Exhibit 10.5
EXCLUSIVE LICENSE AND DEVELOPMENT AGREEMENT
THIS EXCLUSIVE LICENSE AND
DEVELOPMENT AGREEMENT (this “Agreement”) is made as of
the 26 th day of
May 2006, by and between Creighton University (the
“University”) and SafeStitch LLC, a Virginia limited
liability company (the “Company”). References to an
Article, Section, or paragraph mean an Article, Section or
paragraph of this Agreement, unless otherwise specified.
WHEREAS, the University is the owner
of United States Provisional Patent Application No. 60/698,748
filed July 13, 2005, and titled SUTURING SYSTEM FOR TRANSORAL
GASTROPLASTY and United States Provisional Patent Application
No. 60/742,826 filed December 6, 2005, and titled SYSTEMS
AND TECHNIQUES FOR TRANSORAL GASTROPLASTY, as well as International
Patent Application No. PCT/US04/028516 entitled SUTURING DEVICES
AND METHODS, filed September 2, 2004 (claiming benefit of U.S.
Provisional Patent Application Serial No. 60/499,539, filed
September 2, 2003; U.S. Provisional Patent Application Serial
No. 60/507,837, filed October 1, 2003; and U.S.
Provisional Patent Application Serial No. 60/576,510, filed
June 3, 2004), including any current and future Improvements
(defined below) under the above-listed patents, and the University
wishes to license such technologies to the Company under the terms
of this Agreement; and
WHEREAS, the University has developed
and will continue to develop Additional Technologies (defined
below), and the University wishes to grant the Company an option to
license such Additional Technologies during the first thirty-six
(36) months of this Agreement; and
WHEREAS, the University agrees to
grant the Company an Exclusive License (defined below) to use,
develop and sell such technologies described above; and
NOW, THEREFORE, for and in
consideration of the mutual representations and covenants
hereinafter set forth, the parties hereby agree as follows:
Section 1. Definitions. The following terms, when used
with initial capital letters, shall have the meanings set forth
below:
1.1
“Additional Technologies” or “Additional
Technologies and associated Know-How” shall mean any current
technologies in development or future technologies commenced within
the first thirty-six (36) months after the effective date of
this Agreement by the University (with Dr. Charles Filipi as an
inventor) related to any devices, material, and methods used in the
practice of bariatric medicine and treatment of gastroesophageal
reflux disease (“GERD”), transoral surgical techniques,
and further relating to all alimentary and gastrointestinal
components associated therewith, including but not limited to the
esophagus, stomach, intestines and digestive tract, as well as such
conditions as gastric bleeding, hernias, and other medical
conditions that may benefit from such technologies.
1.2
“Affiliate” shall mean any entity that directly or
indirectly controls, is controlled by, or is under common control
with the Company, and for such purpose “control” shall
mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of the entity,
whether through the ownership of voting securities, by contract or
otherwise.
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Exclusive License and Development Agreement
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1.3
“Development” or “Developed” shall mean
actions constituting commercially reasonable development activities
with a goal such that, if successful and commercially viable, the
inventions of the Licensed Patents will be utilized to provide
Licensed Products for sale in the retail market.
1.4
“Improvements” shall mean any inventions, discoveries,
trade secrets, improvements, and technical, clinical and other
information, whether or not patented or patentable, together with
all experience, data, formulas, procedures and results, and
including all chemical, pharmacological, toxicological, clinical,
and assay information relating to any Licensed Patent Rights.
1.5
“Know-How” shall mean all know-how, trade secrets,
inventions, data processes, techniques, procedures, compositions,
devices, methods, formulas, protocols and information, whether or
not patentable, which are confidential and useful or necessary in
making or using the devices set forth in the Licensed Patents,
including, without limitation, all chemical, biochemical,
toxicological and scientific research information necessary or
useful in making, using, or obtaining approval for any device or
method disclosed in the Licensed Patents.
1.6
“Licensed Patent Rights” and “Licensed
Patents” shall mean (1) United States Provisional Patent
Application No. 60/698,748 filed July 13, 2005, and
titled SUTURING SYSTEM FOR TRANSORAL GASTROPLASTY and United States
Provisional Patent Application No. 60/742,826 filed
December 6, 2005, and titled SYSTEMS AND TECHNIQUES FOR
TRANSORAL GASTROPLASTY; (2) International Patent Application
No. PCT/US04/028516 entitled SUTURING DEVICES AND METHODS,
filed September 2, 2004 (claiming benefit of U.S. Provisional
Patent Application Serial No. 60/499,539, filed
September 2, 2003; U.S. Provisional Patent Application Serial
No. 60/507,837, filed October 1, 2003; and U.S.
Provisional Patent Application Serial No. 60/576,510, filed
June 3, 2004); (3) any and all Patent Rights under the
patents or patent applications for any Additional Technologies and
associated Know-How licensed by the Company pursuant to the Option
granted in Section 5.3; and (4) future Improvements
resulting from items described in (1), (2), and (3).
1.7
“Licensed Product” shall mean any device, instrument or
other product, (i) which, but for the license granted under
this Agreement, would infringe at least one Valid Claim in any
country or (ii) the making or use of which, but for the
license granted under this Agreement, would infringe at least one
Valid Claim in any country. For the purposes of clarifying the
meaning of “Licensed Product” by way of an illustrative
example, it is to be understood that a product that would infringe
a Valid Claim in the United States (but for the license granted
under this Agreement) is a “Licensed Product” for all
countries (e.g., England, China, etc.), irrespective of whether or
not a Valid Claim exists in England, China, etc., and irrespective
of whether or not the product would infringe a Valid Claim in
England, China, etc.
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Exclusive License and Development Agreement
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1.8
“Patent Rights” shall mean all rights under patents and
patent applications, disclosures of invention and any and all
patents that issue therefrom (including utility, model and design
patents and certificates of invention), together with any and all
substitutions, extensions (including supplemental protection
certificates), registrations, confirmations, reissues, divisionals,
continuations, continuations-in-part, reexaminations, renewals and
foreign counterparts of the foregoing.
1.9
“Regulatory Filing” shall mean the formal submission of
information, including clinical data if required, to the Food and
Drug Agency (FDA) or other similar regulatory agencies in
other countries in order to apply for approval to market any
Licensed Product within the United States or other countries.
1.10
“Valid Claim” shall mean a bona fide, unexpired issued
claim in a Licensed Patents which has not been held invalid or
unenforceable by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the
time allowed for appeal, which has not been admitted to be invalid
by the licensor or its successors or assigns though reissue or
disclaimer.
Section 2. Grant of Exclusive License.
2.1
Exclusive License . Subject to the terms and conditions of
this Agreement, the University grants the Company an exclusive
(even as to the University), worldwide license under the Licensed
Patent Rights and associated Know-How, including the exclusive
right to make, have made, use, sell, offer for sale, import or
otherwise dispose of and enjoy any and all Licensed Products,
subject to the University retaining a non-exclusive, non-assignable
and non-sublicensable right limited solely to non-commercial
practice under the Licensed Patents and associated Know-How solely
for educational, research, and clinical study purposes. The
University shall, at the Company’s request, execute a
confirmatory license having the terms set forth herein with respect
to any patent application or patent included in the Licensed
Patents.
2.2
Transfer to Affiliates . The Company shall have the right to
extend the rights granted herein to any of its Affiliates, upon the
terms and conditions of this Agreement, provided the Company agrees
in writing to be responsible for the performance by such Affiliates
of all of the Company’s obligations hereunder, including the
payment of earned royalties set forth below on Net Sales of any
Licensed Product by the Affiliates to whom the licenses have been
extended.
2.3
Sublicense Rights. The Company shall have the right under
any and all of the licenses granted by the University herein to
grant sublicenses to third parties at earned royalties not less
than those the Company is required to pay as set forth in
Section 3 of this Agreement.
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Exclusive License and Development Agreement
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(a) With
respect to sublicenses that the Company grants under this
Section 2.3, the Company shall pay the University that
proportion of earned royalties received from its licensees
necessary to provide the University with an amount of revenue from
the Licensed Product sold by such sublicensees equal to the amount
the University would have received from the Company if the Company
had sold such Licensed Product. Additionally, with respect to
sublicenses that the Company grants under this Section 2.3
within the first thirty-six months of the effective date of this
Agreement, the Company shall pay to the University a percentage of
all up-front sublicense revenues or fees actually paid to the
Company pursuant to the grant of such sublicense, other than
royalties, lines of credit, research and development funding, and
other expense payments or reimbursements, in accordance with the
following schedule:
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|
|
|
| Date of Sublicense Grant |
|
Percent of Revenues to |
|
(from date of this Agreement) |
|
University |
|
First six
months
|
|
|
50 |
% |
|
Second six
months
|
|
|
45 |
% |
|
Third six
months
|
|
|
35 |
% |
|
Fourth six
months
|
|
|
30 |
% |
|
Third year
|
|
|
20 |
% |
The
University shall not be entitled to any percentage of up-front
sublicense revenues or fees derived from sublicensing agreements
entered into by the Company after the third year from the date of
this Agreement.
(b) The
granting of such sublicenses shall be in the discretion of the
Company, and the Company shall have the sole power to determine
whether or not to grant sublicenses, the identity of sublicensees,
and the royalty rates and terms and conditions of such sublicenses,
provided that:
(i) The
University shall be provided with a complete, unredacted, fully
executed copy of each executed sublicense agreement (including all
exhibits, appendices, and other attachments) within thirty
(30) days following its execution;
(ii) Each
sublicense agreement shall contain terms requiring that the
sublicense maintain complete and accurate records and permitting
the University to audit such records, and said terms shall be at
least as favorable to the University as those set forth in
Section 3.4(vi) of this Agreement; and
(iii) Each
sublicense agreement shall acknowledge that the University is a
third-party beneficiary to the sublicense agreement.
2.4
Enforcement Rights . The University expressly grants the
Company the first right to enforce any Licensed Patent, with the
Company bearing all costs of such enforcement. In the event that
the Company is found to have insufficient standing to be entitled
to such enforcement rights, then the University agrees to enforce
the Licensed Patent at the Company’s reasonable request and
at the Company’s expense, with the Company having the right
to be participate in such enforcement with counsel of the
Company’s choice and expense.
Section 3. Royalty Payments.
3.1
Royalty Defined . In further consideration for the Exclusive
License and development services granted under this Agreement, the
Company shall pay the University on a quarterly basis an earned
royalty of one and one-half percent (1.5%) on Net Sales (defined
below) of any Licensed Product sold worldwide.
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Exclusive License and Development Agreement
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3.2.
Net Sales . (i) For purposes of this Agreement, the
term “Net Sales” shall mean the revenue that the
Company or its Affiliates actually collect from the sale of any
Licensed Product to an unaffiliated third party, less the following
amounts: (a) payments made or credits allowed to customers for
promotional purposes, allowances, rebates, discounts, profit share
payments and other usual and customary discounts, including,
without limitation, volume and prompt payment discounts, to
customers, (b) the amount of chargebacks, and amounts repaid
or credited by reason of rejections, damages or returns of goods,
or because of retroactive price adjustments, (c) specific amounts
not collectible after reasonable collection efforts,
(d) invoiced taxes, duties, tariffs, surcharges and other
governmental charges paid, absorbed or allowed in connection with
the sale, import or export of the Licensed Product,
(e) freight, postage, insurance charges and other
transportation costs incurred in connection with transporting the
Licensed Product, and (f) discounts or rebates or other payments
required by law to be made under Medicaid, Medicare or other
governmental special medical assistance programs, all as determined
in accordance with generally accepted accounting principles in the
U.S. consistently applied.
(ii) In
the event that a Licensed Product is sold in a finished combination
package with one or more other products, devices, equipment or
components (a “Combination Product”), Net Sales for
such Combination Product will be calculated by multiplying actual
Net Sales of such Combination Product by the fraction A/(A+B) where
A is the selling price of the Licensed Product if sold separately
in finished form and B is the selling price of any other products,
devices, equipment or components in the Combination Product if sold
separately in finished form provided that the selling price of any
Combination Product shall not be less than A+B. In the event that a
product containing such Licensed Product or one or more of such
products, devices, equipment or components in the Combination
Product are not sold separately, then the parties shall negotiate
in good faith a formula for calculating Net Sales for such
Combination Product that reflects the respective contributions of
the product containing the Licensed Product and such other
products, devices, equipment or components to the overall value of
such Combination Product. The Company covenants that it will not
intentionally manipulate the fraction A/ (A+B) to avoid or reduce
royalty payments or obligations that would otherwise be due for
sales of the Licensed Product in combination form or
otherwise.
(iii) Net
Sales shall not include the distribution of the Licensed Product
free of charge for use in clinical trials or research or for
charitable uses. The “Net Sales” for a Licensed Product
that is otherwise transferred to a third party for promotional
purposes without charge or at a discount shall be the average
invoiced price to customers who purchased the Licensed Product
during the applicable calendar quarter.
3.3
Earned Royalty Reduction for Third Party License. The
Company or its Affiliates, in its sole discretion, may take a
license under, or assignment of, patents or know-how of an
unaffiliated third party that arguably cover in whole or in part
any aspect of a Licensed Product under the terms requiring the
Company to pay such third party an earned royalty for the sale of
such Licensed Product. If the Company takes such a third party
license or assignment, the Company shall be entitled to negotiate
and enter into agreements with such third parties and fifty percent
(50%) of any amounts payable by the Company, its Affiliates or
sublicensees with respect to the Licensed Product under such
agreements shall be credited against amounts payable to the
University under this Section 2; provided, however, that the
earned royalty amount due to the University shall not be reduced
below 50% of royalties otherwise due (not less than 0.75% of Net
Sales) for such Licensed Product.
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Exclusive License and Development Agreement
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3.4
Accounting for Payments . (i) Amounts owing to the
University under this Section 3 shall be paid on a quarterly
basis commencing with the calendar quarter in which the first
commercial sale of any Licensed Product is made, with such amounts
due and payable to the University on or before the forty-fifth (45
th )
day following the end of the calendar quarter ending on
March 31, June 30, September 30 or December 31
in which such amounts were earned. Any amounts which remain unpaid
after the date they are due to the University shall accrue interest
from the due date at the rate of 1.5% per month. However, in no
event shall this interest provision be construed as a grant of
permission for any payment delays. The Company shall also be
responsible for repayment to the University of any attorney,
collection agency, or other out-of-pocket University expenses
required to collect overdue payments due from this Section, or any
other applicable section of this Agreement.
(ii) Except
as otherwise directed, all amounts owing to the University under
this Agreement shall be paid in U.S. dollars to the University at
the following address:
Lee I. Fenicle,
Director
Office of Technology Transfer
Creighton University
601 North 30 th Street
Suite 1609
Omaha, NE 68131
(iii) All
royalties owing with respect to Net Sales stated in currencies
other than U.S. dollars shall be converted at the rate shown in the
Federal Reserve Noon Valuation — Value of Foreign Currencies
on the last day of the relevant calendar quarter.
(iv) A
statement showing how any amounts payable to the University under
this Section have been calculated, including a description of any
offsets or credits deducted therefrom, shall be submitted to the
University on the date of each such payment. Such accounting
statements shall also contain the total number of Licensed Products
transferred by the Company, by each Affiliate, and by each
sublicense, with country-by-country breakdowns, during the relevant
calendar quarter; the revenue due to the Company for each of the
aforementioned transfers; and the number of Licensed Products
distributed during the relevant calendar quarter by the Company, by
each Affiliate, and by each sublicense free of charge or at a
discount per Section 3.2(iii). Such accounting statements
shall contain a written representation signed by an executive
officer of the Company that states that the statements are true,
accurate, and fairly represent all amounts payable to the
University pursuant to this Agreement.
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Exclusive License and Development Agreement
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(v) The
University is exempt from paying income taxes under U.S. law.
Therefore, all payments due under this Agreement shall be made
without deduction for taxes, assessments, or other charges of any
kind which may be imposed on the University by any government
outside of the United States or any political subdivision of such
government with respect to any amounts payable to the University
pursuant to this Agreement. The Company may withhold the
appropriate tax from any payment to be made to the University under
this Agreement provided that such withholding is required by
applicable law and the Company submits the amounts withheld to the
applicable tax authorities. In such event the Company will furnish
the University with proof of payment of such tax together with
official or other appropriate evidence issued by the applicable
governmental authority.
(vi) During
the term of this Agreement, and for a period of three years
thereafter, the Company shall keep complete and accurate records in
sufficient detail to permit the University to confirm the accuracy
of all payments and reports due hereunder. The University shall
have the right to cause an independent, certified public accountant
reasonably acceptable to the Company and subject to terms of a
confidentiality agreement to audit such records to confirm royalty
payments for the preceding three years. Such audits may be
exercised during normal business hours no more than once in any
12-month period upon at least 30 days’ prior written
notice to the Company. The University shall bear the full cost of
such audit unless such audit discloses an underpayment by more than
5% of the amount due under this Agreement. In such case, the
Company shall bear the full cost of such audit.
3.5
Survival of Royalty. The Company expressly agrees that any
transfer, in whole or in part, of any rights in and/or to any
Licensed Product, including but not limited to an assignment, sale
of the assets of the Company, the acquisition of the Company, or
merger of the Company with a third-party or parties shall not
affect the Royalty or any other obligation of the Company to the
University set forth in this Agreement.
3.6
Minimum Royalty Payments. The Company shall have no minimum
royalty obligations to the University during the term of this
Agreement.
Section 4. Scope of Development, Resources .
4.1
Facilities. The University shall provide and make available
all necessary facilities, including animal research laboratories to
accommodate Dr. Filipi’s research and development
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