1 Amount and Duration. Somanetics shall pay CORrestore a royalty
fee equal to 9% of the "net sales" (as defined in Section 4.1.3), and shall
pay to ▇▇▇▇▇ & Company a royalty fee of 1% of the "net sales", of the
Products received by Somanetics within (1) the term of the Patent, or (2)
if the Patent is determined to be invalid by a court of appropriate
jurisdiction, 10 years from the date of the first commercial sale or
license of the Products by Somanetics. Somanetics' obligation to pay this
royalty will also terminate upon any termination of the Licenses.
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4.1.2 Due Date. The royalty fee is due and payable quarterly by
Somanetics within 30 days after the end of each of Somanetics' fiscal
quarters with respect to "net sales" of the Products through the end of
such fiscal quarter, less the amount of such royalty fee previously paid to
CORrestore or ▇▇▇▇▇ & Company. On or before the date the royalty fee is
due, Somanetics shall provide CORrestore and ▇▇▇▇▇ & Company a report
describing the "net sales" of the Products through the end of the
applicable fiscal quarter and the calculation of the royalty fee then due.
4.1.3 "Net Sales". If Somanetics sells or licenses the Products, "net
sales" shall mean the net amount actually paid to, and collected by,
Somanetics for the commercial sale or license by Somanetics of the
Products, net of (1) any freight, packaging and crating, transportation
insurance, taxes or other charges collected by Somanetics, and (2) any
subsequent payments, credits or allowances by Somanetics for discounts,
rebates, returns, allowances, credits, reductions, or diminution of any
nature whatsoever. If an unaffiliated third party sells or licenses the
Products pursuant to a license from Somanetics or other transfer of rights
to the Products by Somanetics, "net sales" shall mean, at Somanetics'
election, either (a) the same thing it means when Somanetics sells or
licenses the Products, except that the third party would be substituted for
Somanetics in the definition, or (b) if it would not result in a lower
royalty fee to CORrestore than the royalty fee calculated pursuant to
alternative (a), the same thing it means in Somanetics' agreement with the
third party, if any, as used to calculate Somanetics' royalty on such sale.
If in connection with a Transaction, a successor assumes Somanetics'
obligation to pay such royalties with respect to such third party's sales
or licenses of Products, Somanetics shall be relieved of its obligation to
pay such royalties with respect to such third party's sales or licenses of
Products. If Products are sold together with other products for one price
or are given away in connection with sales of other products, the "net
sales" allocable to such Products shall be the greater of (1) the actual
"net sales" attributable to such Products (based on the relative cost of
the goods sold determined in accordance with generally accepted accounting
principles, if not otherwise determinable), or (2) the "net sales"
attributable to such Products sold separately in the ordinary course of
Somanetics' business in the same country.
4.1.4 Records Audit Rights. During the term that the royalty fee is
payable pursuant to Section 4.1.1 for the most recent five years,
Somanetics shall maintain and retain records of the "net sales" by
Somanetics of the Products. Such records shall be open to inspection at
reasonable times and upon reasonable notice by and at the expense of
CORrestore or ▇▇▇▇▇ & Company or their agents who are appropriately
qualified accountants, together with such other documents and things as
they may reasonably request for purposes of verifying the calculation of
the amount of royalty fees. They shall be entitled to take copies of or
extracts from such records. Should the result of any inspection show that
the figures previously submitted by Somanetics understate the royalty fees
for any quarter by more than three percent, the cost of such inspection for
such quarter shall be borne by Somanetics. Any sum found to be due from or
overpaid by Somanetics shall be promptly paid or refunded, as the case may
be.
4.2 First Warrant. On the Closing Date, Somanetics shall issue to
CORrestore a five-year warrant to purchase 380,000 Somanetics Common Shares and
shall issue to ▇▇▇▇▇ &
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Company a five-year warrant to purchase 20,000 Somanetics Common Shares, in
substantially the form attached as Exhibit B (the "First Warrant"). The per
share exercise price for the First Warrant shall equal $3.00. The warrants shall
become exercisable to purchase the following number of Somanetics Common Shares
at the following times: (1) an aggregate of 300,000 shares beginning on the
Closing Date, (2) an aggregate of 50,000 shares beginning on the date Somanetics
receives 510(k) clearance or approval of a PMA application from the FDA to
market the Products in the United States, and (3) an aggregate of 50,000 shares
beginning on the date Somanetics receives the CE ▇▇▇▇ with respect to the
Products. Notwithstanding any of the foregoing to the contrary, upon any
termination of the Licenses pursuant to Section 1.11, (1) the portion of the
First Warrant that is exercisable at the date of termination of the Licenses
shall continue to be exercisable for 90 days after such termination (or the
remaining term of the First Warrant if such termination is pursuant to Section
1.11.5) and shall then expire and be cancelled, and (2) the portion of the First
Warrant that is not exercisable at the date of termination of the Licenses shall
expire and be cancelled.
4.3 Second Warrant. Only if Somanetics receives shareholder approval
required by the rules of The Nasdaq Stock Market with respect to the Second
Warrant and the Common Shares issuable upon exercise of the Second Warrant, on
the date Somanetics receives 510(k) clearance or approval of a PMA application
from the FDA to market the Products in the United States, Somanetics shall issue
to CORrestore a five-year warrant to purchase an additional 1,920,000 Somanetics
Corporation Common Shares and shall issue to ▇▇▇▇▇ & Company a five-year warrant
to purchase an additional 180,000 Somanetics Corporation Common Shares, in
substantially the form attached as Exhibit C (the "Second Warrant"). The per
share exercise price for the Second Warrant shall equal $3.00. The warrants
shall become exercisable to purchase the following aggregate number of
Somanetics Common Shares at the time Somanetics' cumulative "net sales" of the
Products reach the following levels:
Aggregate
Additional
Net Sales Shares
--------- ------
$5,000,000 233,330
$10,000,000 233,330
$20,000,000 233,340
$35,000,000 350,000
$55,000,000 466,000
$80,000,000 584,000
CORrestore may terminate the Licenses at any time within 120 days after the
Second Warrant was otherwise issuable if Somanetics fails to receive shareholder
approval required by the rules of The Nasdaq Stock Market with respect to the
Second Warrant and the Common Shares issuable upon exercise of the Second
Warrant by the date the Second Warrant is otherwise issuable. Notwithstanding
any of the foregoing to the contrary, upon any termination of the Licenses
pursuant to Section 1.11, (1) the portion of the Second Warrant that is
exercisable at the date of termination of the Licenses shall continue to be
exercisable for 90 days after such termination (or the remaining term of the
First Warrant if such termination is pursuant to Section 1.11.5) and shall then
expire and be cancelled, (2) the portion of the Second Warrant that
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is not exercisable at the date of termination of the Licenses shall expire and
be cancelled, and (3) if the Second Warrant shall not yet have been granted, it
shall not be granted or issued.
4.4 Consulting Fee. During the period from the date of this Agreement until
the date Somanetics shall have sold an aggregate of 1,000 Patches, Somanetics
shall pay each of the Members a consulting fee of $25,000 a year, payable within
30 days after the end of each of Somanetics' fiscal quarters and pro-rated daily
for partial quarters.
5. CLOSING. The closing under this Agreement shall be held simultaneously with
the execution of this Agreement. The consummation of the transactions described
in this Agreement at such time are sometimes referred to in this Agreement as
the "Closing", and such date is sometimes referred to as the "Closing Date". At
the Closing, the Licenses shall become effective pursuant to Section 1, the
development, marketing and consulting activities shall begin pursuant to Section
2, and Somanetics, CORrestore and the Members shall comply with the applicable
covenants and conditions to Closing set forth in Sections 7 and 8.
6. REPRESENTATIONS AND WARRANTIES.
6.1 Representations and Warranties of CORrestore. CORrestore represents and
warrants to Somanetics the following as of the date of this Agreement and as of
the Closing Date:
6.1.1 Organization. CORrestore is a limited liability company, duly
organized, validly existing and in good standing under the laws of the
State of California.
6.1.2 Authority Relative to this Agreement. CORrestore has all
requisite limited liability company power and authority to execute, deliver
and comply with its obligations under the terms of this Agreement. Each of
the Members has all necessary and appropriate power, capacity and authority
to perform all of his obligations pursuant to this Agreement. Execution,
delivery and performance by CORrestore of this Agreement have been duly
authorized on the part of CORrestore by all necessary action of its members
and managers. No other limited liability company action on the part of
CORrestore is necessary to authorize CORrestore's execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by CORrestore and each of the Members and
constitutes a valid and binding obligation of CORrestore and each Member,
enforceable against each of them in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally,
and except as may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding at law or in
equity.
6.1.3 Consents and Approvals; No Violation. Neither the execution and
delivery nor the performance by CORrestore or either Member of this
Agreement, (a) will require any authorization, consent or approval of any
governmental or regulatory authority or of any other person or entity, (b)
will violate the Certificate of Organization or the Operating Agreement of
CORrestore, (c) will breach any provision of, constitute a default under,
or require the authorization or consent of any governmental agency or
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body or any third party under any of the provisions of, any authorization
or order of any governmental agency or body or any third party, or any
note, lease, license, agreement or other instrument or obligation to which
CORrestore or either Member is a party, or by which any of them or any of
their properties or assets may be bound, or (d) will violate any order,
injunction or arbitration award, or any statute, law, rule, regulation or
ruling of any court or governmental authority, United States or foreign,
applicable to CORrestore or either Member or to any of their properties or
assets.
6.1.4 Rights in the Licensed Rights. To the best knowledge of
CORrestore and the Members: (1) The Patent was issued in the United States
Patent and Trademark Office on February 15, 2000 in the names of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, as inventors, and was assigned to
CORrestore, which is the sole owner of the Patent and the rights under it,
and CORrestore and the Members may authorize Somanetics to exercise all
rights of CORrestore and the Members with respect to the Patent, the
Proprietary Information, the Names, the Products and the rights licensed
under the Licenses, and CORrestore and the Members do not know of any
rights, claims, interests, assignments, leases, licenses, restrictive
covenants, rights to possession, liens, encumbrances, security interests,
pledges, charges, burdens, patents, copyrights, trademarks, service marks,
equities, agreements, proprietary rights of others, infringements and
contracts of any nature whatsoever (collectively, "Liens") that would
prevent or restrict Somanetics' exercise of such rights, (2) the Patent,
the Proprietary Information, the Products and the rights licensed under the
Licenses have not been assigned or licensed to any other person or entity,
(3) CORrestore and the Members do not know of any claim of infringement by
or against any person or entity regarding the Patent, the Proprietary
Information, the Products, the rights licensed under the Licenses or any
intellectual property or proprietary rights of any person or entity to
which the Patent, the Proprietary Information, the Products or the rights
licensed under the Licenses are or may be subject, (4) the Patent, the
Proprietary Information, the Products and the rights licensed under the
Licenses have not been assigned, transferred or sold or been subjected to
any confidentiality agreement (other than in favor of CORrestore, the
Members or both), assignment of confidential information, invention
agreement or any other agreement, contract or understanding similar to any
of these agreements, except those delivered and satisfactory to Somanetics,
in its sole discretion, (5) the Patent, the Proprietary Information, the
Products and the rights licensed under the Licenses are, to the knowledge
of CORrestore and the Members, assignable and licensable to Somanetics
without retention of any rights known to CORrestore or the Members in any
of the Patent, the Proprietary Information, the Products or the rights
licensed under the Licenses by any other person or entity, or, to
CORrestore's and the Members' knowledge, any breach, violation or other
conflict with the rights or any other person or entity, and (6) to the
extent the Proprietary Information includes trade secrets, such trade
secrets have been adequately maintained as confidential trade secrets of
CORrestore and the Members. CORrestore and/or the Members are the sole and
exclusive owners of all rights that CORrestore and the Members are
licensing in this Agreement. CORrestore and the Members have properly
maintained all of their proprietary rights in the Patent, the Proprietary
Information, the Products and the rights licensed under the Licenses.
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6.1.5 Absence of Undisclosed Liabilities. CORrestore and the Members
have no liabilities, obligations or indebtedness, and have not granted any
rights to purchase, license or use any of the Patent, the Proprietary
Information, the Products or the rights licensed under the Licenses, other
than those for which Somanetics will not be liable, and to which it will
not be subject, after the Closing Date.
6.1.6 Litigation and Claims. There is no action, lawsuit or proceeding
pending or threatened, nor is there any claim or investigation against
CORrestore or either Member in any court or before any federal, state,
municipal or other governmental department, agency or instrumentality,
domestic or foreign, or before any arbitrator affecting the Patent, the
Proprietary Information, the Products and the rights licensed under the
Licenses or that would adversely affect CORrestore's or either Member's
performance of its, his obligations under this Agreement. Neither
CORrestore nor either of the Members is subject to any consent decree,
order, injunction, judgment or other determination of any court or before
any Federal, State, municipal or other governmental department, agency or
instrumentality, domestic or foreign, which is applicable to the Patent,
the Proprietary Information, the Products and the rights licensed under the
Licenses or CORrestore's or either Member's performance of this Agreement.
6.1.7 Accredited Investor. Each of CORrestore, the Members and ▇▇▇▇▇ &
Company is an "accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Neither CORrestore nor ▇▇▇▇▇ & Company was formed for
the specific purpose of acquiring the First Warrant, the Second Warrant or
the underlying Common Shares and each either (1) has total assets in excess
of $5,000,000, or (2) all of its equity owners are "accredited investors".
Each of the Members is an individual, and either (1) has net worth
(including his spouse's net worth) in excess of $1,000,000, or (2) had
individual income in excess of $200,000 (or $300,000 with his spouse's
income) for each of 1998 and 1999 and is reasonably expected to have at
least that amount of income for 2000.
6.1.8 Sophistication. Each of CORrestore, the Members and ▇▇▇▇▇ &
Company either (1) has such knowledge and experience in financial and
business matters that it or he is capable of evaluating the merits and
risks of the potential purchase of the First Warrant, the Second Warrant
and the underlying Common Shares, or (2) has employed the services of an
independent investment advisor, attorney or accountant who qualifies as a
"purchaser representative", as such term is defined in Rule 501 promulgated
under the Securities Act, to evaluate the merits and risks of such an
investment on its, his behalf.
6.1.9 Economic Risk. Each of CORrestore, the Members and ▇▇▇▇▇ &
Company acknowledges and recognizes that an investment in the First
Warrant, the Second Warrant and the underlying Common Shares involves a
high degree of risk in that (1) it or he may not be able to liquidate the
investment, (2) transferability is extremely limited, and (3) it or he
could sustain the loss of the entire investment. The total consideration
given in exchange for the First Warrant, the Second Warrant and the
underlying Common Shares that CORrestore, the Members and ▇▇▇▇▇ & Company
might purchase would represent less than 10% of its, his net worth. Each of
CORrestore, the Members and ▇▇▇▇▇ & Company is able
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to bear the economic risk it or he would assume by acquiring the First
Warrant, the Second Warrant and the underlying Common Shares.
6.1.10 Investment Intent; Resale. Each of CORrestore, the Members and
▇▇▇▇▇ & Company is or will be acquiring the First Warrant, the Second
Warrant and the underlying Common Shares for investment, for its, his own
account, and not with a view to, or for sale in connection with, any
distribution of the First Warrant, the Second Warrant or the underlying
Common Shares. Each of CORrestore, the Members and ▇▇▇▇▇ & Company
acknowledges and recognizes that the First Warrant, the Second Warrant and
the underlying Common Shares will not be registered under the Securities
Act, the Michigan Uniform Securities Act or the securities statutes of any
other state or jurisdiction, that there is no present intention of so
registering the First Warrant, the Second Warrant and the underlying Common
Shares or any right of CORrestore, either of the Members or ▇▇▇▇▇ & Company
to cause them to be registered, that the First Warrant, the Second Warrant
and the underlying Common Shares cannot be resold (and each of CORrestore,
the Members and ▇▇▇▇▇ & Company covenants that it or he will not resell
them) unless they are subsequently registered under applicable Federal and
State securities laws or unless exemptions from all such applicable
registration requirements are available, and, consequently, CORrestore,
each of the Members and ▇▇▇▇▇ & Company have to bear the economic risk of
the investment for an indefinite period of time. Each of CORrestore, the
Members and ▇▇▇▇▇ & Company acknowledges and recognizes that the
certificates or other documents evidencing the First Warrant, the Second
Warrant and any of the underlying Common Shares acquired by CORrestore,
either of the Members or ▇▇▇▇▇ & Company will be legended to indicate the
foregoing restrictions.
6.1.11 Independent Decision. Each of CORrestore, the Members and ▇▇▇▇▇
& Company has made its, his own investment decision concerning the First
Warrant, the Second Warrant and the underlying Common Shares. None of
CORrestore, either of the Members nor ▇▇▇▇▇ & Company has received, nor has
or will rely on, any representations, opinions or recommendations from
Somanetics concerning the potential investment, including, without
limitation, concerning the First Warrant, the Second Warrant and the
underlying Common Shares or Somanetics.
6.1.12 Information. At all times following CORrestore's, the Members'
and ▇▇▇▇▇ & Company's initial contact with Somanetics pertaining to the
Licenses and the First Warrant, the Second Warrant and the underlying
Common Shares, Somanetics has made available to each of CORrestore, the
Members and ▇▇▇▇▇ & Company the opportunity (1) to ask questions of, and
receive answers from, Somanetics and persons acting on its behalf
concerning Somanetics and the terms and conditions of the transactions
described in this Agreement, and (2) to obtain any additional information
and documents, to the extent Somanetics possessed such information or
documents or could acquire them without unreasonable effort or expense,
necessary to verify the accuracy of the information furnished to
CORrestore, either of the Members or ▇▇▇▇▇ & Company by Somanetics. Each of
CORrestore, the Members and ▇▇▇▇▇ & Company acknowledges receipt from
Somanetics of all information concerning the First Warrant, the Second
Warrant and the underlying Common Shares and Somanetics that any of them
requested and a copy of this Agreement, Somanetics' Annual Report on Form
10-K for the fiscal year ended
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November 30, 1999, its Quarterly Report on Form 10-Q for the first quarter
ended February 29, 2000, its Prospectus, dated March 31, 2000, as
supplemented by its Prospectus Supplement, dated April 11, 2000, its Proxy
Statement in connection with its 2000 Annual Meeting of Shareholders, its
Annual Report to Shareholders for the fiscal year ended November 30, 1999,
a copy of the First Warrant and the Second Warrant, and a description of
its Common Shares. Each of CORrestore, the Members and ▇▇▇▇▇ & Company is
assuming responsibility, and is not relying upon Somanetics in any manner
whatsoever, to verify, analyze and evaluate any information CORrestore,
either of the Members or ▇▇▇▇▇ & Company has received and any additional
information any of them has obtained or desires to obtain. Each of
CORrestore, the Members and ▇▇▇▇▇ & Company has been furnished, or will
obtain, all information any of them requests or desires to know before
acquiring the First Warrant, the Second Warrant or any of the underlying
Common Shares.
6.1.13 Status After Purchase. Each of CORrestore, the Members and
▇▇▇▇▇ & Company acknowledges and accepts that if it or he acquires the
First Warrant, the Second Warrant and the underlying Common Shares, it or
he will have only a minority interest in Somanetics with little, if any,
control over Somanetics or its business and no right to representation on
its Board of Directors.
6.1.14 Purchase Price. Each of CORrestore, the Members and ▇▇▇▇▇ &
Company acknowledges and accepts that the consideration for the First
Warrant, the Second Warrant and the underlying Common Shares and the terms
and exercise price of the First Warrant and the Second Warrant have been
arbitrarily set by Somanetics based primarily on its negotiations with
CORrestore, the Members and ▇▇▇▇▇ & Company, and the consideration is not
necessarily related to Somanetics' asset value, net worth, earnings
potential or other established criteria of value. Each of CORrestore, the
Members and ▇▇▇▇▇ & Company is assuming sole responsibility to evaluate the
fairness of the consideration.
6.1.15 Disclaimer. Each of CORrestore, the Members and ▇▇▇▇▇ & Company
acknowledges and accepts that Somanetics is not recommending the
acquisition of the First Warrant, the Second Warrant or the underlying
Common Shares or giving CORrestore, either of the Members or ▇▇▇▇▇ &
Company any representations, warranties or opinions whatsoever, including
any concerning such acquisition, the consideration for the First Warrant,
the Second Warrant or the underlying Common Shares, the terms or exercise
price of the First Warrant or the Second Warrant or Somanetics. Each of
CORrestore, the Members and ▇▇▇▇▇ & Company is assuming full responsibility
to independently evaluate its potential acquisition of the First Warrant,
the Second Warrant and the underlying Common Shares without any reliance on
Somanetics, and to obtain, verify and evaluate all material information
necessary or desired by CORrestore, either of the Members or ▇▇▇▇▇ &
Company to make its or his decision, including, without limitation,
information concerning Somanetics its directors, officers and principal
shareholders, its related party transactions, its financial condition and
needs, its business, its products, markets, customers, suppliers, and
competitors, its facilities, its contingent obligations, its securities and
their relative rights, preferences and privileges, and any potential
issuance of additional securities.
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6.2 Limitations on Representations. Nothing in this Agreement shall be
construed as:
6.2.1 A warranty or representation by CORrestore or the Members as to
the validity or scope of the Patent; or
6.2.2 A warranty or representation by CORrestore or the Members that
anything made, used, sold, or otherwise disposed of under any license
granted in this Agreement is or will be free from infringement of patents
of third parties, except as otherwise expressly provided in this Agreement;
or
6.2.3 A requirement that CORrestore or the Members shall file any
patent application, secure any patent, or maintain any patent in force,
except as otherwise expressly provided in Section 2.2; or
6.2.4 An obligation to bring or prosecute actions or suits against
third parties for infringement, except as otherwise expressly provided in
this Agreement; or
6.2.5 An obligation to furnish any manufacturing information or
similar information related to the Licensed Business, except as otherwise
expressly provided in this Agreement; or
6.2.6 Conferring a right to use in advertising, publicity, or
otherwise any trademark or trade name of CORrestore or the Members, except
as otherwise expressly permitted under the Name License; or
6.2.7 Granting by implication, estoppel or otherwise, any licenses or
rights other than as expressly provided in this Agreement.
6.3 Additional Limitation on Representations. CORrestore and the Members
make no representations and extend no warranties of any kind, either express or
implied, and assume no responsibilities whatsoever with respect to use, sale, or
other disposition by Somanetics or its vendees or other transferees of products
incorporating or made by use of (a) inventions licensed under this Agreement or
(b) information furnished under this Agreement, except as otherwise expressly
provided in this Agreement.
6.4 Representations and Warranties of Somanetics. Somanetics represents and
warrants to CORrestore and each of the Members the following as of the date of
this Agreement and as of the Closing Date:
6.4.1 Organization. Somanetics is a corporation, duly organized,
validly existing and in good standing under the laws of the State of
Michigan.
6.4.2 Authority Relative to this Agreement. Somanetics has all
requisite corporate power and authority to execute, deliver and comply with
its obligations under the terms of this Agreement. Execution, delivery and
performance by Somanetics of this Agreement have been duly authorized on
the part of Somanetics by all necessary action of its Board of Directors.
No other corporate action on the part of Somanetics is necessary to
authorize Somanetics' execution, delivery and performance of this
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Agreement. This Agreement has been duly and validly executed and delivered
by Somanetics and constitutes a valid and binding obligation of Somanetics,
enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally, and
except as may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding at law or in
equity.
6.4.3 Consents and Approvals; No Violation. Neither the execution and
delivery nor the performance by Somanetics of this Agreement, (a) will
require any authorization, consent or approval of any governmental or
regulatory authority or of any other person or entity, (b) will violate the
Articles of Incorporation or Bylaws of Somanetics, (c) will breach any
provision of, constitute a default under, or require the authorization or
consent of any governmental agency or body or any third party under any of
the provisions of, any authorization or order of any governmental agency or
body or any third party, or any note, lease, license, agreement or other
instrument or obligation to which Somanetics is a party, or by which it or
any of its properties or assets may be bound, or (d) will violate any
order, injunction or arbitration award, or any statute, law, rule,
regulation or ruling of any court or governmental authority, United States
or foreign, applicable to Somanetics or to any of its properties or assets.
6.4.4 Litigation and Claims. There is no action, lawsuit or proceeding
pending or threatened, nor is there any claim or investigation against
Somanetics in any court or before any federal, state, municipal or other
governmental department, agency or instrumentality, domestic or foreign, or
before any arbitrator that would adversely affect Somanetics' performance
of its obligations under this Agreement. Somanetics is not subject to any
consent decree, order, injunction, judgment or other determination of any
court or before any Federal, State, municipal or other governmental
department, agency or instrumentality, domestic or foreign, which is
applicable to Somanetics' performance of this Agreement.
7. COVENANTS.
7.1 Covenants of CORrestore and the Members.
7.1.1 Consents. On or before the Closing Date, CORrestore and the
Members shall use all reasonable efforts to obtain all of the consents and
approvals required to make the representation in Section 6.1.3 true.
CORrestore and the Members shall deliver evidence of such consents to
Somanetics on or before the Closing Date.
7.1.2 Limited Liability Company Approvals. CORrestore shall cause its
Members and manager to approve this Agreement and the Licenses described in
this Agreement and shall provide evidence of such approvals to Somanetics
at the Closing.
7.1.3 Patent Enforcement Assistance. CORrestore and the Members shall
provide all reasonable assistance reasonably requested by Somanetics to
enforce the Patent and Somanetics' rights under the Licenses.
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7.1.4 Confidentiality by CORrestore and the Members. Except as
authorized in writing by Somanetics or its successors (whether by sale or
other transfer of stock, sale or other transfer of assets or merger)
(references in this Section 7.1.4 to "Somanetics" include Somanetics and
all of its predecessors or successors), or as required by legal process,
CORrestore and the Members shall not at any time, either before, at or
after the Closing Date, disseminate, distribute, disclose, reveal, copy,
use, communicate or otherwise appropriate, either directly or indirectly,
through any individual, person or entity, any "Confidential Information"
(as defined in Section 7.1.4.1), and CORrestore and the Members shall
retain all such information in trust in a fiduciary capacity for the sole
use and benefit of Somanetics. Each of CORrestore and the Members
acknowledges that the Confidential Information is valuable, special and
unique to Somanetics' business under the Licenses and on which such
business depends, and is proprietary to Somanetics under the Licenses, and
that Somanetics wishes to protect such Confidential Information by keeping
it secret and for the sole use and benefit of Somanetics. Each of
CORrestore and the Members shall take all steps reasonably necessary and
all steps reasonably requested by Somanetics to insure that all such
Confidential Information is kept secret and confidential for the sole use
and benefit of Somanetics. All records and other materials pertaining to
the Confidential Information, whether or not developed by CORrestore or
either of the Members shall be and remain subject to the Licenses in favor
of Somanetics. At any time during the term of the Licenses that Somanetics
so requests, each of CORrestore and the Members shall promptly deliver to
Somanetics all materials concerning any Confidential Information, the
Licensed Business (as defined in Section 7.1.4.2), copies of such materials
and any other materials under the Licenses which are in CORrestore's or
either of the Members' possession or under any of their control, including,
without limitation, any documents, records, files, lists and the like.
7.1.4.1 "Confidential Information". For purposes of this
Agreement, "Confidential Information" means and includes all
information known or used by Somanetics, CORrestore, either of the
Members or any of their Affiliates and marked "confidential" by
Somanetics, relating to the Patent, the Proprietary Information, the
Products, the rights licensed under the Licenses, the Licenses or the
Licensed Business, regardless of whether developed by or for
Somanetics, CORrestore, either of the Members or any of their
Affiliates by any person, which is maintained as confidential by
Somanetics, CORrestore or either of the Members and is not otherwise
explicitly, consciously, properly, legally and generally known (unless
it is generally known as a result of a breach of this Agreement or any
similar agreement) in any industry in which Somanetics or its
Affiliates is or may become engaged. Confidential Information
specifically includes, but is not limited to, such information,
whether now possessed or later obtained, concerning the Products, the
Procedures, and the plans, marketing, sales and inventory methods,
materials, processes, methods, procedures, devices used in the
Licensed Business by CORrestore, Somanetics or either of their
predecessors or permitted successors, business forms, prices,
investors, suppliers, organizations or other entities with which
CORrestore, Somanetics or either of their predecessors or successors
deals, contractors, representatives and customers of CORrestore,
Somanetics or either of their predecessors or successors, plans for
the development of new products and services and expansion into new
areas or
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markets, internal operations, financial data, financial plans,
salaries, commissions, purchasing policies, bidding practices or
procedures, pricing policies, advertising practices, customer
identities and lists, formulas, patterns, source codes, trade secrets,
and other proprietary or confidential information of any type,
together with all written, graphic and other materials relating to all
or any part of the same.
7.1.4.2 "Licensed Business". For purposes of this Agreement,
"Licensed Business" means and includes the business of developing,
making, manufacturing, marketing and selling or licensing the Products
and services relating thereto and commercially exploiting the Licenses
and the Patent, the Proprietary Information, the Products and the
rights licensed under the Licenses.
7.1.4.3 "Affiliate". For purposes of this Agreement, "Affiliate"
means and includes every person or entity who is on the date of this
Agreement or becomes during the term of the Licenses, directly or
indirectly, a shareholder, director, officer, partially- or
wholly-owned subsidiary, sister corporation, parent corporation,
successor, successor in interest or permitted assignee of the
applicable person or entity.
7.1.5 Non-Competition. During the shorter of (1) the term of the
Patent, and (2) the term of the Licenses (the "Period"), neither CORrestore
nor either of the Members shall, either directly or indirectly, or through
or for any individual, person or entity wherever located engage in any
activities, perform any services (including, without limitation, consulting
services) or conduct, maintain or operate any businesses relating to
surgical products or the Procedure that are competitive with, or in the
same line of business or activity as, the Licensed Business, or engage in
activities or services performed by, or sell products sold by, Somanetics
in the Licensed Business ("Competing Business").
7.1.6 Non-Solicitation. During the Period, neither CORrestore nor
either of the Members shall, either directly or indirectly, or through or
for any individual, person or entity wherever located, (1) solicit,
recruit, attempt to hire or hire any person who is then employed by, is a
consultant to, or is an agent of, Somanetics or who was employed by, a
consultant to, or an agent of, Somanetics at any time beginning 12 months
before the date in question, or (2) encourage, induce or attempt to induce,
or aid, assist or abet any other party or person in encouraging, inducing
or attempting to induce, any such employee, consultant or agent to alter or
terminate his employment, consultation or agency with Somanetics.
7.1.7 Conflicts of Interests. During the Period, neither CORrestore
nor either of the Members shall, unless approved in writing by the Board of
Directors or the Chief Executive Officer of Somanetics, (1) participate in
any way in the benefits of transactions between Somanetics and its
investors, suppliers or customers, or have personal financial transactions
with any of Somanetics' investors, suppliers or customers, including,
without limitation, having a financial interest in Somanetics' investors,
suppliers or customers (other than ownership of publicly-traded
securities), or making loans to, or receiving loans from, Somanetics'
investors, suppliers or customers, except pursuant to this
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Agreement, (2) realize a personal gain or advantage from a transaction in
which Somanetics has an interest, or use information obtained in connection
with this Agreement for its or his personal advantage or gain, (3) accept
any offer to serve as an officer, director, partner, consultant, or manager
with, or be employed in a technical capacity by, a person or entity which
is a competitor of Somanetics in the Licensed Business relating to surgical
products or the Procedure, or (4) participate in a hostile takeover attempt
of Somanetics.
7.1.8 Further Assurances. Each of CORrestore and the Members will
promptly prepare, execute and deliver to Somanetics such lists, instruments
and documents and cooperate with Somanetics in such other respects as
Somanetics may from time to time, before or after the Closing reasonably
request to carry out the terms of this Agreement.
7.2 Covenants of Somanetics.
7.2.1 Consents. On or before the Closing Date, Somanetics shall use
all reasonable efforts to obtain all of the consents and approvals required
to make the representation in Section 6.4.3 true. Somanetics shall deliver
evidence of such consents to CORrestore and the Members on or before the
Closing Date.
7.2.2 Corporate Approvals. Somanetics shall cause its Board of
Directors to approve this Agreement and the Licenses described in this
Agreement and shall provide evidence of such approval to CORrestore and the
Members at the Closing.
7.2.3 Patent Enforcement Assistance. Somanetics shall provide all
reasonable assistance reasonably requested by CORrestore or the Members to
enforce the Patent.
7.2.4 Confidentiality by Somanetics. Except as authorized in writing
by CORrestore or its successors (whether by sale or other transfer of
membership interests, sale or other transfer of assets or merger)
(references in this Section 7.2.4 to "CORrestore" include CORrestore and
all of its predecessors or successors), or as required by legal process,
Somanetics shall not at any time, either before, at or after the Closing
Date, disseminate, distribute, disclose, reveal, copy, use, communicate or
otherwise appropriate, either directly or indirectly, through any
individual, person or entity, any "CORrestore Confidential Information" (as
defined in Section 7.2.4.1), except that Somanetics may disseminate,
distribute, disclose, reveal, copy, use, communicate or otherwise
appropriate such information as required by applicable law or rules and
regulations of stock markets or for the purposes of exploiting the Licenses
and carrying on the Licensed Business, including, without limitation,
disclosing information to (1) the manufacturers of any of the Products or
any suppliers of components of any products to the extent necessary to
allow them to manufacture the Products or supply components, (2) potential
customers to the extent necessary to allow them to use the Products or
understand its benefits, (3) permitted assignees, transferees or
sublicensees of any of Somanetics' rights under this Agreement to the
extent necessary to allow them to exercise the rights granted to them, and
(4) employees and agents of Somanetics to the extent necessary to exploit
the Licenses granted to Somanetics in this Agreement. Somanetics
acknowledges that the CORrestore Confidential Information is valuable,
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special and unique to CORrestore and is proprietary to CORrestore and
licensed to Somanetics under the Licenses, and that CORrestore wishes to
protect such CORrestore Confidential Information by keeping it secret.
Somanetics shall take all steps reasonably necessary and all steps
reasonably requested by CORrestore to insure that all such CORrestore
Confidential Information is kept secret and confidential, subject to the
exceptions described in this Section 7.2.3. All records and other materials
pertaining to the CORrestore Confidential Information, whether or not
developed by Somanetics, CORrestore or either of the Members shall be and
remain subject to the Licenses in favor of Somanetics. At any time after
the termination of the Licenses that CORrestore so requests, Somanetics
shall promptly deliver to CORrestore all materials concerning any
CORrestore Confidential Information, copies of such materials and any other
materials under the Licenses which are in Somanetics' possession or under
its control, including, without limitation, any documents, records, files,
lists and the like.
7.2.4.1 "CORrestore Confidential Information". For purposes of
this Agreement, "CORrestore Confidential Information" means and
includes all information known or used by Somanetics, CORrestore,
either of the Members or any of their Affiliates and marked
"confidential" by CORrestore, relating to the Patent, the Proprietary
Information, the Products, the rights licensed under the Licenses, the
Licenses or the Licensed Business, regardless of whether developed by
or for Somanetics, CORrestore, either of the Members or any of their
Affiliates by any person, which is maintained as confidential by
Somanetics, CORrestore or either of the Members and is not otherwise
explicitly, consciously, properly, legally and generally known (unless
it is generally known as a result of a breach of this Agreement or any
similar agreement) in any industry in which Somanetics, CORrestore or
any of their Affiliates is or may become engaged. Confidential
Information specifically includes, but is not limited to, such
information, whether now possessed or later obtained, concerning the
Products, Procedures, trade secrets, and other proprietary or
confidential information of any type, together with all written,
graphic and other materials relating to all or any part of the same.
7.2.5 Reservation of Shares. During the term of the First Warrant and
the Second Warrant, Somanetics shall reserve out of its authorized but
unissued Common Shares, a sufficient number of Common Shares to issue them
to the holders of the First Warrant and the Second Warrant upon exercise of
those warrants.
7.2.6 Appointment of a Director. If within one year after the Closing
Date CORrestore designates in writing a person to serve as a director of
Somanetics, then at its next Board of Directors meeting, Somanetics will
cause its Board of Directors to increase its size by one member and appoint
the person designated by CORrestore as a director to fill the newly-created
vacancy in the class whose term expires at the next annual meeting of
shareholders. In connection with the next Annual Meeting of Shareholders,
Somanetics will use its reasonable efforts to have that designee elected as
a director of Somanetics.
7.2.7 Medical Advisory Board. Somanetics and CORrestore shall
cooperate with each other to establish a mutually acceptable medical
advisory board to provide
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Somanetics with information and advice on the Products, the application of
the Licenses, Somanetics' research programs relating to the Products, and
technical matters relating to the Products.
7.2.8 Further Assurances. Somanetics will promptly prepare, execute
and deliver to each of CORrestore and the Members such lists, instruments
and documents and cooperate with each of CORrestore and the Members in such
other respects as CORrestore or either of the Members may from time to
time, before or after the Closing reasonably request to carry out the terms
of this Agreement.
8. CONDITIONS TO CLOSING.
8.1 Conditions to Somanetics' Obligations. The obligations of Somanetics
under this Agreement are subject to the satisfaction of the following conditions
at or before the Closing; provided that Somanetics may waive the satisfaction of
any such condition:
8.1.1 Accuracy of CORrestore's and the Members' Representations and
Warranties. The representations and warranties made by CORrestore and the
Members in this Agreement, including, without limitation, the
representations and warranties in Section 6.1, shall be true and correct,
in all material respects, at and as of the Closing Date.
8.1.2 Compliance with Covenants. The covenants required to be
performed by CORrestore or either of the Members on or before the Closing,
including, without limitation, the covenants of CORrestore and the Members
in Section 7.1, shall have been so performed, in all material respects, on
or before the Closing Date, and CORrestore and the Members shall have
delivered evidence of such compliance to Somanetics on the Closing Date.
8.1.3 Certificate of CORrestore's Manager and the Members. CORrestore
and the Members shall have delivered to Somanetics a Certificate, dated as
of the Closing Date, signed by a manager of CORrestore on behalf of
CORrestore and by the Members certifying as to the fulfillment of the
conditions specified in Sections 8.1.1 and 8.1.2.
8.1.4 Consents. CORrestore and the Members shall have obtained the
material approvals and consents to the transactions described in this
Agreement required by Section 7.1.1.
8.2 Conditions to CORrestore's and the Members' Obligations. The
obligations of CORrestore and the Members under this Agreement are subject to
the satisfaction of the following conditions at or before the Closing; provided
that CORrestore and the Members may waive the satisfaction of any such
condition:
8.2.1 Accuracy of Somanetics' Representations and Warranties. The
representations and warranties made by Somanetics in this Agreement,
including, without limitation, the representations and warranties in
Section 6.4, shall be true and correct, in all material respects, at and as
of the Closing Date.
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8.2.2 Compliance with Covenants. The covenants required to be
performed by Somanetics before the Closing, including, without limitation,
the covenants of Somanetics in Section 7.2, shall have been so performed,
in all material respects, on or before the Closing Date, and Somanetics
shall have delivered evidence of such compliance to CORrestore and the
Members on the Closing Date.
8.2.3 Certificate of Somanetics' Officer. Somanetics shall have
delivered to CORrestore and the Members a Certificate, dated as of the
Closing Date, signed by an officer of Somanetics on behalf of Somanetics
certifying as to the fulfillment of the conditions specified in Sections
8.2.1 and 8.2.2.
8.2.4 Consents. Somanetics shall have obtained the material approvals
and consents to the transactions described in this Agreement required by
Section 7.2.1.
9. WARRANTIES; INDEMNIFICATION.
9.1 Survival. All representations, warranties, covenants and agreements by
Somanetics, CORrestore and the Members contained in this Agreement shall survive
the execution and delivery of this Agreement and the Closing Date.
9.2 CORrestore's Indemnification of Somanetics. CORrestore shall indemnify,
defend and hold harmless Somanetics, its successors, heirs and assigns, and any
parent, subsidiary or Affiliate of Somanetics and Somanetics' directors,
officers, shareholders, employees, agents and representatives ("Somanetics'
Personnel") from and against any demand, claim, action, cause of action,
lawsuit, contract, agreement, damage, liability, loss, cost, expense, debt,
obligation, tax or assessment, whether known or unknown, fixed, actual, accrued,
or contingent, liquidated or unliquidated, including, without limitation,
interest, penalties, reasonable attorneys' fees and costs and expenses incident
to proceedings, investigations or the defense of any claim, whether or not
litigation has commenced ("Somanetics' Damages"), incurred by, imposed upon or
asserted against Somanetics or Somanetics' Personnel, arising out of, resulting
from, or attributable or relating to, and to pay Somanetics on demand the full
amount of any sum which Somanetics pays or becomes obligated to pay on account
of, any of the following:
9.2.1 Any breach of, or failure to perform, any of CORrestore's or
either of the Members' representations, warranties, covenants or agreements
contained in this Agreement or in any of the documents executed in
connection with this Agreement;
9.2.2 Any liabilities or obligations of CORrestore or either of the
Members, including, without limitation, any obligations for any
Developments or any funding or assistance in connection with any further
Developments, except as otherwise specifically provided in this Agreement;
9.2.3 Any action, suit, claim, or legal, administrative, arbitration,
governmental or other proceeding or investigation against Somanetics or
Somanetics' Personnel or any Somanetics' Damages which are in connection
with acts of CORrestore or either of the Members occurring before the
Closing Date; or
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9.2.4 Any indemnification claim expressly provided elsewhere in this
Agreement.
9.3 Somanetics' Indemnification of CORrestore and the Members. Somanetics
shall indemnify, defend and hold harmless CORrestore, the Members and their
successors, heirs and assigns, and any parent, subsidiary or Affiliate of
CORrestore or the Members and CORrestore's members, managers, employees, agents
and representatives ("CORrestore's Personnel") from and against any demand,
claim, action, cause of action, lawsuit, contract, agreement, damage, liability,
loss, cost, expense, debt, obligation, tax or assessment, whether known or
unknown, fixed, actual, accrued, or contingent, liquidated or unliquidated,
including, without limitation, interest, penalties, reasonable attorneys' fees
and costs and expenses incident to proceedings, investigations or the defense of
any claim, whether or not litigation has commenced ("CORrestore's Damages"),
incurred by, imposed upon or asserted against CORrestore, either of the Members
or CORrestore's Personnel, arising out of, resulting from, or attributable or
relating to, and to pay CORrestore or the applicable Member on demand the full
amount of any sum which CORrestore or the applicable Member pays or becomes
obligated to pay on account of, any of the following:
9.3.1 Any breach of, or failure to perform, any of Somanetics'
representations, warranties, covenants or agreements contained in this
Agreement or in any of the documents executed in connection with this
Agreement;
9.3.2 Any obligations of Somanetics specifically provided in Sections
3 and 4;
9.3.3 Any product liability or similar claims related to
manufacturing, making, marketing, use or sale, of Products and caused by
defects in design, materials or workmanship of the Products caused by
Somanetics or its distributors, sub-licensees or agents or otherwise
arising from Somanetics' conduct of the Licensed Business; or
9.3.4 Any action, suit, claim, or legal, administrative, arbitration,
governmental or other proceeding or investigation against CORrestore,
either of the Members CORrestore's Personnel or any CORrestore's Damages
which are in connection with acts of Somanetics and not subject to Section
9.2; or
9.3.5 Any indemnification claim expressly provided elsewhere in this
Agreement.
9.4 Defense of Claims. If any party ("Indemnified Party") receives notice
of, or discovers, any claim or the commencement of any action for which the
other party or parties ("Indemnitor") is or may be liable under this Agreement
("Indemnified Claim"), the Indemnified Party shall promptly notify the
Indemnitor of such claim or action in writing and shall provide the Indemnitor
with copies of any pleadings or other documents evidencing such Indemnified
Claim. The Indemnitor shall be entitled to participate in the defense of any
Indemnified Claim, and, if it so elects, to assume the defense of the
Indemnified Claim, with counsel reasonably satisfactory to the Indemnified
Party. After written notice from the Indemnitor to the Indemnified Party of such
election to assume the defense, the Indemnitor shall not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by the
Indemnified
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Party in connection with the defense of the Indemnified Claim, other than costs
and expenses of the Indemnified Party incurred at the request of the Indemnitor
or incurred after the Indemnitor has ceased to assume the defense of the
Indemnified Claim or indicated its intention to do so. The assumption of the
defense of any such Indemnified Claim shall not be deemed an admission by the
Indemnitor that it is liable for any such Indemnified Claim. The Indemnitor may,
at its election, settle or compromise any Indemnified Claim if such settlement
is paid for by the Indemnitor and completely releases the Indemnitee, but the
Indemnified Party shall not settle or compromise any Indemnified Claim without
the prior consent of the Indemnitor, unless the Indemnitor shall have failed or
refused to assist the Indemnified Party in the defense of such Indemnified Claim
or shall unreasonably withhold its consent to a proposed settlement or
compromise of such claim. The parties shall use their reasonable efforts to
agree on whether Somanetics' Damages or CORrestore's Damages exist, and if so,
the amount. Any amounts determined to be owed shall be paid within 30 days of
such determination. The parties agree to cooperate reasonably with each other in
the defense of claims under this Agreement.
9.5 Patent Infringement Claims. If any party discovers facts or events
relating to a potential infringement of the Patent by a third party, such party
shall promptly give notice of such facts or events to the other parties.
Somanetics shall have the right, exercisable by written notice to the other
parties within 120 days after such notice is given to the parties, to prosecute
such infringement claim at its own cost and expense, and if it prosecutes such
claim, to retain any resulting recovery received. If Somanetics does not provide
such notice within such 120 day period or does not prosecute such claim with
reasonable diligence after providing such notice, CORrestore and the Members
shall have the right, exercisable by written notice to the other parties within
120 days after the later of the end of Somanetics' 120-day period and the date
Somanetics ceases to prosecute such claim with reasonable diligence, to
prosecute such infringement claim at its own cost and expense, and if it
prosecutes such claim, to retain any resulting recovery received. Any party may
prosecute such claim, at its own cost and expense, and may retain any resulting
recovery received, after the expiration of all of the foregoing periods. The
excess, if any, of the gross amount of any resulting recovery received by
Somanetics over the amount of the costs and expenses of prosecuting such
infringement claim incurred by Somanetics shall constitute "Net Sales" for
purposes of this Agreement, including the Second Warrant.
9.6 Limitation of Liability.
9.6.1 CORrestore's Limit. Notwithstanding anything in this Agreement
to the contrary, CORrestore shall not be liable to indemnify any of
Somanetics' Personnel with respect to Somanetics' Personnel's aggregate
Indemnified Claims in excess of the aggregate royalty and consulting fees
paid by Somanetics to CORrestore pursuant to Section 4.1 or 4.4.
9.6.2 Somanetics' Limit. Notwithstanding anything in this Agreement to
the contrary, Somanetics shall not be liable to indemnify any of
CORrestore's Personnel with respect to CORrestore's Personnel's aggregate
Indemnified Claims in excess of the aggregate royalty and consulting fees
paid by Somanetics to CORrestore pursuant to Section 4.1 or 4.4.
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10. MISCELLANEOUS.
10.1 Injunction. Each of CORrestore and the Members acknowledges and agrees
that the covenants and undertakings contained in Sections 7.1.4, 7.1.5, 7.1.6,
and 7.1.7 of this Agreement, and Somanetics acknowledges and agrees that the
covenants and undertakings contained in Section 7.2.4, relate to matters which
are of a special, unique and extraordinary character and that a violation of any
of those terms of this Agreement will cause irreparable injury to the other
parties and the Licensed Business, and that the amount of such injury will be
difficult, if not impossible, to estimate or determine and cannot adequately be
compensated by monetary damages. Therefore, each of CORrestore and the Members,
on the one hand, and Somanetics, on the other hand, acknowledges that the other
parties shall be entitled, in addition to all other rights and remedies
available under this Agreement and applicable law, as a matter of course, to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by any of the other parties and by such other persons as the court
shall order. Each of the parties waives any requirement that the other parties
post any bond in connection with obtaining such relief or in connection with any
proceeding or appeal with respect to any such relief obtained.
10.2 Brokerage. All negotiations relative to this Agreement and the
transactions contemplated in this Agreement have been carried on by the parties
to this Agreement directly without the intervention of any person, except for
▇▇▇▇▇ & Company, and such negotiations, and the consummation of the transactions
under this Agreement, will not result in any liability by any party for any
finder's fee, brokerage commission or other similar fee, except for the fee to
▇▇▇▇▇ & Company, which will be paid by Somanetics as provided in Section 4. Each
party (the "Party") shall indemnify, defend and hold the other parties harmless
from and against any claim for brokerage commissions or finder's fees or other
commissions or fees resulting from any actions of the Party which are not in
accordance with the preceding sentence.
10.3 Expenses. Each party to this Agreement shall pay its own expenses in
connection with the negotiation, execution and performance of this Agreement,
the transactions described in this Agreement, and all things required to be done
by them pursuant to this Agreement, including counsel fees, brokerage, finder or
financial advisor fees, filing fees and accounting fees, except as otherwise
expressly provided in this Agreement.
10.4 Transfer and Other Taxes. Any sales, use, transfer, excise, recording,
documentary and similar taxes applicable to the granting of the Licenses or the
filing of any documents evidencing the granting of such Licenses shall be paid
by CORrestore.
10.5 No Disclosures. The parties acknowledge and agree that the
negotiations and discussions between the parties with respect to this
transaction have been confidential. None of CORrestore, either of the Members or
Somanetics shall make any public disclosure or publicity release pertaining to
the existence or subject matter of this Agreement without the consent of the
other parties; provided, however, that the parties and their directors,
officers, employees and agents shall be permitted to make such disclosures to
the public, to stock exchanges, to The Nasdaq Stock Market or to governmental
agencies as is reasonably deemed necessary to comply with any applicable
securities laws or the policies of The Nasdaq Stock Market or other laws, and
Somanetics shall be permitted to disclose the terms of this Agreement in its
securities filings
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and attach a copy of this agreement as an exhibit to any such filings; provided
that once this Agreement is executed, any of the parties may without restriction
disclose the existence of this Agreement.
10.6 Notices. Any notice or other communication required or which may be
given under this Agreement shall be in writing and either delivered personally
to the addressee, telegraphed, telecopied or telexed to the addressee, sent by
overnight courier to the addressee or mailed, certified or registered mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed, telecopied or telexed to the addressee, or, if sent by overnight
courier, one business day after the date so sent, or, if mailed, three business
days after the date of mailing, as follows:
If to CORrestore: CORrestore, LLC
Room 62-598, Building CHS
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
If to the Members: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
Room 62-598, Building CHS
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
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With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
If to Somanetics: Somanetics Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
Any of the foregoing may change its address for notices by notice to the other
parties.
10.7 Entire Agreement. This Agreement, including the other documents
referred to in this Agreement, contains the entire agreement of the parties with
respect to the Licenses and the other transactions described in this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement or in other documents executed in connection with this Agreement. This
Agreement supersedes all prior agreements, commitments and understandings,
written or oral, between the parties with respect to such transactions,
including, without limitation, the letter of intent between the parties, dated
as of November 30, 1999, and any such prior agreements or understandings are
merged into this Agreement.
10.8 Governing Law. The laws of the State of Michigan shall govern this
Agreement, its construction, and the determination of any rights, duties or
remedies of the parties arising out of or relating to this Agreement (regardless
of the laws that might otherwise govern under applicable Michigan principles of
conflicts of law), including, without limitation, matters of validity,
construction, effect, performance and remedies.
10.9 Arbitration.
10.9.1 The parties agree that any dispute, claim or controversy
relating in any way to this Agreement shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), with judgment upon the award rendered by
the arbitrator to be entered in any court of competent jurisdiction.
Notwithstanding the foregoing or the then-current specified Commercial
Arbitration
29
30
Rules of the AAA, the following shall apply with respect to the arbitration
proceeding: (i) the arbitration proceeding shall be conducted by three (3)
arbitrators; and (ii) the arbitrators may grant any relief or remedy which
the arbitrator deems just and equitable. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for a temporary
restraining order, preliminary injunction, or other interim or conservatory
relief, as necessary, without breach of this Section and without any
abridgment of the powers of the arbitrators. Any arbitration or litigation
arising out of or relating to this Agreement shall be commenced and
conducted in Georgia.
10.9.2 Each party to the arbitration is to pay an equal part of the
deposit fixed by the AAA. Notwithstanding the determination of the
arbitrator (i) all costs associated with the arbitration and imposed by the
AAA or the arbitrator shall be borne by the party that is not the
prevailing party in the arbitration, and (ii) each party to the arbitration
shall be responsible for the attorneys' fees and other professional fees
incurred by the other party in connection with the arbitration if and to
the extent that the other party prevails. Determinations of such arbitrator
will be final and binding upon the parties to the arbitration, and judgment
upon the award rendered by the arbitrator may be entered in any court
having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case
may be. Pursuant to MCLA Section 600.5001 the parties agree that a judgment
of any Michigan Circuit Court may be rendered upon any arbitration award
made pursuant to this Section. The arbitrator shall apply the law of the
State of Michigan without giving effect to its conflict of law rules.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signatures.
10.11 Interpretation. The headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement. All
references to "Sections" and "Exhibits" in this Agreement are, unless
specifically indicated otherwise, references to sections of, or exhibits to,
this Agreement. Whenever the singular is used, the same shall include the plural
and vice versa, where appropriate. Words of any gender shall include each other
gender where appropriate. The Exhibits to this Agreement are a part of this
Agreement as if set forth in full in this Agreement.
10.12 Severability. The provisions of this Agreement shall be deemed
severable, and if any provision of this Agreement is determined to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
have no effect on the other provisions of this Agreement, which shall remain
valid, operative and enforceable. In addition, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
10.13 Waiver and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions of this
Agreement may
30
31
be waived, only by a written instrument signed by the parties or, in the case of
a waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of such right, power or privilege, nor shall any waiver on the part of
any party of any right, power or privilege under this Agreement, nor any single
or partial exercise of any right, power or privilege under this Agreement,
preclude any other or further exercise of such right, power or privilege under
this Agreement.
10.14 Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties to this Agreement and their
respective permitted successors and assigns; provided that the parties may not
assign or transfer any of their rights or delegate any of their obligations
under this Agreement without the prior written consent of the other parties, and
any purported assignment or transfer by any party that is not in compliance with
the foregoing is void.
10.15 Acknowledgment. The parties to this Agreement acknowledge and agree
that they are sophisticated business people, that they have sufficient knowledge
and expertise in business and financial matters to evaluate the merits and risks
associated with the execution and performance of this Agreement, including the
Exhibits and all related documents and agreements, that they have fully read and
fully understand all of the terms and provisions of this Agreement, the attached
Exhibits and all related documents and agreements, that they have been
represented by competent legal counsel of their own choosing and that they
executed this Agreement, the Exhibits and all related documents and agreements,
freely, without duress or coercion and with full knowledge of their significance
and consequences.
10.16 Limitations. In no event shall any of the Members, either jointly or
severally, be liable for any sums or damages to Somanetics in excess of the
amounts actually received by that Member as a result of this Agreement. The
Members and CORrestore disclaim all warranties, other than those expressly set
forth herein, including all implied warranties of merchantability and fitness
for a particular purpose. In no event will CORrestore or any of the Members be
liable for any lost profits, consequential damages or any other indirect
damages, even if they were informed of the possibility.
31
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the introductory paragraph of this Agreement.
CORRESTORE: CORRESTORE, LLC
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Its: Project Manager
-----------------------
THE MEMBERS: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SOMANETICS: SOMANETICS CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Its: President & CEO
----------------------
The undersigned is signing this Agreement solely for the purposes of making
its representations and warranties contained in Sections 6.1.7 through 6.1.15.
▇▇▇▇▇ & COMPANY
By: /s/ ▇▇▇ ▇▇▇▇▇
---------------------------------
Its: President
----------------------
32
33
EXHIBIT B
WARRANT AGREEMENT
Dated as of: June 2, 2000
To: [CORrestore, LLC] [▇▇▇▇▇ & Company]
Pursuant to resolutions of the Board of Directors of Somanetics
Corporation, a Michigan corporation (the "Company"), and pursuant to the License
Agreement, dated as of June 2, 2000, among the Company, CORrestore, LLC,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, M.D., and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D. (the
"Agreement"), the Company hereby grants to you the right to purchase up to
[Three Hundred Eighty] [Twenty] Thousand ([380,000] [20,000]) Common Shares, par
value $.01 per share, of the Company (the "Shares") at $3.00 per Share, upon the
terms and conditions contained in this Warrant Agreement and subject to the
terms and conditions of the Agreement (the "Warrant"). Capitalized terms used in
this Warrant Agreement but not defined in this Warrant Agreement have the
meanings given them in the Agreement.
1. This Warrant and the Shares issuable upon exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended, the Michigan
Uniform Securities Act or the securities statutes of any other state or
jurisdiction (collectively, the "Securities Acts"). The Warrant and the Shares
issuable upon exercise of the Warrant are restricted securities and may not be
pledged, hypothecated, sold or transferred in the absence of an effective
registration statement for the Warrant or the Shares, as applicable, under the
Securities Acts or an opinion of counsel, satisfactory in form and substance to
the Company, that registration of such pledge, hypothecation, sale or transfer
of this Warrant or Shares is not required under the Securities Act and that
registration of the sale of the Shares upon exercise of the Warrant by the
transferee will not require registration under the Securities Acts.
2. (a) Subject to the other terms of this Warrant Agreement, you may
exercise the Warrant in accordance with the following schedule:
(i) Commencing June 2, 2000, [290,000] [10,000] of the Shares may be
purchased.
(ii) Commencing on the date the Company receives 510(k) clearance or
approval of a PMA application from the FDA to market the Products in the
United States, an additional [45,000] [5,000] of the Shares may be
purchased.
(iii) Commencing on the date the Company receives the CE ▇▇▇▇ with
respect to the Products, an additional [45,000] [5,000] of the Shares may
be purchased.
Notwithstanding anything in this Warrant Agreement to the contrary, if the
Company (1) merges with any other entity, or (2) transfers all or substantially
all of its properties and assets to any other entity, or (3) effects a statutory
share exchange, capital reorganization or reclassification, in each case only if
holders of the Company's Common Shares immediately before the transaction hold
less than 50% of the surviving entity's (or its ultimate parent's) outstanding
voting securities immediately after the transaction (each, a "Transaction"),
then, and in each such case, if and only if (1) the Transaction includes the
Licenses, and (2) the consideration received by the Company's shareholders in
the Transaction has a fair market value (as determined in good faith by the
Company's Board of Directors) of at least $10.00 per Company Common Share, the
34
Warrant shall be exercisable to purchase all of the Shares, to the extent not
already purchased, upon the consummation of the Transaction.
(b) Subject to the next two sentences, the Warrant shall expire (to
the extent not previously exercised) on June 1, 2005. Under the Agreement, the
"Licenses" (as defined in the Agreement) may terminate as provided in Section
1.11 of the Agreement. Upon any such termination, (1) the portion of this
Warrant that is exercisable at the date of termination of the Licenses shall
continue to be exercisable for 90 days after such termination (or the remaining
term of this Warrant if such termination is pursuant to Section 1.11.5 of the
Agreement) and shall then expire and be cancelled, and (2) the portion of this
Warrant that is not exercisable at the date of termination of the Licenses shall
expire and be cancelled.
3. This Warrant shall be exercised by giving a written notice of exercise
to the Treasurer of the Company. Such notice shall specify the number of Shares
to be purchased and shall be accompanied by payment in full (in the manner set
forth in Paragraph 10 of the Amended and Restated Somanetics Corporation 1997
Stock Option Plan (the "1997 Plan"), which paragraph is incorporated into this
Warrant Agreement by reference and shall bind you and the Company as if set
forth in full in this Warrant Agreement) of the aggregate exercise price for the
number of Shares purchased, and, unless a current registration statement is in
effect covering the resale of Shares acquired upon exercise of this Warrant, by
a representation that the Shares are being acquired for your own account, for
investment and not with a view to the resale or distribution of the Shares and
that any subsequent offer for sale or sale of any such Shares shall be made
either pursuant to (1) a Registration Statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), which Registration
Statement has become effective and is current with respect to the Shares being
offered and sold, or (2) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption you shall, before any
offer for sale or sale of such Shares, obtain a favorable written opinion from
counsel approved by the Company as to the availability of such exemption. The
Company shall endorse an appropriate legend referring to the foregoing
restriction upon the certificate or certificates representing any shares issued
or transferred upon exercise of this Warrant. Such exercise shall be effective
only upon the actual receipt of such written notice, of the exercise price, and
of the representation described above, and no rights or privileges of a
shareholder of the Company in respect of any of the Shares issuable upon the
exercise of any part of the Warrant shall inure to you, or any other person
entitled to exercise this Warrant, unless and until certificates representing
such Shares shall have been issued, and prior to such issuance no adjustment
shall be made for dividends, distributions or other rights in respect of such
Shares, except as provided in paragraphs 5 and 6.
4. If upon exercise of this Warrant there shall be payable by the Company
or a subsidiary any amount for income tax withholding, in the Company's Board of
Directors' sole discretion, either you shall pay such amount to the Company, or
the number of Shares delivered by the Company to you shall be appropriately
reduced, to reimburse the Company for such payment. The Company's Board of
Directors may, in its sole discretion, permit you to satisfy such withholding
obligations, in whole or in part, by electing to have the number of Shares
delivered or deliverable by the Company upon exercise of this Warrant
appropriately reduced, or by electing to tender Common Shares back to the
Company subsequent to exercise of this Warrant, to reimburse the Company for
such income tax withholding. The Company's Board of Directors may make such
other arrangements with respect to income tax withholding as it shall determine.
2
35
5. The provisions set forth in Paragraph 16 of the 1997 Plan are
incorporated into this Warrant Agreement by reference and shall bind you and the
Company as if set forth in full in this Warrant Agreement. References in such
Paragraph 16 to "Participant", "stock option" and "Plan" shall be deemed
references to you, this Warrant and this Warrant Agreement, respectively, for
all purposes under this Warrant Agreement.
7. Subject to Paragraph 16 of the 1997 Plan, after the date of this Warrant
Agreement, if a dividend is declared upon the Company's outstanding Common
Shares payable in Company Common Shares, or if the outstanding Company Common
Shares are changed into or exchanged for a different number or kind of
securities or other consideration of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger, statutory share exchange or otherwise, or if there shall be any
other change in the number or kind of outstanding Company Common Shares or of
any securities or other consideration into which such Common Shares shall have
been changed or for which they shall have been exchanged, then the number of
Common Shares then subject to this Warrant shall be adjusted to equal the number
and kind of securities or other consideration that would be owned by the Warrant
holder if this Warrant had been exercised immediately before the date fixed for
determining the shareholders entitled to participate in such transaction. In the
case of any such substitution or adjustment, the exercise price in this Warrant
Agreement for each Share before such substitution or adjustment shall be the
exercise price for all securities or other consideration that have been
substituted for such Share or to which such Share shall have been adjusted. No
such adjustment or substitution shall require the Company to sell or issue a
fractional share, and the total substitution or adjustment with respect to this
Warrant Agreement shall be limited accordingly.
8. This Warrant and the Shares receivable upon exercise of this Warrant
have not been registered under the Securities Act, the Michigan Uniform
Securities Act or the securities statutes of any other state or jurisdiction
(collectively, the "Securities Laws"). This Warrant and the Shares receivable
upon exercise of this Warrant are "restricted securities" as defined in Rule 144
under the Securities Act, and may not be pledged, hypothecated, sold or
transferred without registration under the Securities Laws or an exemption from
such registration requirements, such as Rule 144.
Very truly yours,
SOMANETICS CORPORATION,
a Michigan corporation
By:
---------------------------------------
Its:
---------------------------------
The above is agreed to and
accepted:
[CORrestore, LLC] [▇▇▇▇▇ & Company]
By:
----------------------------
Its:
------------------
Dated:
--------------------
3
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EXHIBIT C
WARRANT AGREEMENT
Dated as of: ,
------------ -----
To: [CORrestore, LLC] [▇▇▇▇▇ & Company]
Pursuant to resolutions of the Board of Directors of Somanetics
Corporation, a Michigan corporation (the "Company"), and pursuant to the License
Agreement, dated as of June 2, 2000, among the Company, CORrestore, LLC,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, M.D., and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D. (the
"Agreement"), the Company hereby grants to you the right to purchase up to [One
Million Nine Hundred Twenty Thousand] [One Hundred Eighty Thousand] ([1,920,000]
[180,000]) Common Shares, par value $.01 per share, of the Company (the
"Shares") at $3.00 per Share, upon the terms and conditions contained in this
Warrant Agreement and subject to the terms and conditions of the Agreement (the
"Warrant"). Capitalized terms used in this Warrant Agreement but not defined in
this Warrant Agreement have the meanings given them in the Agreement.
1. This Warrant and the Shares issuable upon exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended, the Michigan
Uniform Securities Act or the securities statutes of any other state or
jurisdiction (collectively, the "Securities Acts"). The Warrant and the Shares
issuable upon exercise of the Warrant are restricted securities and may not be
pledged, hypothecated, sold or transferred in the absence of an effective
registration statement for the Warrant or the Shares, as applicable, under the
Securities Acts or an opinion of counsel, satisfactory in form and substance to
the Company, that registration of such pledge, hypothecation, sale or transfer
of this Warrant or Shares is not required under the Securities Act and that
registration of the sale of the Shares upon exercise of the Warrant by the
transferee will not require registration under the Securities Acts.
2. (a) Subject to the other terms of this Warrant Agreement, you may
exercise the Warrant to purchase the following number of Shares at the time the
Company's cumulative "net sales" of the Products reach the following levels:
Additional
Net Sales Shares
--------- ------
$5,000,000 [213,330] [20,000]
$10,000,000 [213,330] [20,000]
$20,000,000 [213,340] [20,000]
$35,000,000 [320,000] [30,000]
$55,000,000 [426,000] [40,000]
$80,000,000 [534,000] [50,000]
Notwithstanding anything in this Warrant Agreement to the contrary, if the
Company (1) merges with any other entity, or (2) transfers all or substantially
all of its properties and assets to any other entity, or (3) effects a statutory
share exchange, capital reorganization or reclassification, in each case only if
holders of the Company's Common Shares immediately before the transaction hold
less than 50% of the surviving entity's (or its ultimate parent's) outstanding
voting securities immediately after the transaction (each, a "Transaction"),
then, and in each such case, if and only if (1) the Transaction includes the
Licenses, and (2) the consideration received by the Company's shareholders in
the Transaction has a fair market value (as determined in good faith
37
by the Company's Board of Directors) of at least $10.00 per Company Common
Share, the Warrant shall be exercisable to purchase all of the Shares, to the
extent not already purchased, upon the consummation of the Transaction.
(b) Subject to the next two sentences, the Warrant shall expire (to
the extent not previously exercised) on _________, 20__. Under the Agreement,
the "Licenses" (as defined in the Agreement) may terminate as provided in
Section 1.11 of the Agreement. Upon any such termination, (1) the portion of
this Warrant that is exercisable at the date of termination of the Licenses
shall continue to be exercisable for 90 days after such termination (or the
remaining term of this Warrant if such termination is pursuant to Section 1.11.5
of the Agreement) and shall then expire and be cancelled, and (2) the portion of
this Warrant that is not exercisable at the date of termination of the Licenses
shall expire and be cancelled.
3. This Warrant shall be exercised by giving a written notice of exercise
to the Treasurer of the Company. Such notice shall specify the number of Shares
to be purchased and shall be accompanied by payment in full (in the manner set
forth in Paragraph 10 of the Amended and Restated Somanetics Corporation 1997
Stock Option Plan (the "1997 Plan"), which paragraph is incorporated into this
Warrant Agreement by reference and shall bind you and the Company as if set
forth in full in this Warrant Agreement) of the aggregate exercise price for the
number of Shares purchased, and, unless a current registration statement is in
effect covering the resale of Shares acquired upon exercise of this Warrant, by
a representation that the Shares are being acquired for your own account, for
investment and not with a view to the resale or distribution of the Shares and
that any subsequent offer for sale or sale of any such Shares shall be made
either pursuant to (1) a Registration Statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), which Registration
Statement has become effective and is current with respect to the Shares being
offered and sold, or (2) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption you shall, before any
offer for sale or sale of such Shares, obtain a favorable written opinion from
counsel approved by the Company as to the availability of such exemption. The
Company shall endorse an appropriate legend referring to the foregoing
restriction upon the certificate or certificates representing any shares issued
or transferred upon exercise of this Warrant. Such exercise shall be effective
only upon the actual receipt of such written notice, of the exercise price, and
of the representation described above, and no rights or privileges of a
shareholder of the Company in respect of any of the Shares issuable upon the
exercise of any part of the Warrant shall inure to you, or any other person
entitled to exercise this Warrant, unless and until certificates representing
such Shares shall have been issued, and prior to such issuance no adjustment
shall be made for dividends, distributions or other rights in respect of such
Shares, except as provided in paragraphs 5 and 6.
4. If upon exercise of this Warrant there shall be payable by the Company
or a subsidiary any amount for income tax withholding, in the Company's Board of
Directors' sole discretion, either you shall pay such amount to the Company, or
the number of Shares delivered by the Company to you shall be appropriately
reduced, to reimburse the Company for such payment. The Company's Board of
Directors may, in its sole discretion, permit you to satisfy such withholding
obligations, in whole or in part, by electing to have the number of Shares
delivered or deliverable by the Company upon exercise of this Warrant
appropriately reduced, or by electing to tender Common Shares back to the
Company subsequent to exercise of this Warrant, to reimburse the Company for
such income tax withholding. The Company's Board of Directors may make such
other arrangements with respect to income tax withholding as it shall determine.
2
38
5. The provisions set forth in Paragraph 16 of the 1997 Plan are
incorporated into this Warrant Agreement by reference and shall bind you and the
Company as if set forth in full in this Warrant Agreement. References in such
Paragraph 16 to "Participant", "stock option" and "Plan" shall be deemed
references to you, this Warrant and this Warrant Agreement, respectively, for
all purposes under this Warrant Agreement.
7. Subject to Paragraph 16 of the 1997 Plan, after the date of this Warrant
Agreement, if a dividend is declared upon the Company's outstanding Common
Shares payable in Company Common Shares, or if the outstanding Company Common
Shares are changed into or exchanged for a different number or kind of
securities or other consideration of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger, statutory share exchange or otherwise, or if there shall be any
other change in the number or kind of outstanding Company Common Shares or of
any securities or other consideration into which such Common Shares shall have
been changed or for which they shall have been exchanged, then the number of
Common Shares then subject to this Warrant shall be adjusted to equal the number
and kind of securities or other consideration that would be owned by the Warrant
holder if this Warrant had been exercised immediately before the date fixed for
determining the shareholders entitled to participate in such transaction. In the
case of any such substitution or adjustment, the exercise price in this Warrant
Agreement for each Share before such substitution or adjustment shall be the
exercise price for all securities or other consideration that have been
substituted for such Share or to which such Share shall have been adjusted. No
such adjustment or substitution shall require the Company to sell or issue a
fractional share, and the total substitution or adjustment with respect to this
Warrant Agreement shall be limited accordingly.
8. This Warrant and the Shares receivable upon exercise of this Warrant
have not been registered under the Securities Act, the Michigan Uniform
Securities Act or the securities statutes of any other state or jurisdiction
(collectively, the "Securities Laws"). This Warrant and the Shares receivable
upon exercise of this Warrant are "restricted securities" as defined in Rule 144
under the Securities Act, and may not be pledged, hypothecated, sold or
transferred without registration under the Securities Laws or an exemption from
such registration requirements, such as Rule 144.
Very truly yours,
SOMANETICS CORPORATION,
a Michigan corporation
By:
---------------------------------------
Its:
-------------------------------
The above is agreed to and
accepted:
[CORrestore, LLC] [▇▇▇▇▇ & Company]
By:
----------------------------
Its:
------------------
Dated:
--------------------
3