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Exhibit 10.2
LICENSE AGREEMENT
THIS AGREEMENT
("Agreement") dated as of August 22, 2000 (the "Effective
Date") by and between Mitchell S. Roslin, M.D., a citizen of the
United States of America residing in New York, NY ("Licensor"), and
Cyberonics, Inc., a Delaware corporation with offices in Houston,
Texas ("Licensee").
Recitals:
Licensee is engaged in designing,
developing, investigating, testing, and marketing specialized
medical devices primarily used or to be used for treating disorders
by nervous system stimulation, and owns basic patents related to
the use of nerve stimulation for eating, endocrine and other
disorders, including patents on the use of vagus nerve stimulation
(VNS) to treat obesity;
Licensor is medical doctor
licensed to practice medicine in the State of New York, and is a
co-inventor with Burke T. Barrett of Licensee and Ramesh Reddy,
M.D. on a United States patent application for bi-lateral VNS for
the treatment of obesity, Serial No. 09/346,396, filed on or
about July 1, 1999, and/or continuations or divisions thereof,
and a PCT counterpart application thereof (collectively, "the
‘396 Application"), the original animal studies for which
were initiated by Licensor with participation, assistance, support,
advice and devices of Licensee; and
Licensee and Licensor desire to
enter into an agreement under which Licensee will acquire from
Licensor the exclusive right and license to practice the
inventions) covered by the ‘396 Application to the fullest
extent of Licensor’s right, title and interest in and to the
invention(s), and in and to all other inventions conceived, made,
reduced to practice, owned or controlled by Licensor in the field
of nervous system stimulation, on the terms and conditions set
forth in this Agreement.
In consideration of the foregoing
recitals, and the mutual undertakings set forth herein, Licensee
and Licensor (collectively, "the Parties") do hereby AGREE AS
FOLLOWS:
Article I. Definitions. As used in this Agreement,
terms shall have the following meanings:
1.01 " Confidential
Information " shall mean information of Licensee relating to
its business plans, experimental products, research or development
activities, financial information, identity of customers and key
personnel, marketing and distribution, and other transactions,
actual or prospective, treated by Licensee as secret and protected
as such by confidentiality or nondisclosure agreements or the like
and by applicable marking of documents and other tangible items
with words indicative of information of confidential or secret
content and with applicable notice where the content is
communicated orally or visually.
1.02 " FDA " shall mean the
U.S. Food and Drug Administration, which has responsibility under
the law for, among other things, establishing protocol for clinical
investigation of medical devices and granting Investigational
Device Exemption ("IDE"), determining from results of clinical
investigation whether a medical device is safe and effective for
treating a disease or disorder, and
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granting Pre-Market Approval ("PMA") of medical devices.
1.03 " Invention " shall
mean an advance, innovation, discovery, or improvement in a
product, process, method, or technique, whether patentable or not,
conceived, made, or reduced to practice by Licensor, alone or with
others, or owned or controlled in whole or in part by Licensor, at
any time during the term of this Agreement, in the field of nervous
system stimulation.
1.04 " Licensed Patents "
shall mean United States patent application Serial No. 09/346,396
filed July 1, 1999 in the names of Mitchell Roslin and others
for "Treatment of Obesity by Bilateral Vagus Nerve Stimulation",
and all continuations, continuations in part and divisions thereof,
all patents issued, reissued, reexamined, and renewed (e.g., by
payment of maintenance fees or annuities, as the case may be)
thereon, and all counterparts (i.e., corresponding applications and
patents) and equivalents (i.e., statutorily protected or designated
by status of invention, characterized as other than a patent
application or patent) thereof filed or issued in other countries
(including but not limited to nationalizations under the Patent
Cooperation Treaty (PCT) in the name (with or without others),
on behalf, or with concurrence of Licensor; and any and all
Inventions, whether or not applications for patent, patents or
equivalents are filed thereon, and, if filed, such patent, patents
or equivalents. The Licensed Patents as of the Effective Date
hereof are set forth in Exhibit A (attached hereto and
integrated herein), subject to modification from time to time to
add newly arising, filed or issued Licensed Patents as provided
herein.
1.05 " Licensed Products "
shall mean any and all products, devices, apparatus, and systems,
and " Licensed Methods " shall mean any and all methods,
techniques, and processes, covered by any claim(s) of the Licensed
Patents.
1.06 " Net Sales " shall
mean gross sales of Licensed Products by Licensee or its
sublicensee(s), as the case may be, less taxes and tariffs (by
whatever name they may be designated) imposed by governmental
authorities on the manufacture, sale, importation, lease or storage
of Licensed Products and actually paid by Licensee (or its
sublicensee(s)); packing and freight charges (including insurance
costs for transportation) actually included in Licensee’s (or
its sublicensee’(s’)) invoices for Licensed Products;
and credits for returns, discounts, and allowances actually granted
by Licensee (or it sublicensee(s)) to customers for Licensed
Products. In the event that a Licensed Product is disposed of in a
transaction with a third party other than an arms length sale
between unrelated parties, the transaction shall be treated and
accounted for by Licensee and its sublicensees, as applicable, as a
typical sale at the average gross sales price of the Licensed
Product by Licensee or the sublicensee, as the case may be, in the
market in which such transaction occurred.
1.07 " License Fee " shall
mean a fee paid to Licensee by a sublicensee for the privilege of
receiving a sublicense, which is neither based on Net Sales by the
sublicensee nor deductible from royalties paid or payable to
Licensee by the sublicensee for its Net Sales.
Article II. Grant of License.
2.01 Exclusive License .
Licensor agrees to grant and hereby does grant to Licensee the
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exclusive worldwide right and license to all of Licensor’s
rights in and to the Licensed Patents, including but not limited to
the exclusive worldwide right and license to make, have made, use,
sell, import, export and otherwise dispose of the Licensed
Products, and to practice the Licensed Methods.
2.02 Right to grant
Sublicenses . The license granted to Licensee hereunder shall
include the exclusive right to grant sublicenses to third parties
for the exercise of any or all of the rights granted in the
Licensee’s license in any territory constituting a country,
portion of a country, or countries of the world.
Article III. Royalties; Advances; Audit.
3.01 Royalties .
(a) Licensee shall pay
Licensor Royalties at the royalty rate specified in Exhibit
B applied to (i) Net Sales of Licensed Products by
Licensee and its sublicensees and (ii) any License Fees
received by Licensee on account of sublicenses.
(b) Royalties shall be deemed
earned when sales are made, but shall be due and payable quarterly
in United States dollars, within 90 days after the end of the
fiscal quarter of Licensee in which the applicable sales were made.
Only one Royalty shall be due per Licensed Product sold, regardless
of the number of Licensed Patents and/or claims that may apply or
the number of times a Licensed Product may be used to practice
Licensed Methods.
(c) With each quarterly
payment of Royalties, Licensee shall furnish a quarterly report to
Licensor setting forth its own and its sublicensees’
cumulative gross sales, permitted deductions and resulting Net
Sales of the Licensed Products, License Fees and the Royalty
payment due thereon for the applicable fiscal quarter. If no sales
of Licensed Products were made in the quarter by Licensee or its
sublicensees, the report shall so state.
3.02 Advances .
(a) Annual . Licensee
shall pay Licensor annual advances ("Annual Advances") against
earned Royalties in the amount of $25,000.00 each, to be paid on
January 1 of each year, retroactive to January 1, 2000, for a
period of five years ending December 31, 2004 (totaling
$125,000.00), or until the first sale of a Licensed Product,
whichever occurs first. Annual Advances shall be deducted from
Royalties earned at any time during the term of this Agreement (or
payable thereafter as provided herein).
(b) Milestone .
Licensee shall also pay Licensor advances for each of the following
milestones against future earned Royalties ("Milestone Advances"),
within 30 days after the respective milestone is first reached
during the term of this Agreement, in the following amounts (up to
a maximum cumulative amount of $325,000.00): (1) $25,000.00 upon
the first implant by Licensor of a Licensee VNS device in a patient
in the pilot clinical study of VNS as a treatment for obesity
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(which milestone the parties acknowledge has been reached as of
the date hereof), (2) $50,000.00 upon completion of a 30-patient
pilot clinical study of VNS as a treatment for obesity, (3)
$100,000.00 upon completion of a pivotal or Phase III clinical
study of VNS as a treatment for obesity that would support a
Premarket Approval (PMA) application to FDA and
submission of the results of that study as part of a PMA
application submission to the FDA, and (d) $150,000.00 upon FDA
approval of VNS for the treatment of obesity. A prerequisite for
the payment of each Milestone Advance, in addition to actual
achievement of the respective milestone, is that Licensor shall
have performed the implant for milestone (1), and, except in the
event of either his death or a disability that prevents hi
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