EXCLUSIVE LICENSE AND DEVELOPMENT AGREEMENT
Exhibit 10.5
THIS EXCLUSIVE LICENSE AND DEVELOPMENT AGREEMENT (this “Agreement”) is made as of the
26th day of May 2006, by and between ▇▇▇▇▇▇▇▇▇ 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 ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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.
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
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
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 | |||
| (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.
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.
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 (45th) 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:
▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
Office of Technology Transfer
▇▇▇▇▇▇▇▇▇ University
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Office of Technology Transfer
▇▇▇▇▇▇▇▇▇ University
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(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
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 ▇▇. ▇▇▇▇▇▇’▇ research and
development of any Licensed Product. The University shall be compensated by the Company or
otherwise reimbursed by the Company for use of such facilities as provided in the Research and
Development Budget, which is appended hereto as Exhibit A and which is hereby incorporated into
this Agreement, or as otherwise agreed upon by the parties. The Company agrees to update the
Research and Development Budget not less frequently than once per year, with input from the
University.” The University shall not be held liable for the decisions of any third party or
University authority or regulatory committee to disallow any animal research studies at the
University. To the extent the University is prohibited from conducting any animal research studies
on behalf of the Company, the funding requirements set forth under Section 5.1 shall be reduced by
an amount equal to the amount allocated towards animal research in the Research and Development
Budget and any extensions and renewals thereof.
4.2 ▇▇. ▇▇▇▇▇▇’▇ Research and Development. For as long as ▇▇. ▇▇▇▇▇▇ is an employee
of the University, the University agrees that ▇▇. ▇▇▇▇▇▇ shall devote at least ninety percent (90%)
of his working time over the next four (4) years commencing on the effective date of this Agreement
and at least fifty percent (50%) of his time for two (2) years thereafter, using his best efforts,
towards the research and development of any Licensed Product to a final design and prototype as a
commercially viable product and assist the Company with the prosecution of any and all patent
applications related thereto. ▇▇. ▇▇▇▇▇▇ shall be compensated for such work as provided for in the
Research and Development Budget, or as otherwise agreed upon by the parties.
4.3 Company Ownership of Intellectual Property.
(a) Ownership of Intellectual Property Rights. The Company shall own all inventions
conceived of and reduced to practice solely by its employees and agents, and all patent
applications and patents claiming such inventions developed without the use of any Licensed Patent
Rights or associated Know-How; and such inventions, patent applications and all resulting Patent
Rights shall not be subject to this Agreement. The University shall own all inventions conceived
of and reduced to practice solely by ▇▇. ▇▇▇▇▇▇, its other employees, and/or its agents in the
course of this Agreement, and all patent applications and patents claiming such inventions; and
such inventions, patent applications and all resulting Licensed Patent Rights shall be subject to
the exclusive license, royalty, and associated provisions of this Agreement. Company and
University shall jointly own all inventions conceived of and reduced to practice jointly by (i) ▇▇.
▇▇▇▇▇▇, the University’s other employees, and/or the University’s agents and (ii) the Company’s
employees and/or the Company’s agents in the course of this Agreement; and such inventions, patent
applications and all resulting Licensed Patent Rights shall be subject to the exclusive license,
royalty, and associated provisions of this Agreement. Notwithstanding anything to the contrary
contained in this Section 4.3, the University shall solely own all inventions conceived of or
reduced to practice under the Research and Development Budget and any extensions and renewals
thereof, and all patent applications and patents claiming such inventions, irrespective of whether
such inventions are conceived of solely by Company employees and agents, solely by University
employees and agents, or jointly by University employees and agents and Company employees and
agents; and such inventions, patent applications and all resulting Licensed Patent Rights shall be
subject to the exclusive license, royalty, and associated provisions of this Agreement.
(b) Ownership of Copyright and Trademark Materials. It is also contemplated that the
University and its employees may create copyrightable and trademark- or servicemark-eligible work
related to the Company’s or any Licensed Product’s marketing, promotion, and public relations
(“Other Work”) in connection with the performance of the development services under this Agreement.
The University agrees that the copyright or ▇▇▇▇ and all other rights in and to the Other Work
shall belong completely and in all respects to the Company and that the University and its
employees shall retain no rights in or to such Other Work. The University further expressly agrees
that the aforementioned Other Work will be considered and deemed as work made for hire for the
benefit and exclusive ownership of the Company to the fullest extent permitted by law, provided,
however, that if any copyrightable work shall not be legally qualified as work made for hire, the
University agrees to assign, and does hereby so assign to the
Company, all rights, title and interest in and to such Other Work, including, but not limited to,
the copyright or ▇▇▇▇ therein. Where the Company has authorized the University to subcontract all
or a portion of any services or to engage any other organization to perform all or a portion of any
services, the University further agrees to require by contract that any such subcontractor or
organization assign, either to the University or to the Company as the designated client, all such
Other Work created by such subcontractor or organization the University also agrees to furnish and
execute such additional documents as the Company may require to establish the Company’s ownership
of the copyright or ▇▇▇▇ in the Other Work including, without limitation, such assignments of the
copyright or ▇▇▇▇ therein throughout the world as the Company may deem appropriate.
Notwithstanding the Company’s ownership of any Other Work set forth above, the Company agrees that
the University shall have the right to publish or present the results of scientific investigations
associated with this Agreement, provided that confidential and/or propriety information of the
Company not publicly known shall not be disclosed without the Company’s prior written permission.
The University shall provide the Company with a copy of the manuscript, paper, or poster not less
than 30 days prior to any submission to any third party. If identified by the Company, the
University will delete any of the Company’s proprietary or confidential information contained
herein. Additionally, the trademarks “SafeStitch” and “SafeStitch LLC”, as well as any and all
variants thereof, any domain names thereof, and goodwill associated therewith, shall be the
property of the Company. The parties agree that all goodwill generated by any Licensed Product or
the marks “SafeStitch” and “SafeStitch LLC”, as well as any variants thereof, shall inure to the
benefit of the Company.
(c) Prosecution and Maintenance of Patent Rights. The University shall, using agents
or attorneys agreed to by the parties (including agreement with respect to costs associated with
drafting and prosecuting patent applications), file, prosecute and maintain the Licensed Patents
and all patent applications and patents disclosing and claiming inventions made in whole or in part
by the University employees, agents or contractors resulting from the research and development the
University engages in on behalf of the Company under the Agreement. The University shall file,
prosecute and maintain one or more patent applications and patents in those countries designated by
the Company. The University shall provide copies of all documents filed with or received from any
domestic or foreign patent office to the Company to allow the Company adequate time to review and
comment. For any patent prosecution or maintenance in any country designated by the Company, the
Company shall reimburse the University within 45 days or receipt of written invoices provided to
the Company by the University for all expenses, including attorney’s fees and government fees
associated with such filings, prosecution and maintenance costs, and for patent searches performed
as part of an analysis of whether to file a patent application claiming such an invention.
Reimbursement by the Company for legal services would be limited to an amount no greater than the
median amount set forth in the then current AIPLA Report of the Economic Survey for comparable
legal services unless otherwise agreed to in writing in advance. The amounts of this reimbursement
would not be subjected to the limits or deducted from any other payments due from the Company to
the University under the Agreement. The Company would reserve the right to discontinue
reimbursement of such patent drafting, prosecution and/or maintenance in any country or for any
patent application or patent by giving the University thirty days written notice. The Company
would be responsible only for costs or fees incurred prior to such notice to the University, and
the University would have the right, but not the obligation, to continue such drafting,
prosecution, or maintenance at
SafeStitch LLC
Exclusive License and Development Agreement
Page 9 of 17
Exclusive License and Development Agreement
Page 9 of 17
the University’s own expense. In the event that the Company chooses to discontinue reimbursement
of patent drafting, prosecution, and/or maintenance in any country for any patent, then the
associated Patent Rights in that country shall revert back to the University. A decision by the
Company to discontinue reimbursement for patent costs in a particular country shall not affect the
Company’s reporting and payment obligations with respect to sales of Licensed Products by the
Company, its Affiliates, and its sublicensees in the particular country.
(d) Infringement by Third Parties. If a party to this Agreement becomes aware of any
infringement or potential infringement of any Licensed Patent Right, the party to this agreement
shall promptly notify the other party of such infringement or potential infringement. During the
term of this Agreement the Company shall have the right, but not the obligation, at is sole expense
and with counsel of its own choice, to enforce the Licensed Patent Rights and associated Know-How
against any infringer, including the right to file suit for patent infringement naming the
University as a party, and the right to settle such suit with the University’s consent, which
consent shall not be unreasonably withheld . The University shall permit the use of its name in
all such suits, sign all necessary papers, and do all reasonable things necessary, at the Company’s
expense, to facilitate the prosecution of such infringement suits. The Company shall pay to the
University one and one-half percent (1.5%) of any amount collected as a result of such judgement or
settlement within 30 days of the receipt thereof. The Company shall incur no other liability to
the University as a consequence of such litigation, the conduct of such litigation or any
unfavorable decision resulting from it, including any decision holding any of the Licensed Patent
Rights invalid or unenforceable. In the event that the Company chooses not to file suit for patent
infringement within 180 days after becoming aware of infringement, the University shall have the
right, but not the obligation, at its sole expense and with counsel of its own choice, to enforce
the Licensed Patent Rights and associated Know-How against any infringer, including the right to
file suit for patent infringement naming the Company as a party, and the right to settle such suit
with the Company’s consent, which consent shall not be unreasonably withheld. The Company shall
permit the use of its name in all such suits, sign all necessary papers, and do all reasonable
things necessary, at the University’s expense, to facilitate the prosecution of such infringement
suits. The University shall pay to the Company one and one-half percent (1.5%) of any amount
collected as a result of such judgement or settlement within 30 days of the receipt thereof. The
University shall incur no other liability to the Company as a consequence of such litigation, the
conduct of such litigation or any unfavorable decision resulting from it, including any decision
holding any of the Licensed Patent Rights invalid or unenforceable.
Section 5. Commercial Funding and Development.
5.1 Funding Requirements. Company shall invest, in aggregate, at least $2,500,000
within thirty-six (36) months of the effective date of this Agreement (i) under the Research and
Development Budget and any extensions and renewals thereof, and (ii) towards development of any
Licensed Product. If the Company fails to do so, all rights in the Licensed Patent Rights and
associated Know-How shall revert back to the University. Further, Company agrees to pay to the
University an overhead fee equal to 20% of the direct and personnel costs for services conducted at
University or Company facilities in or around a 100 mile radius of Omaha, Nebraska (i) pursuant to
the Research and Development Budget as set forth in Exhibit A, and
SafeStitch LLC
Exclusive License and Development Agreement
Page 10 of 17
Exclusive License and Development Agreement
Page 10 of 17
any extensions and renewals thereof and (ii) towards development of any Licensed Product. The
parties may mutually agree from time to time to include direct or personnel costs for the
development of a Licensed Product not conducted in the Omaha area in the calculation of the
overhead fee. In this regard, the parties agree that amounts paid to Phoenix Analysis & Design
Technologies (PADT) for the first two years from the date of this Agreement pursuant to the
Research and Development Budget shall be included in the calculation of the overhead fee. Such
overhead fee payments shall be made on a monthly basis and shall be accompanied by an accounting
statement detailing expenditures made by the Company during the preceding month. Such accounting
statements shall contain a written representation signed by an executive officer of the Company
that states that the statements are true and accurate. The Company shall maintain records relating
to such expenditures and permit audits of such records in accordance with the terms of Section
3.4(vi) of this Agreement. It is understood that the first $150,000 of costs related to the
prosecution of patents, including costs related to the defense or claims related thereto,
associated with the Licensed Patent Rights and associated Know-How are not included in the
$2,500,000 amount recited in this Section 5.1.
5.2 Commercial Exploitation Term. The Company shall exercise its own business
judgment and its sole and absolute discretion over the marketing, sale, distribution, promotion, or
other commercial exploitation (collectively, the “Commercial Exploitation” or “Commercially
Exploited”) of any Licensed Product. In the event the Company has not Commercially Exploited or
commenced Development of a Licensed Patent and its associated Know-How by the seventh
(7th) anniversary of the later of the effective date of this Agreement or the date such
technology is disclosed to and accepted by the Company, then Company shall promptly execute such
papers as are necessary to cause the reversion of such Licensed Patent and associated Know-How back
to the University, with no rights retained by Company, and the University will have the right to
seek a third party with whom to commercialize such Patent and associated Know-How. Company may
purchase one year extensions in addition to the seven years provided for Commercial Exploitation at
a cost of $100,000 per Licensed Patent per year of extension to avoid the reversion of any Patent
Right that has not been Commercially Exploited or Developed. At any time, the Company may choose
at its discretion not to develop one or more of the Licensed Patents. In such event, the Company
will promptly notify the University in writing that the Company has decided to not commercialize
such Licensed Patent, and all rights to such Licensed Patent and its associated Know-How shall
revert back to the University.
5.3 New Technology Disclosure and Grant of Option. During the first thirty-six (36)
months from the effective date of this Agreement, the University shall have an ongoing obligation
to disclose any Additional Technologies and associated Know-How, and the Company shall have an
option for thirty (30) days after such disclosure (the “Option”) to accept or reject such disclosed
technology for continued Development. Such disclosures shall be made no less than quarterly, and
the date of written acceptance by the Company shall commence the 7-year term set forth in Section
5.2 with respect to each disclosed and accepted item. The University shall not have any right to
reimbursement under this Agreement for any technology not specifically referenced in this Agreement
until disclosed to and accepted by the Company subject to the terms of this Section 5.3.
SafeStitch LLC
Exclusive License and Development Agreement
Page 11 of 17
Exclusive License and Development Agreement
Page 11 of 17
5.4 Enforceability. The Company agrees to cooperate in executing any documents
necessary to cause rights in the Licensed Patent Rights and associated Know-How to revert back to
the University pursuant to Sections 5.1 and 5.2, and the rights of the University to such reversion
shall be enforceable by specific performance. The parties agree to submit any dispute to
non-binding arbitration as governed under the rules of arbitration in the Omaha, NE area before
filing suit in any court of law. The prevailing party shall be entitled to reimbursement of any
legal fees incurred pursuant to this Section 5.4.
Section 6. Confidentiality and Disclosure.
6.1 Confidentiality.
(a) By the University. From and after the execution of this Agreement, the University
shall keep secret and retain in the strictest confidence, and shall not use for the benefit of any
person other than the Company, all confidential information and trade secrets disclosed to the
University relating to any Licensed Product or the business and other operations of the Company,
including, without limitation, the Licensed Patent Rights and associated Know-How that will be
developed, designed, and/or otherwise created, whether or not any of such technology is protected
or can be protected by patents, trademarks, copyrights or other intellectual property rights. The
University shall use reasonable efforts to ensure that all employees, contractors and consultants
employed or engaged by the University in furtherance of its business shall maintain the same
confidentiality related to Company matters that are required by the University. For purposes of
this Agreement, the parties understand and agree that the term “confidential information” does not
include information which (i) has been published or is now in the public domain, or in the future
becomes published or in the public domain through no action of the University; (ii) subsequent to
disclosure hereunder, is received by the University from a third party not known by the University
to be under an obligation of confidentiality to the Company; (iii) is independently developed by
the University without reference to the confidential information of the Company; or (iv) is
disclosed with the prior written approval of the Company. Company understands that in the course
of prosecution of Patent Rights, it may be desirable and/or necessary that certain information be
disclosed to one or more patent offices or otherwise, and nothing in this Agreement shall be
construed as restricting the University from making such disclosures.
(b) By the Company. From and after the execution of this Agreement, the Company shall
keep secret and retain in the strictest confidence, and shall not use for the benefit of any person
other than the University, all confidential information and trade secrets disclosed to the Company
relating to any Licensed Product or the business and other operations of the University, including,
without limitation, the Licensed Patent Rights and associated Know-How that will be developed,
designed, and/or otherwise created, whether or not any of such technology is protected or can be
protected by patents, trademarks, copyrights or other intellectual property rights. The Company
shall use reasonable efforts to ensure that all employees, contractors and consultants employed or
engaged by the Company in furtherance of its business shall maintain the same confidentiality
related to University matters that are required by the Company. For purposes of this Agreement,
the parties understand and agree that the term “confidential information” does not include
information which (i) has been published or is now in the public domain, or in the future becomes
published or in the public domain through no
SafeStitch LLC
Exclusive License and Development Agreement
Page 12 of 17
Exclusive License and Development Agreement
Page 12 of 17
action of the Company; (ii) subsequent to disclosure hereunder, is received by the Company
from a third party not known by the Company to be under an obligation of confidentiality to the
University; (iii) is independently developed by the Company without reference to the confidential
information of the University; or (iv) is disclosed with the prior written approval of the
University. Notwithstanding the foregoing, the Company may exercise its sole business judgment in
disclosing information related to any Licensed Product in furtherance of the Development or
Commercial Exploitation of such Licensed Product and may also disclose any information legally
required to be disclosed by any regulatory body related to the Commercial Exploitation or
Development of any Licensed Product without the consent or prior approval of the University.
6.2 Disclosure.
(a) By the University. If the University is requested or required by a court having
competent jurisdiction, by oral questions, by interrogatories, or similar requests for information
or documents, by subpoena, civil investigative demand or similar process, to disclose any
confidential information of the Company, the University shall provide the Company with written
notice of such request or requirement so that the Company may seek an appropriate protective order
and/or waive compliance with the provisions of this Agreement. The University agrees to cooperate
with the Company, at the Company’s sole expense, in obtaining such protective order. If the
Company does not obtain such protective order or provide a waiver of the obligations of this
Agreement within a reasonable time after the University has provided written notice under this
paragraph, the University may disclose such confidential information pursuant to such request or
requirement without liability under this Agreement.
(b) By the Company. If the Company is requested or required by a court having
competent jurisdiction, by oral questions , by interrogatories, or similar requests for information
or documents, by subpoena, civil investigative demand or similar process, to disclose any
confidential information of the University, the Company shall provide the University with written
notice of such request or requirement so that the University may seek an appropriate protective
order and/or waive compliance with the provisions of this Agreement. The Company agrees to
cooperate with the University, at the University’s sole expense, in obtaining such protective order
or provide a waiver of the obligations of this Agreement within a reasonable time after the Company
has provided written notice under this paragraph; the Company may disclose such confidential
information pursuant to such request or requirement without liability under this Agreement.
Section 7. Indemnification.
7.1 By the University. The University agrees to defend and indemnify and hold the
Company harmless against any and all claims, suits, proceedings, expenses, recoveries and damages,
including court costs and reasonable attorneys fees and expenses, arising out of, based on, or
caused by the breach by the University of any representation of warranty contained in this
Agreement, except to the extent that such claims, suits, proceedings, expenses, recoveries or
damages arise from or are aggravated by acts of or failure to act by the Company; provided that the
Company shall provide the University with reasonably prompt written notice of any claim or action
for which it seeks indemnification under this Section 7.1. The University shall have sole control
of the defense and settlement of any such claim or action; and the Company shall
reasonably cooperate and provide reasonable assistance in connection with the defense and
settlement of any such claim or action. Nothing in this Section 7.1 shall be construed as
requiring the University to defend, indemnify, or hold the Company harmless with respect to any
claim, suit, proceeding, expense, recovery, or damage related to alleged infringement of any third
party Patent Right by any product, device, or method developed by the University under this
Agreement.
SafeStitch LLC
Exclusive License and Development Agreement
Page 13 of 17
Exclusive License and Development Agreement
Page 13 of 17
7.2 By the Company. The Company agrees to defend and indemnify and hold the
University harmless against any and all claims, suits, proceedings, expenses, recoveries, and
damages including court costs and reasonable attorneys feeds and expenses, in connection with any
of the Licensed Products sold by the Company or its Affiliates arising out of, based on, or caused
by (i) the Company’s use, manufacture, sale, offer for sale or disposal of the Licensed Product;
(ii) the storage, sale, shipment, promotion or distribution of the Licensed Products by the Company
or its Affiliates; or (iii) the breach by the Company of any representation or warranty contained
in this Agreement, in each case except to the extent that such claims, suits, proceedings,
expenses, recoveries or damages arise from or are aggravated by acts of or failure to act by the
University; provided that (a) the University shall provide the Company with reasonably prompt
written notice of any claim or action for which it seeks indemnification under this Article; (b)
the Company shall have sole control of the defense and settlement of any such claim or action; and
(c) the University shall reasonably cooperate and provide reasonable assistance in connection with
the defense and settlement of any such claim or action.
Section 8. Representations and Warranties.
8.1 University Representations and Warranties. The University represents and warrants
to the Company that all necessary university, corporate, and governmental authorizations, consents
and approvals which are necessary or required for the entering into of this Agreement have been
duly obtained; and the entering into of this Agreement by the University will not violate any
provision of law, statute, rule or regulation or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body to which the University is
subject.
8.2. Company Representations and Warranties. The Company represents and warrants to
the University that:
(a) all necessary corporate and other authorizations, consents and approvals which are
necessary or required for the entering into of this Agreement have been duly obtained; the entering
into of this Agreement by the Company shall not (i) violate any provision of law, statute, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative
agency or other governmental body or (ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (or give raise to any right of
termination, cancellation or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the Company under its
organizational documents, as amended to date, or any material note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or agreement in which the Company
is a party or by which it or any of its properties or assets is bound or affected.
SafeStitch LLC
Exclusive License and Development Agreement
Page 14 of 17
Exclusive License and Development Agreement
Page 14 of 17
8.3 Disclaimer of Warranties.
(a) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THIS ARTICLE 9, NEITHER PARTY MAKES
ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY KIND INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(b) NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE SUCCESS OF THE
DEVELOPMENT OR THE COMMERCIAL EXPLOITATION OF ANY PRODUCT.
Section 9. Governing Law; Construction; Severability. This Agreement and the rights and
liabilities of the parties hereunder shall be governed by and determined in accordance with the
laws of the State of Illinois. All pronouns shall be deemed to be the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may require. References to a person or
persons shall include partnerships, corporations, companies, unincorporated associations, trusts,
estates and other types of entities. Every provision of this Agreement is intended to be
severable. To the extent any provision of this Agreement is prohibited or otherwise ineffective
under applicable law, such provision shall be considered to be ineffective to the smallest degree
possible in order to make this Agreement effective under applicable law. In any judicial
proceeding, if a court shall refuse to enforce the scope of any restrictions herein, including
geographic and/or time restrictions, to their fullest extent, then such scope, including the
geographic and/or time restrictions, shall be reduced to the extent necessary to permit enforcement
of such restrictions to the fullest extent possible.
Section 10. No Partnership. Nothing contained herein shall be construed as creating a
partnership (including, without limitation, a limited partnership) or joint venture between or
among the parties hereto. No party shall act as or be deemed to be a partner or joint venturer of
any other party.
Section 11. Captions; Headings. The captions and headings in this Agreement are for
convenience only and are not to be considered in construing this Agreement.
Section 12. Counterparts. This Agreement, and any amendments hereto may be executed in
counterparts all of which taken together shall constitute one agreement.
Section 13. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto with respect to the subject matter hereof. With the exception of such agreements or
other documents that are expressly incorporated herein, it is the intention of the parties that
this Agreement shall be the sole source of agreement of the parties and this Agreement shall govern
even when inconsistent with or different from, the provisions of any applicable law or rule.
Section 14. Amendments. This Agreement may not be altered, amended, changed, supplemented,
waived or modified in any respect or particular unless the same shall be in writing and unanimously
agreed to by the parties hereto.
Section 15. Effect on Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, executors, administrators, successors
and assigns.
[signature page follows]
SafeStitch LLC
Exclusive License and Development Agreement
Page 15 of 17
Exclusive License and Development Agreement
Page 15 of 17
Signature Page
| ▇▇▇▇▇▇▇▇▇ University | ||||
By:
|
/s/ ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ | May 26, 2006 | ||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | Date | |||
| VP, Administration and Finance | ||||
| ▇▇▇▇▇▇▇▇▇ University | ||||
| SafeStitch LLC | ||||
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | May 4, 2006 | ||
| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | Date | |||
| Business Manager | ||||
| SafeStitch LLC | ||||
SafeStitch LLC
Exclusive License and Development Agreement
Page 16 of 17
Exclusive License and Development Agreement
Page 16 of 17
EXHIBIT A
RESEARCH AND DEVELOPMENT BUDGET
| Annual | Total | |||||||
Personnel |
||||||||
Director |
150,000 | 300,000 | * | |||||
Biomedical engineer — consultant |
100,000 | 200,000 | * | |||||
Biomedical engineer — knotting / electrical |
100,000 | 200,000 | ||||||
Biomedical engineer — needle mechanism |
100,000 | 200,000 | ||||||
Biomedical engineer — automation |
100,000 | 200,000 | ||||||
Animal technician |
30,000 | 60,000 | ||||||
Research fellow |
40,000 | 40,000 | ||||||
Administrative assistant |
30,000 | 60,000 | ||||||
SUBTOTAL SALARIES |
1,260,000 | |||||||
Taxes and Benefits — 37% |
281,200 | |||||||
TOTAL PERSONNEL |
1,541,200 | |||||||
Direct Costs |
||||||||
Animals |
82,400 | |||||||
Surgical supplies |
20,000 | |||||||
Office supplies |
10,000 | |||||||
Operating room equipment |
10,000 | |||||||
Consultant costs |
300,000 | |||||||
Prototype expense |
350,000 | |||||||
TOTAL DIRECT COSTS |
772,400 | |||||||
Indirect Costs and Overhead |
||||||||
▇▇▇▇▇▇▇▇▇ University Indirect Cost Allowance — 20% |
462,700 | |||||||
Legal |
150,000 | |||||||
Accounting |
30,000 | |||||||
Insurance |
50,000 | |||||||
Licenses and fees |
10,000 | |||||||
Travel |
20,000 | |||||||
Marketing |
10,000 | |||||||
Contingency at 10% |
304,630 | |||||||
TOTAL INDIRECT COSTS |
1,037,330 | |||||||
TOTAL BUDGET |
3,350,930 | |||||||
| * | No benefits included |
SafeStitch LLC
Exclusive License and Development Agreement
Page 16 of 17
Exclusive License and Development Agreement
Page 16 of 17