1
EXHIBIT 99.2
SETTLEMENT AGREEMENT
THIS AGREEMENT made and entered into this 12th day of July,
2001, (the "Effective Date") by and between Vascular Solutions, Inc., a
Minnesota Corporation having an office at 2495 Xenium Lane North, Minneapolis,
Minnesota 55441 ("VSI") and St. Jude Medical Puerto Rico B.V., a Dutch
corporation having an office at One Lillehei Plaza, St. Paul, Minnesota 55117
and Daig Corporation, a Minnesota corporation having an office at 14901 DeVeau
Place, Minnetonka, Minnesota, 55345, (collectively "St. Jude").
WHEREAS, St. Jude has filed an action in the U.S. District
Court for the District of Minnesota, Case No. 00-1587 RHK/JMM, against VSI
alleging that VSI's Duett products and their use infringe one or more claims of
U.S. Patent No. 5,275,616 (the " '616" patent), U.S. Patent No. B1 5,275, 616,
reexamination certificate, (the "B1 '616" patent), U.S. Patent No. 5,591,205
(the " '205" patent), U.S. Patent No. 5,601,602 (the " '602" patent), and U.S.
Patent No. 5,716,375 (the " '375" patent) (the "Minnesota Action");
WHEREAS, VSI has alleged that St. Jude has engaged in certain
tortious interference and unfair competition; that St. Jude has violated Section
43(a) of the Lanham Act; and that the '616, B1 '616, '205, '602 and '375 patents
are unenforceable, invalid and not infringed (the "Minnesota Counterclaims");
and
WHEREAS, St. Jude and VSI desire to enter into an agreement
and licenses to settle the Minnesota Action and the Minnesota Counterclaims upon
the terms and conditions set forth herein.
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
Part 1 - Definitions
1.1 "St. Jude's Patents" shall mean the '616 patent, the B1
'616 patent, the '205 patent, the '602 patent, the '375 patent, U.S. Patent No.
5,108,421, U.S. Patent No. 5,192,300, and U.S. Patent No. 5,478,352, and any
reissues, reexaminations, extensions thereof or any divisional or continuation
applications thereof, or continuation-in-part patent applications thereof
entitled to the benefit of a filing date prior to the Effective Date, any
patents issuing thereon, and all corresponding foreign patents heretofore or
hereafter issued.
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EXHIBIT 99.2
1.2 "VSI's Patents" shall mean U.S. Patent No. 5,383,896
(the " '896" patent), U.S. Patent No. 5,626,601 (the " '601" patent), U.S.
Patent No. 5,868,778 (the " '778" patent), U.S. Patent No. 5,957,952 (the "
'952" patent), and U.S. Patent No. 6,017,359 (the " '359" patent), and any
reissues, reexaminations, extensions thereof or any divisional or continuation
applications thereof, or continuation-in-part patent applications thereof
entitled to the benefit of a filing date prior to the Effective Date, any
patents issuing thereon, and all corresponding foreign patents heretofore or
hereafter issued.
1.3 "Valid Patent" shall mean any of St. Jude's Patents or
VSI's Patents which is unexpired and which has not been declared invalid or
unenforceable by a decision of the U.S. Patent and Trademark office (the "PTO"),
foreign patent office or appropriate administrative agency, or a court of
competent jurisdiction which is both unappealed and unappealable.
1.4 "Valid Claim" shall mean any claim of an unexpired
Valid Patent which has not been declared invalid or unenforceable by a decision
of the PTO, foreign patent office or appropriate administrative agency, or a
court of competent jurisdiction which is both unappealed and unappealable.
1.5 "Licensed Product" shall mean any vascular closure
device, the making, using, offering for sale, sale or importing of which, in the
absence of a license, would infringe a Valid Claim of a Valid Patent of VSI or
any Affiliate thereof (in the case of St. Jude) or of St. Jude or any Affiliate
thereof (in the case of VSI).
1.6 "Final Determination" shall mean any final
determination in respect of St. Jude's Patents or VSI's Patents which is both
unappealed and unappealable.
1.7 "Affiliates" shall mean any corporation or other entity
which, as of the Effective Date, directly or indirectly owns, is owned by or is
under common ownership with a party to this Agreement to the extent of at least
fifty percent (50%) of the equity having the power to vote on or direct the
affairs of the corporation or other entity. Any such corporation or other entity
shall be deemed to be an Affiliate only so long as such ownership or control
exists.
1.8 "Net Sales" shall mean the sum total of all charges
invoiced to unafilliated customers of Licensed Products sold by a party and its
Affiliates or agents less: (i) normal trade, case discounts and rebates actually
allowed; (ii) credits or refunds actually allowed for spoiled, damaged,
outdated, or returned goods; (iii) sales and other excise taxes imposed and paid
directly
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EXHIBIT 99.2
with respect to the sale; (iv) invoices which become uncollectible after
reasonable means and time for collection; and (v) transportation costs to the
extent separately invoiced.
Part 2 - Releases and License Grants
2.1(a) Each party hereto hereby releases the other and its
Affiliates and the customers thereof from liability for any claim of patent
infringement each party has or may have in respect of any Licensed Product for
which a royalty is paid in accordance with this Agreement.
2.1(b) Subject to the royalty obligations of Part 3 hereof,
each party hereto hereby grants to the other and its Affiliates an irrevocable,
worldwide, non-exclusive license, without the right to grant sublicenses, under
VSI's Patents and St. Jude's Patents, respectively, to make, use, sell and offer
to sell Licensed Products.
2.1(c) No right or license is granted by either party in
respect of any registered or common law tradename, trademark, service mark,
trade dress or product configuration of each party hereto or anything
confusingly similar thereto.
2.1(d) Each party shall be responsible to the other for all
obligations of its Affiliates in the same fashion and to the full extent that
each party is obligated to the other hereunder, including, but not limited to,
the payment of royalties due with respect to sales made by Affiliates. A breach
by an Affiliate of a party will be treated as a breach by that party.
2.1(e) Provided each party hereto adheres to the terms and
conditions of this Agreement, VSI, St. Jude and their Affiliates will not,
during the term hereof, assert against each other any claim of a Valid Patent
not specifically mentioned herein which is entitled, under 35 U.S.C. ss.ss.119,
120 and/or 121, to the benefit of a filing date prior to the Effective Date in
respect to any Valid Patent for which royalties are paid under this Agreement.
2.1(e)(1) The non-assertion clause of Part 2.1(e) hereof shall
not apply to any patent claim which contains an element not disclosed or claimed
in any Valid Patent.
2.1(f) Each party hereto hereby releases the other and its
Affiliates (and its respective officers, directors, employees, agents, and
attorneys) from any and all liabilities, claims, causes of action and damages
arising from actions of VSI and/or St. Jude prior to the Effective Date hereof,
under or in connection with VSI's Counterclaims, filed in the Minnesota Action.
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EXHIBIT 99.2
Part 3 - Royalties
3.1(a) In consideration of dismissal of the Minnesota Action
and in further consideration of this Agreement, and immediately upon its
execution, VSI shall pay a royalty of two and one-half percent (2.5%) of Net
Sales of VSI/Affiliate Licensed Products sold by VSI or its Affiliates up to and
including June 30, 2001. This shall be no less than $350,000.
3.1(b) In further consideration of entering into this
Agreement and dismissing the Minnesota Action, royalties shall accrue at the
rate of two and one-half percent (2.5%) of Net Sales of Licensed Products sold
by VSI or its Affiliates beginning as of July 1, 2001.
3.1(c) Upon payment of an aggregate total royalty of three
million Dollars ($3,000,000) by VSI to St. Jude, VSI's royalty obligation will
cease and the license will be paid-up and will continue royalty-free.
3.2(a) It is agreed that St. Jude does not currently make, use
or sell a Licensed Product. If St. Jude chooses to begin to sell a Licensed
Product, it will notify VSI in accordance with the notice provisions of this
Agreement. In consideration of this Agreement, and after notice to VSI of sales
of Licensed Product, St. Jude shall pay a royalty of two and one-half percent
(2.5%) of Net Sales of Licensed Products sold by St. Jude or its Affiliates.
3.2(b) Upon payment of an aggregate total royalty of three
million Dollars ($3,000,000) by St. Jude to VSI, St. Jude's royalty obligation
will cease and the license will be paid up and will continue royalty-free.
3.3 Neither party shall be obligated to pay maintenance
fees or annuities for any patent licensed hereunder. Neither party shall be
obligated to pay royalties hereunder in respect of any patent of VSI's Patents
or St. Jude's Patents which has not been maintained by failure to pay
maintenance fees or annuities. Any such failure by either party will not be
grounds to terminate any license granted under this Agreement. Neither party
shall be obligated to pay royalties on any patent that is no longer a Valid
Patent.
3.4 Royalty payments hereunder shall be made in U.S.
Dollars regardless of where Licensed Product is made or sold and notwithstanding
currency restrictions or regulations in any country where Licensed Product is
sold. Net Sales in other than U.S. Dollars will be
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EXHIBIT 99.2
converted to U.S. Dollars for determining the royalty on the last day of the
period for which royalties are accrued, and shall be payable at the exchange
rate published in the Wall Street Journal, Western Edition on said last day of
each respective quarter.
3.5 Royalty payments (with the exception of VSI's one-time
payment for past sales as set forth in Section 3.1(a)) shall be made on a
calendar quarter basis. Each quarterly payment hereunder shall be made within
thirty (30) days of the last day of each quarter. All royalty payments made
under any provision of this Agreement shall be accompanied by a report certified
by the paying party setting forth separately the Net Sales of all Licensed
Products sold during the period covered by each such report.
3.6 Royalties shall be payable only once with respect to
the same unit of Licensed Product regardless of the number of claims of VSI's or
St. Jude's Patents pertaining thereto.
3.7 Each party obligated to pay a royalty, and its
Affiliates, shall keep and maintain records of sales of Licensed Products. Such
records shall be open to inspection at any reasonable time during normal
business hours not more often than once each calendar year within two (2) years
after the royalty period to which such records relate, by an independent
Certified Public Accountant selected by a party to whom the other party or its
Affiliates have no reasonable objection and at the expense of the party
selecting said Certified Public Accountant, who shall have the right to examine
and make abstracts of the records kept pursuant to the Agreement and report
findings of said examination of records to the party requesting inspection
insofar as it is necessary to evidence any mistake or impropriety on the part of
the examined party. Said public accountant shall treat as confidential and shall
not disclose to the party requesting inspection any information other than
information which shall be given to the party requesting inspection pursuant to
any provision of this Agreement. It is not reasonable to object to a party's
choice of an independent Certified Public Accountant merely on the basis that
the independent Certified Public Accountant provides other accounting or audit
services to a party.
3.8 If an audit conducted pursuant to Part 3.7 hereof
reveals a discrepancy in royalty payments by the examined party, any
underpayment shall be paid with interest within thirty (30) days after the
Accountant's report. Any overpayment shall be refunded within the same time
period. If any underpayment is greater than five percent (5%) of the amount due,
it shall be paid with interest (in accordance with Paragraph 3.9) plus a ten
percent (10%) surcharge of that portion of the underpayment which is in excess
of five percent (5%) of the amount actually due.
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EXHIBIT 99.2
3.9 Notwithstanding each party's right to terminate for
breach under Part 9.2(a) hereof, late royalty payments hereunder will bear
interest at the rate of one percent (1%) per month.
Part 4 - reserved
Part 5 - Dismissal of the Minnesota Action
5.1 Upon Execution of this agreement, the parties will
stipulate to consent judgment in substantially the form attached hereto as
Appendix A hereof. St. Jude will submit the Consent Judgment to the court in the
Minnesota Action. St. Jude and VSI agree to perform all reasonable acts
necessary to effect entry of the Consent Judgment by the Court.
Part 6 - reserved
Part 7 - Representations and Warranties
7.1 Each party hereto hereby represents and warrants:
(i) that each party has the right to enter into this
Agreement, to grant the releases and rights granted herein and does not require
the consent of any third party to grant the releases and rights granted herein;
(ii) that each party is not currently engaged in, nor
will it engage in, any activity which would in any manner be inconsistent with
the releases and rights granted herein;
(iii) that the execution and delivery of this Agreement
by each party has been duly and validly authorized by all necessary action on
the part of each party and any party from whom it derives its rights and that,
assuming valid execution by each party, this Agreement is a valid and binding
obligation of each party enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally, and
rules or laws concerning equitable remedies; and,
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EXHIBIT 99.2
(iv) that execution and delivery of this Agreement by
each party, or compliance with the terms and provisions hereof, will not breach
any statute or regulation of any governmental authority or conflict with or
breach any judgment, order, injunctive decree, or ruling of any court or
governmental authority, domestic or foreign, to which each party is subject or
of the articles or by-laws of each party.
7.2 Neither party warrants the validity or enforceability
of any patent licensed hereunder. Neither party warrants that practicing an
invention licensed hereunder does not infringe third-party patents.
Specifically, St. Jude licenses vascular closure subject matter from Kensey Nash
Corporation ("Kensey-Nash"). No implied license or sublicense is granted herein
to any right derived by St. Jude from Kensey-Nash or any other entity not
expressly a party to this Agreement.
Part 8 - Marking
8.1 After exhausting existing inventories of Licensed
Product and labels therefor, if any, each party hereto shall use reasonable
efforts to promptly comply with 35 U.S.C. ss.287 by marking, and/or by causing
its Affiliates to mark, all Licensed Products with the patent numbers of VSI's
Patents and St. Jude's Patents which cover the Licensed Products in question.
Part 9 - Term and Early Termination
9.1 Unless sooner terminated as herein provided, this
Agreement shall continue in full force and effect commencing with the Effective
Date until the expiration of the last-to-expire of VSI's Patents (in the case of
license to St. Jude) and St. Jude's Patents (in the case of license to VSI).
Upon termination hereunder, no party shall have a royalty obligation exceeding
two and one-half percent (2.5%) of total Net Sales, notwithstanding an aggregate
payment of less than three million Dollars ($3,000,000).
9.2(a) Either party may terminate the license it has granted
to the other party upon the breach of any of the terms herein contained by the
other party upon ninety (90) days written notice, provided, however, that if
during said ninety (90) days the party so notified cures the breach complained
of, this Agreement shall continue in full force and effect.
9.2(b) In the event the license of one party hereto is
terminated as provided in Part 9.2(a), the defaulting party shall promptly make
an accounting to the non-defaulting party of the inventory of Licensed Products
which it and its Affiliates have on hand as of the date of such termination. The
defaulting party and its Affiliates shall then have the right, for a period of
six
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EXHIBIT 99.2
(6) months after said termination, to sell such inventory provided that the Net
Sales thereof shall be subject to the royalty rates set forth above and so
payable to the non-defaulting party.
9.2(c) In the event that further lawful performance of this
Agreement or any part hereof by either party is rendered impossible by or as a
consequence of any law, regulation, order, rule, direction, priority, seizure,
allocation, requisition, or any other official action by any department, bureau,
board, administration or other instrumentality or agency or any government or
political subdivision thereof having jurisdiction over such party, such party
shall not be considered in default hereunder by reason of any failure to perform
occasioned thereby.
Part 10 - General Provisions
10.1 Except as required by law or order of a court of
competent jurisdiction, VSI and St. Jude shall keep this Agreement and its terms
confidential. Neither party shall originate any publicity, news release, or
other public announcement, written or oral, whether to the public press, to
stockholders, or otherwise, relating to this Agreement, to any amendment thereto
or to performance hereunder, or the existence of an arrangement between the
parties without the prior written approval of the other party. Neither party
hereto shall use the name of the other (or any variant thereof) in any
advertising, packaging or other promotional material in connection with the sale
of Licensed Products. If by operation of law, a party is required to disclose
any part of this Agreement, notice shall be given to the other as far in advance
as is practicable. Any portion of the Agreement not required to be disclosed
must be redacted prior to disclosure.
10.2 Neither party shall unreasonably withhold its consent
or agreement when such consent or agreement is required hereunder or is
requested in good faith by the other party hereunder.
10.3 This Agreement is unassignable by either party except
with the prior written consent of the other and except that it may be assigned
without consent to a corporate successor of VSI or St. Jude or to a person or
corporation acquiring all or substantially all of the business and assets of the
division or divisions of VSI or St. Jude involved in the sale of Licensed
Products. Any such corporate successor or acquiring party shall be bound to VSI
or St. Jude in the same manner and to the full extent each party is bound to the
other hereunder.
10.4 All notices to be given by each party to the other
shall be made in writing, transmitted via facsimile and confirmed by U.S. Post
Office Registered or Certified Mail, return
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EXHIBIT 99.2
receipt requested, and addressed, respectively, to the parties at the following
addresses, or to such other address as the parties hereafter agree to:
To VSI:
Howard C. Root, President
Vascular Solutions, Inc.
2495 Xenium Lane North
Minneapolis, Minnesota 55441
Facsimile No. (763) 656-4250
with copies to:
James W. Geriak
Lyon & Lyon LLP
1900 Main Street, 6th Floor
Irvine, California 92614
Facsimile No. (949) 567-6600
To St. Jude:
David W. Adinolfi, President
Daig Corporation
14901 DeVeau Place
Minnetonka, Minnesota 55435
Facsimile No. 952-352-9746
with copies to:
Kevin T. O'Malley, General Counsel
St. Jude Medical, Inc.
One Lillehei Plaza
St. Paul, Minnesota 55117
Facsimile No. 651-490-4333
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EXHIBIT 99.2
Each notice shall be effective as of its first date of receipt by the receiving
party.
10.5(a) This Agreement constitutes the entire agreement
between the parties and supersedes all written or oral prior agreements or
understandings. No variation or modification of the terms or provisions of this
Agreement shall be valid unless in writing and signed by the parties hereto.
10.5(b) No rights or licenses are granted by VSI under this
Agreement to St. Jude, or by St. Jude to VSI, either expressly or by
implication, except those specifically set forth herein.
10.5(c) Waiver by VSI or St. Jude of any single default or
breach or succession of defaults or breaches by the other shall not deprive VSI
or St. Jude of any right to terminate this Agreement arising out of any
subsequent default or breach.
10.5(d) All matters affecting the interpretation, validity
and performance of this Agreement shall be governed by the laws of the state of
Minnesota applicable to agreements made and to be performed wholly within
Minnesota, but the scope and validity of VSI's Patents or St. Jude's Patents
shall be governed by the applicable laws of the country granting the patent in
question.
10.6 The captions herein are solely for convenience of
reference and shall not affect the construction or interpretation of this
Agreement.
10.7 The covenants, terms and provisions of this Agreement
(including, without limitation, the non-assertion provisions of Part 2.1(e)
hereof) will inure to the benefit of and be binding upon the parties hereto and
their respective successors and assigns.
10.8 This Agreement may be executed separately or
independently in any number of counterparts, each and all of which together
shall be deemed to have been executed simultaneously and for all purposes to be
one Agreement. Facsimile signatures shall constitute original, binding
signatures.
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EXHIBIT 99.2
IN WITNESS WHEREOF, VSI and St. Jude have caused this
Agreement to be executed in duplicate by their respective duly authorized
officers.
St. Jude Medical Puerto Rico B.V.
Date: July 12, 2001 By /s/ Kevin T. O'Malley
------------- -------------------------
Its: Director
Name: Kevin T. O'Malley
Daig Corporation
Date: July 12, 2001 By /s/ David W. Adinolfi
------------- -----------------------
Its: President
Name: David W. Adinolfi
Vascular Solutions, Inc.
Date: July 12, 2001 By /s/ Howard C. Root
------------- -------------------
Its: President
Name: Howard C. Root
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EXHIBIT 99.2
Appendix A
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
THIRD DIVISION
ST. JUDE MEDICAL, PUERTO RICO, B.V. )
and )
DAIG CORPORATION )
)
Plaintiffs/Counterclaim-Defendants, )
) CIVIL ACTION NO.
v. ) 00-1587 RHK/JMM
)
VASCULAR SOLUTIONS, INC. )
)
Defendant/Counterclaim-Plaintiff. )
CONSENT JUDGMENT
As a result of Plaintiffs and Defendant having executed a Settlement
Agreement and upon the joint motion of the parties for entry of a Consent
Judgment, the following Consent Judgment shall be in full force and effect from
this date forward.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that:
1. The Court has jurisdiction over the parties and the subject matter
of this action.
2. U.S. Patent Nos. 5,275,616; B1 5,275,616; 5,591,205; 5,601,602; and
5,716,375 are valid and enforceable.
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EXHIBIT 99.2
3. The Duett device manufactured and sold by Vascular Solutions
infringes at least one claim of each of U.S. Patent Nos. 5,275,616; B1
5,275,616; 5,591,205; 5,601,602; and 5,716,375.
4. All counterclaims and defenses raised in this action by Defendant
are dismissed with prejudice.
5. Defendant acknowledges that U.S. Patent Nos. 5,275,616; B1
5,275,616; 5,591,205; 5,601,602; and 5,716,375 are valid and enforceable, and
that it is precluded from challenging, directly or indirectly, the validity or
enforceability of these patents in any court or tribunal or in the U.S. Patent
and Trademark Office.
6. This Court retains jurisdiction to enforce this Order and Judgment
and the Settlement Agreement.
7. Each party shall bear its own costs, fees and expenses.
8. This Consent Judgment and the Settlement Agreement of which it is a
part, shall be in full and final satisfaction of all claims based on or arising
out of the allegations pled by Plaintiffs St. Jude Medical Puerto Rico B.V. and
Daig Corporation against Defendant Vascular Solutions, Inc. in this litigation,
and all claims based on or arising out of the allegations pled by Defendant
against Plaintiffs.
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EXHIBIT 99.2
Dated: July____, 2001 CONSENT BY ST. JUDE
MEDICAL AND DAIG
CORPORATION
By:___________________________
Richard L. Stroup
Christine E. Lehman
Jemy Soegeng
FINNEGAN, HENDERSON,
FARABOW, GARRETT &
DUNNER, LLP
1300 I Street, N.W.
Washington, D.C. 20005-3315
(202) 408-4000
Lawrence J. Field
LEONARD, STREET &
DEINARD, P.A.
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
(612) 335-1500
Attorneys for Plaintiffs St. Jude
Medical, B.V. and
Daig Corporation
Dated: ______________, 2001 CONSENT BY VASCULAR
SOLUTIONS, INC.
By:___________________________
John Kappos
James Geriak
LYON & LYON, LLP
1900 Main Street, Sixth Floor
Irvine, CA 92614
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EXHIBIT 99.2
Scott A. Benson
BRIOL & ASSOCIATES
80 South 8th Street, Suite 3905
Minneapolis, MN 55402
Attorneys for Defendant
Vascular Solutions, Inc.
Dated: ______________, 2001
IT IS SO ORDERED, ADJUDGED
AND DECREED
_______________________________
UNITED STATES DISTRICT JUDGE