Exhibit 10.3
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
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and
policies of the entity, whether through the ownership of voting
securities, by contract or otherwise.
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.
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
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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.
(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
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sublicense, other than royalties, lines of credit, research and
development funding, and other expense payments or reimbursements,
in accordance with the following schedule:
| |
|
|
|
|
| Date of Sublicense
Grant |
|
Percent of Revenues to
University |
|
(from date of this Agreement) |
|
|
|
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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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
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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.
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.
(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
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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 C
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