LICENSE AGREEMENT

 

                                                                    Exhibit 10.2

 

                                                                  EXECUTION COPY

 

                                LICENSE AGREEMENT

 

 

         This Agreement entered into and effective as of December 19, 2005 (the

"Effective Date") is between PROTEIN POLYMER TECHNOLOGIES, INC., a Delaware

corporation (hereinafter referred to as "Company"), and SURGICA CORPORATION, a

Delaware corporation (hereinafter referred to as "Licensor"). Company and

Licensor are each hereinafter referred to as a "Party" and collectively as the

"Parties".

 

 

                              W I T N E S S E T H:

 

         WHEREAS, the Licensor and Company entered into an Asset Purchase Option

Agreement, dated as of November 23, 2005 (the "Option Agreement"), pursuant to

which Company, among other things, obtained the right to purchase from Licensor

substantially all of the assets of Licensor then existing or thereafter acquired

through the date of the exercise of the Option (as that term is defined in the

Option Agreement);

 

         WHEREAS, as partial consideration offered by Licensor to induce Company

to enter into the Option Agreement, Licensor desires to grant to Company, and

Company desires to obtain from Licensor, an exclusive license to Licensor's

intellectual property rights; and

 

         WHEREAS, in connection with the Option Agreement and this Agreement,

the Parties are entering into a separate Supply Agreement (defined below),

pursuant to which Licensor shall supply to Company certain manufactured Product,

services and cooperation and Company shall provide to Licensor certain services

and cooperation.

 

         NOW, THEREFORE, in consideration of the premises and mutual covenants

and agreements herein set forth and for other good and valuable consideration,

the receipt and adequacy of which are hereby acknowledged, the Parties hereto

hereby agree as follows:

 

1.        DEFINITIONS.

         -----------

 

         In this Agreement   (including   the recitals) the following   expressions

shall have the following meanings unless the context otherwise requires:

 

                  "Affiliate" shall mean, in relation to either Party, (a) any

         corporation, partnership, limited liability company, or other entity

         ("Entity") in which the relevant Party directly or indirectly holds 50%

         or more of the voting interests, (b) any Entity which holds directly or

         indirectly 50% or more of the voting stock or shares of the relevant

         Party, (c) any other Entity in which 50% or more of the voting

         interests is directly or indirectly held by any Entity described in

         clause (b), or (d) any Entity in which the relevant Party directly or

         indirectly holds less than 50% of the voting interests but has

         management control of such Entity in that it has the ability to appoint

         or remove the majority of the directors or managers of such Entity. For

         the purpose of this definition, Licensor shall not be an Affiliate of

         Company, and Company shall not be an Affiliate of Licensor.

 

 

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                  "Assumed Liability Matters" shall mean those specified

         liabilities of the Licensor set forth in Schedule B.

 

                  "Calendar Quarter" shall mean the usual and customary calendar

         quarters, the first quarter being the months of January, February and

         March, the second quarter being the months of April, May and June, the

         third quarter being the months of July, August and September, and the

         fourth quarter being the months of October, November and December.

 

                  "Copyrights" shall mean all copyright and rights in the nature

         of copyright now or subsequently owned or controlled by Licensor or its

         Subsidiaries at any time prior to or during the term of this Agreement

         relating to or embodying any part of the Know-How, including without

         limitation any materials consisting of or containing software or

         databases.

 

                  "Cost of Goods Sold" shall mean, for any applicable period,

         Company's cost of goods for Products sold determined in accordance with

         generally accepted accounting principles, consistently applied.

 

                   "ECA" means the European Competent Authorities, any Notified

         Bodies, or any successor agencies responsible for European Regulatory

         Approvals.

 

                  "FDA" shall mean the United States Food and Drug

         Administration or any successor agency vested with administrative and

         regulatory authority to approve testing and commercial distribution of

         products for human and veterinary use in the United States.

 

                  "Field" shall mean any and all human or veterinary

         applications.

 

                  "Fully-Burdened Cost" shall mean all of the direct and

         proportional indirect costs and expenses for providing the specified

         Product or services, including but not limited to raw materials and

         supplies, labor, equipment, utilities, facilities and overhead as

         determined according to generally accepted accounting principles (GAAP)

         consistently applied.

 

                  "Governmental Body" means any: (a) nation, principality,

         state, commonwealth, province, territory, county, municipality,

         district or other jurisdiction of any nature; (b) federal, state,

         local, municipal, foreign or other government; (c) governmental or

         quasi-governmental authority of any nature (including any governmental

         division, subdivision, department, agency, bureau, branch, office,

         commission, council, board, instrumentality, officer, official,

         representative, organization, unit, body or Entity and any court or

         other tribunal); (d) multi-national organization or body; or (e)

         individual, entity or body exercising, or entitled to exercise, any

         executive, legislative, judicial, administrative, regulatory, police,

         military or taxing authority or power of any nature.

 

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                  "Gross Margin" shall mean, for a Product, the invoiced price

         of such Product upon the sale by Company or any Affiliate of the

         Company to another entity, less the Cost of Goods Sold of such Product

         for the applicable accounting period.

 

                  "Intellectual Property" shall mean all Patents, Know-How,

         Trademarks and Copyrights.

 

                  "Know-How" shall mean all trade secrets, inventions, methods,

         processes, know-how and negative know-how, techniques, products,

         designs, cultures, other biological materials and other materials and

         compositions, information, data or experience whether patentable or

         not, useful in the Field that are (i) owned or controlled by Licensor

         or its Subsidiaries as of the Effective Date or (ii) developed,

         acquired or that otherwise become controlled by Licensor or its

         Subsidiaries at any time during the term of this Agreement, including

         without limitation, processes, techniques, methods, operating

         instructions, machinery designs, raw material or product

         specifications, drawings, blue prints, laboratory books, notes, records

         and any other technical and commercial information relating to

         research, design, development, manufacture, assembly, use or sale of

         the Products in the Field.

 

                  "Know How Documentation" shall mean complete and accurate

         written documentation concerning all Confidential Information of

         Licensor necessary or desirable to use, practice and/or otherwise

         exploit the Know-How and related Intellectual Property, including but

         not limited to the Device Master Record, Device History Record, Design

         History File, and Quality System Record (as those terms are defined in

         21 CFR 820, Quality System Regulation) for each of PVA Plus(TM),

         MaxiStat(TM), and MicroStat(TM) (510(k) clearance numbers K001678,

         K020033, and K032619, respectively), the 510(k) submissions as

         supplemented or amended resulting in such clearances, internal audit

         reports, reports and communications associated with an inspection or

         audit of Licensor's operations by a Governmental Body, and laboratory

         notebooks, experimental reports, batch records, invention disclosures,

          and patent applications.

 

                  "Net Profit" shall mean Net Sales less (i) the amount paid by

         Company for goods pertaining to the Products sold by Company that are

         obtained by Company pursuant to the Supply Agreement or other similar

         arrangement, (ii) other monies paid to Licensor by Company under the

         Supply Agreement, and (iii) Company's Fully Burdened Cost in providing

         the services and cooperation to Licensor as set forth in the Supply

         Agreement and/or the applicable Project Plan (as that term is defined

         in the Supply Agreement).

 

                  "Net Sales" shall mean the gross invoice price of Products

         sold by Company to any other entities, less (i) quantity and/or cash

         discounts actually allowed or taken; (ii) freight, postage and

         insurance; (iii) amounts repaid or credited by reasons of rejections or

         return of goods or because of retroactive price reductions specifically

         identifiable to Products; (iv) amounts payable resulting from

         governmental (or agency thereof) mandated rebate programs; (v)

         third-party rebates to the extent actually allowed; (vi) custom duties

         and taxes (excluding income, value-added and similar taxes), if any,

         directly related to the sale; and (vii) any other specifically

         identifiable amounts included

 

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         in such Product gross sales that will be credited for reasons

         substantially equivalent to those listed hereinabove.

 

                  "Patent(s)" shall mean:

 

                       (a) any and all patents and applications for patents

                  owned or controlled by Licensor as of the Effective Date which

                  are useful in the Field including, but not limited to, those

                  that are identified in Schedule A, attached hereto, along with

                  any and all foreign counterparts thereof, all continuations,

                   continuations-in-part, divisions and renewals thereof, all

                  patent supplementary protection certificates and similar

                  rights that are based on or derive priority from any of the

                  foregoing or which may be granted thereon, and all reissues,

                  re-examinations, extensions, patents of addition and patent of

                  importation thereof;

 

                       (b) any and all patent applications by Licensor or its

                   Subsidiaries useful in the Field that are filed, acquired or

                  that otherwise become controlled by Licensor during the term

                  of this Agreement, all continuations, continuations-in-part or

                  divisions of any such applications, any patents which shall

                  issue based on such applications, continuations,

                  continuations-in-part, or divisions and any and all patents,

                  patent supplementary protection certificates and similar

                  rights that are based upon or derive priority from any of the

                  foregoing or which may be granted thereon and all reissues,

                  renewals or extensions thereof or patents of addition thereto;

                  and

 

                       (c) all such patent applications, patent certificates and

                  rights, a Valid Claim of which would be infringed by the

                  manufacture, marketing, use or sale of Product (but for the

                  license granted herein).

 

                  "Product(s)" shall mean any product which (i) if made, used or

         sold would infringe one or more Valid Claims in an issued Patent but

         for the License granted pursuant to Section 3.1 of this Agreement, or

         (ii) otherwise uses, incorporates or was conceived, developed or

         reduced to practice using the Patents or Know-How that comprise, in

         part, the Intellectual Property subject to the License set forth in

         Section 3.1 hereof.

 

                  "Regulatory Agency" means (a) the FDA, (b) the ECA, or (c) any

         other Governmental Body with regulatory authority similar to the FDA or

         ECA in any other jurisdiction anywhere in the world.

 

                  "Regulatory Approval" shall mean with respect to any country,

         filing for and receipt of all regulatory agency or other registrations,

         clearances and approvals required in such country in respect of Product

         for any purpose specified in this Agreement or, if no purpose is

         specified, to enable Product to be manufactured, offered for sale, sold

         and distributed, and for Non-Clinical Use or Clinical Use to take

         place, in such country.

 

                   "Subsidiary" shall mean a corporation, limited liability

         company or partnership of which a Party holds 50% or more of the voting

         or economic interest. For the purpose of this definition, Licensor

         shall not be a Subsidiary of Company.

 

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<PAGE>

 

 

                  "Supply Agreement" shall mean that certain Supply and Services

         Agreement entered into between Licensor and Company of even date

         herewith.

 

                   "Third Party" shall mean a person other than Licensor, Company

         or their respective Affiliates.

 

                  "Trademarks" shall mean any and all trademarks, trade names,

         service marks, service names, logos and similar proprietary right

         owned, controlled or licensed by Licensor to be used in connection with

         the Licensor's Intellectual Property or Products.

 

                  "Valid Claim" shall mean a claim in any unexpired Patent which

         has not been held invalid by a decision of a court or other appropriate

         body of competent jurisdiction against which there is no appeal or

         where any period for appealing against such decision has expired

         without an appeal having been validly submitted.

 

2.        CONDITIONS TO LICENSE.

         ---------------------

 

         2.1    Licensor hereby represents and warrants that, as a condition

precedent to entering into this Agreement, Licensor has:

 

               (a) Successfully obtained Angiodynamics, Inc.'s ("Angiodynamics")

written consent, the form of which is attached as Exhibit D to the Option

Agreement, to the assignment to Company of all of Licensor's rights and

obligations under the Distributor Agreement dated June 28, 2002 by and between

Licensor and Angiodynamics; and

 

               (b) Received an unconditional and irrevocable assignment of all

rights, title and interest of its employees, officers and/or directors

(including, without limitation, Louis R. Matson) in and to all inventions

pertaining or applicable to the Field.

 

3.        ASSIGNMENT OF 510(K) CLEARANCES; GRANT OF LICENSE.

         -------------------------------------------------

 

         3.1    Rights Granted.

               --------------

 

               (a) Subject to the terms and conditions of this Agreement

(including, without limitation, Company's payment of the License Fee), Licensor

hereby sells, assigns, transfers, conveys, grants, and delivers and Company

hereby accepts from Licensor all of Licensor's right, title and interest in and

to its 510(k) Clearances, including numbers: K001678 relating to PVA Plus(TM),

K020033 relating to MaxiStat(TM) and K032619 relating to MicroStat(TM), filed

with the United States Food and Drug Administration and all information

submitted along with such applications ("510(k) Clearances").

 

               (b) Upon execution and delivery of this Agreement, Licensor shall

effectuate the sale, assignment, transfer, conveyance, grant and delivery of the

510(k) Clearances to Company by delivering to Company (or its designees) a duly

executed bill of sale and assignment for the 510(k) Clearances in substantially

the form of Exhibit A, attached hereto, and shall notify the FDA of the same by

delivering to Company (or its designees) a duly executed letter of notification

in substantially the form of Exhibit B, attached hereto.

 

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               (c) Subject to the terms and conditions of this Agreement

(including, without limitation, Company's payment of the License Fee), Licensor

hereby grants to Company and Company hereby accepts from Licensor an exclusive

(even as against Licensor), worldwide license, with the right to sublicense, to

the Intellectual Property to make, have made, modify, import, use, offer to

sell, sell and have sold Products and perform and have performed all processes

under the Intellectual Property, solely in the Field in all countries in the

world (the "License").

 

               (d) Solely with respect to the License of Trademarks set forth

herein, (i) Company may utilize and exploit such Trademarks only in connection

with the Products, (ii) Licensor may from time to time request samples of

Company's use of the Trademarks in commerce, and (iii) Company shall comply with

the reasonable written use standards and requirements imposed by Licensor

concerning the use of its Licensor's Trademarks.

 

               (e) Licensor hereby agrees that it shall not, without the prior

written consent of Company, use, make, have made, modify, import, use, perform,

offer to sell, sell or have sold any products, compositions or methods in the

Field, or license or transfer to any Third Party (including without limitation,

any Affiliate) any of such rights in the Field.

 

               (f) With respect to any Intellectual Property developed or

acquired by Licensor after the Effective Date, Company agrees that the License

with respect to such after-acquired Intellectual Property shall be subject to

any contractual obligations of Licensor under bona fide arm's length third party

agreements; provided that, in the event the License is restricted or limited by

any such contractual obligations of Licensor, then Licensor shall use reasonable

commercial efforts to exclude or, where applicable, to minimize any such

restriction or limitation.

 

               (g) Licensor acknowledges and agrees that the License set forth

in Section 3.1 above, includes, without limitation, a license to make, have

made, modify, import, use, offer to sell, sell and have sold any and all of

Licensor's Products that have received, or during the term of this Agreement

will receive, Regulatory Approval from any applicable Regulatory Agency.

 

               (h) To the extent permissible under the terms of any and all

marketing and/or distribution agreements in effect as of the Effective Date, or

in effect during the term of this Agreement, Licensor shall sublicense all of

its rights under such agreements to Company for the duration of this Agreement.

To the extent that such a sublicense requires the consent of the other

contractual party, Licensor shall reasonably cooperate with Company to obtain

such consent.

 

4.        TRANSFER OF LICENSED TECHNOLOGY.

         -------------------------------

 

         No later than ten (10) days after the Effective   Date,   Licensor   shall

provide to Company a copy of the current Device Master Record and Quality System

Record for each of PVA Plus(TM), MaxiStat(TM), and MicroStat(TM),   together with

a copy   of the   submissions   as   amended   or   supplemented   resulting   in   their

respective   510(k)   clearances.   Thereafter,   Licensor   shall   provide   Know How

Documentation as requested in writing by Company within ten (10) days.

 

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5.        PAYMENT TO LICENSOR.

         -------------------

 

5.1       License Fee; Indemnification Against Certain Claims.

         ---------------------------------------------------

 

               (a) Upon execution and delivery of this Agreement and no later

than five (5) calendar days after the Effective Date, Licensor shall provide

Company written, complete and accurate records specifying Licensor's total debt

concerning the categories set forth in Schedule C, attached hereto.

 

               (b) Promptly upon Company receipt and diligent review of

Licensor's records concerning its outstanding debts, Company shall deliver to

Licensor, or to Licensor's designee(s), the "License Fee" in full satisfaction

of its license fee obligations hereunder, which shall consist of (i) the

assumption of "Assumed Liability Matters" by the Company as of the Effective

Date as set forth in Schedule B and (ii) an aggregate amount of up to Three

Hundred and Ninety One Thousand and Zero Cents ($391,000.00) as set forth in

Schedule C, to satisfy Licensor's outstanding debts and/or liabilities.

 

               (c) Company's License Fee obligations shall consist of assuming

and repaying Company's outstanding debt as provided in Section 5.1(b) above as

of the Effective Date in an aggregate amount not to exceed the amount specified

in Section 5.1(b). Company agrees to take all commercially reasonable steps

necessary to assume, pay, perform and discharge when due, all of Company's

outstanding debt as provided in Section 5.1(b) as of the Effective Date in an

aggregate amount not to exceed the amount specified in Section 5.1(b)

 

               (d) Company shall indemnify, hold harmless and defend Licensor

from and against and will pay or reimburse Licensor with respect to any and all

claims by Sapphire Group LLC against Licensor to which Licensor may become

subject, directly arising out of or in connection with any fees found by a court

of competent jurisdiction to be actually owed by Licensor to Sapphire Group LLC

arising solely pursuant to that certain engagement letter signed by Sapphire

Group LLC and agreed to by Licensor, dated as of July 7, 2003, as amended

pursuant to that amendment letter signed by Sapphire Group LLC and agreed to by

Licensor, dated as of July 6, 2004, and as supplemented by that supplement

letter signed by Sapphire Group LLC and agreed to by Licensor, dated as of June

3, 2005, solely in connection with Licensor entering into and executing the

Option Agreement, the License Agreement and/or the Asset Purchase Agreement, as

to each, if and when entered into and executed by Licensor and Company (a

"Sapphire Claim"). Notwithstanding the foregoing, the Licensor's right to

defense of such claims as set forth in this Section 5.1(d) shall not be

dependent upon any finding by any court of competent jurisdiction with respect

to any such Sapphire Claim. All Sapphire Claims shall be resolved pursuant to

those procedures set forth in Section 7.3. In no event, shall Company's total

liability pursuant to this Section 5.1(d) exceed Two Hundred Thousand Dollars

and Zero Cents ($200,000.00), such total liability shall not be reduced by any

reasonable attorneys' fees incurred by Company in defense of Licensor to any

such Sapphire Claim as provided herein.

 

5.2       Royalties.

         ---------

 

                                        7

 

 

<PAGE>

 

 

               (a) Subject to the provisions of this Agreement, Company shall

pay Licensor, no later than forty-five (45) days after the close of each

Calendar Quarter throughout the term of this Agreement, a royalty equal to

twenty-five (25%) of Company's Net Profit from Products for the Calendar Quarter

(or part thereof in the case of the first or last Calendar Quarter for which a

royalty is payable if not a full quarter) then ended (the "Surgica Royalty").

 

                (b) In the event any Product or Products are sold pursuant to a

sales agreement, marketing agreement, distribution agreement or similar

arrangement to which the Company is a party with any entity ("Net Distributor

Revenue"), Company shall pay Licensor, no later than forty-five (45) days after

the close of each Calendar Quarter, the royalty specified in Section 5.2(a) as

applied to the Company's share or interest in the Product or Product-related

revenue from said entity's sale of Products; provided, however, that in no case

shall Company have any obligation to pay any amounts to Licensor under this

Section 5.2(b) for the sale of Products by Company to any other entities.

 

               (c) Company shall deliver to Licensor written reports of Net

Profit, Net Sales and Net Distributor Revenue during the preceding Calendar

Quarter on or before the forty-fifth (45th) day following the end of each

Calendar Quarter. Such reports shall include a calculation of the earned royalty

due and shall be accompanied by the monies due. If no earned royalties are due,

then Company shall indicate such on its written report.

 

6.        CONFIDENTIALITY.

         ---------------

 

         6.1    Subject to Section 6.3, during the term of this Agreement and for

a period of five (5) years thereafter (except with respect to trade secrets, for

which the obligations of non-use and non-disclosure shall continue for so long

as such trade secrets are protected by their owner as trade secrets), each Party

shall maintain in confidence and shall not disclose to any Third Party any

know-how, trade secrets, business or technical information or other information

("Confidential Information") received from the other Party relating to any

Product, and shall not use the other Party's Confidential Information except for

the purposes of this Agreement without the prior written consent of such other

Party. These confidentiality and non-use obligations shall not apply to any

Confidential Information that the receiving Party can demonstrate:

 

                (a) at the time of disclosure to the receiving Party was, or

thereafter becomes, a part of the public domain through no fault of the

receiving Party, its Affiliates, distributors or sublicensees;

 

               (b) was subsequently lawfully disclosed to the receiving Party by

a Third Party not under an obligation of confidentiality with or through the

disclosing Party;

 

               (c) was in the lawful possession of the receiving Party prior to

disclosure by the disclosing Party; or

 

               (d) is req