Rule 24b-2 Confidential Treatment
Brackets Indicate Omissions
EXHIBIT 10.9
DEVELOPMENT AGREEMENT
THIS AGREEMENT made as of September 24, 1990, by and between
CarboMedics, Inc., a Texas corporation, having a place of business at 1300-B
East Anderson Lane, Austin, Texas 78752 (hereinafter referred to as "CMI"), and
Helix BioCore, Inc., 3905 Annapolis Lane, Minneapolis, Minnesota 55447
("Helix").
WHEREAS, under license agreement of even date herewith (the "License
Agreement"), CMI has granted a license to Helix to use and sell a certain
embodiment of a bileaflet mechanical cardiac valve prosthesis (hereinafter
referred to as the "Valve") which is claimed under United States patent
4,692,165 (the "Licensed Product") and
WHEREAS CMI manufactures and sells Pyrolite coated components for
mechanical cardiac valve protheses using CMI's proprietary technology, which
includes all knowledge and information relating to inventions, methods, systems,
devices, processes, trade secrets and other confidential information used in the
design, fabrication, inspection and testing of prosthetic heart valve components
incorporating CMI's proprietary carbon materials Pyrolite and Biolite and other
proprietary substrate materials (hereinafter referred to as "CMI's Proprietary
Technology") and
WHEREAS Helix desires to complete design development and clinical
trials and have the Valve approved and manufactured for commercial production in
the U.S. and international markets and
WHEREAS CMI desires to manufacture mechanical heart valve components
for the Valve and to undertake such work on a "best efforts" basis, all upon the
terms and conditions set forth in the OEM supply contract of even date herewith
between CMI and Helix (the "Supply Contract") and
WHEREAS the research and development required to develop manufacturing
processes for a mechanical cardiac valve prothesis and bring it to commercial
market is expensive and the consideration agreed to in this Agreement is not, in
itself, sufficient to induce CMI to enter into this Agreement and
WHEREAS CMI is unwilling to incur the expense of such research and
development without the additional consideration of a long-term supply contract
to manufacture components for the Valve in commercial quantities and
WHEREAS, under an option agreement of even date herewith, CMI has given
Helix an option to license certain technology on the terms stated in such option
agreement (the "Option Agreement") and
WHEREAS the parties acknowledge and agree that the Supply Contract is
partial consideration for the completion of the research and development project
outlined in this Agreement,
NOW, THEREFORE, in consideration of the premises and in reliance upon
the mutual covenants and agreements hereinafter set forth, the parties agree as
follows:
1. Purposes of Agreement. The purpose of this Agreement is to establish
a program to complete the design and testing of the Valve, (the "Program") so
that commercial distribution can begin.
2. The Program.
2.1 Scope of the Program. In consideration of the Supply
Agreement and Helix's payments in accordance with and subject to the
terms of Section 3 hereof, the parties agree that:
a. As promptly as possible after the execution hereof, CMI and
Helix will begin joint development and fabrication of a sewing
cuff for the Valve.
b. CMI will perform preliminary tests of prototype Pyrolite
components. Helix may, at its option, observe such tests. CMI
will report the results of the tests to Helix. Helix will make
such changes in the design as it deems necessary or desirable.
CMI will cooperate with Helix in making changes necessary to
facilitate manufacture of the design. Helix will have the sole
right and responsibility to approve the design which is
finally adopted.
c. CMI will provide Helix with Valve components in the
quantities and sizes identified on Exhibit A, attached to and
made part of this Agreement. Any Valve components manufactured
in the course of the Program in excess of the quantities set
out on Exhibit B will be supplied to Helix under the terms of
the Supply Agreement before the beginning of the First
Contract Year as that term is defined in the Supply Contract.
d. CMI will perform or cause to be performed with respect to
the Valve components all accelerated wear testing and animal
implants required by the United States Food and Drug
administration ("FDA") under the guidelines in effect at the
initiation of the Program and in accordance with GMP and GLP
regulations.
e. Helix will provide CMI with a complete set of drawings for
components for the Valve. CMI will provide drafting services
to aid Helix in the preparation of such drawings.
f. Helix will have the responsibility for obtaining all
approvals required by the FDA. CMI will provide information to
the FDA in the areas of its expertise as required by the FDA.
g. CMI will provide Helix with access to and information
regarding CMI's final inspection procedures for the
components.
h. Helix will be solely responsible for (i) manufacturing the
sewing cuff except as set forth in Section l(e) of the Supply
Contract, (ii) final assembly of all components, (iii)
sterilization and packaging of the Valve, (iv) design and
fabrication of the auxiliary instrumentation and (v)
preparation of all labels including instructions for use.
2.2 Program Schedule. Work on the Program will be scheduled
for completion as set forth in the schedule in Exhibit B attached to
and made part of this Agreement (the "Program Schedule"). CMI will use
its best efforts to meet the deadlines set forth in the Program
Schedule but does not guaranty that such deadlines can be met because
the Program Schedule assumes that there are no unforeseen technical
difficulties and that all current assumptions related to the design of
the Valve are proven correct. The Program Schedule does not allow for
redesigns or reiteration of any step. For purposes of this section, and
section 3 below, and section 17.1 below the term "unforeseen technical
difficulties" will include but not be limited to material-related
difficulties; failure in any FDA or CMI-recommended test; and
process-related events that prevent CMI from meeting the final
specifications.
3. Program Price. In consideration of the work to be performed under
this Agreement, Helix will pay CMI $2.39 million. Such sum will be payable in
the installments set out on Exhibit B. The first installment will be due upon
signing this Agreement. Each remaining installment will be due and payable
before CMI begins the applicable activity. This price is based upon the
assumption that the Program will proceed without encountering delays caused by
unforeseen technical problems and without changes to the drawings and/or
specifications. The parties agree that if such delays or changes occur, Helix
will bear the reasonable cost of such delays or changes as additional charges to
be paid before correction of the delay or problem is attempted by CMI, with
Helix's approval.
4. Periodic Reports.
4.1 Progress Reports. Within 15 business days after the end of
every second calendar month, CMI will submit to Helix a written status
report detailing CMI's efforts during the two preceding months and the
results thereof. CMI will also submit to Helix CMI's best estimate of
the tasks to be accomplished during the next two calendar months.
4.2 Progress Reviews. The parties will undertake joint
progress reviews as indicated in Exhibit B and at such other times as
may be mutually agreed to at CMI's facility.
5. Changes in Specifications. During the term of this Agreement Helix
will have the right, exercisable at any time or from time to time, to make any
changes(s) in the drawings or specifications. Helix acknowledges that any such
change may affect the costs or schedule or both.
6. Proprietary Rights; Inventions. Helix agrees that any invention,
discovery or improvement, patentable or not, that is related to CMI's
Proprietary Technology and is created, conceived or reduced to practice in the
performance of this Agreement by CMI will be the exclusive property of CMI.
7. Tooling and Fixtures. All tooling and fixtures which are designed
and built using funds provided by Helix will be the exclusive property of CMI.
Upon completion of the Program and commencement of production of components for
Helix, CMI will deliver to Helix, free of charge, the two wear testers used in
the development process.
8. Confidentiality and Proprietary Rights.
8.1 General. All knowledge and information which either party
may acquire from the other pursuant to the terms of this Agreement
respecting inventions, methods, systems, devices, processes,
improvements, trade secrets and other private matters (hereinafter
referred to as the "Information"), will for all time and for all
purposes be regarded as strictly confidential and held in trust solely
for the benefit and use of the party disclosing such Information, and
it is agreed that the use or public disclosure of any such Information
by the party receiving it would be wrongful and would cause irreparable
injury to the disclosing party.
8.2 Confidential Information of CMI. Without limiting the
generality of subsection 8.1 above, all CMI's information, inventions,
improvements, drawings, special tooling, fixtures, data, manufacturing
techniques, processes and research and development relating to the
manufacture, inspection and testing of the components will be the sole
property of CMI.
8.3 Confidential Information of Helix. Without limiting the
generality of Section 8.1 above, all Helix's proprietary information,
inventions, improvements, drawings, technology, research and
development and other rights of Helix in prosthetic cardiac components
and devices will be the sole property of Helix. Helix will acquire no
interest in CMI's Proprietary Technology, or in the manufacturing
tolerances or other related information as a result of the execution
and performance of this Agreement.
8.4 Procedures for Maintaining Confidentiality. Each party
agrees to maintain the confidentiality of any Information and to that
end agrees as follows:
(a) Not to make any use whatsoever of any Information
except for the purpose for which it is supplied,
either for itself or any other person, firm or
corporation;
(b) Not to reveal any Information to third parties,
without the prior written approval of the disclosing
party except that CMI may reveal such Information to
third parties who are bound by confidentiality
agreements to the extent such parties need to know
the Information to provide services required by CMI
pursuant to this Agreement or the Supply Contract;
(c) To keep all Information strictly secret and
confidential and to that end, without limiting the
generality of the foregoing, to cause all written
materials relating to or containing any Information
to be plainly marked to indicate the secret and
confidential nature thereof, and to prevent
unauthorized use or reproduction thereof;
(d) To maintain such Information in controlled files
accessible only to authorized personnel;
(e) To limit access to said Information to those of its
employees who are cleared for access to restricted
areas within each party's facilities, which employees
shall first have executed a confidentiality agreement
which requires, among other things, that such
employee will maintain the secrecy of all
confidential information which such employee may
obtain in the course of employment;
(f) In the event the receiving party receives a request
to disclose all or any part of the Information under
the terms of a valid and effective subpoena or order
issued by a court of competent jurisdiction, the
receiving party agrees to (i) notify immediately the
disclosing party of the existence, terms and
circumstances surrounding such request; (ii) consult
with the disclosing party on the advisability of
taking legally available steps to resist or narrow
such request, and (iii) if disclosure of such
Information is required, exercise its best efforts to
obtain an order or other reliable assurance that
confidential treatment will be accorded to such
portion of the Information as must be produced or
disclosed.
8.5 Exceptions. The foregoing restrictions will not apply to
any information which is (i) known to the receiving party prior to
receipt thereof from the disclosing party as evidenced by such
receiving party's written records kept in the ordinary course of its
business, or (ii) of public knowledge without breach by the receiving
party of its obligations hereunder, or (iii) rightfully received by the
receiving party from a third party without restriction on disclosure or
use, or (iv) disclosed by the disclosing party to a third party without
restriction on disclosure or use, or (v) independently developed by
personnel of the receiving party who have not had access to or
knowledge of the contents of the disclosing party's disclosure, or (vi)
disclosed after receiving the written consent therefor of an authorized
officer of the disclosing party; provided that in each event, the
receiving party can demonstrate same to the reasonable satisfaction of
the disclosing party.
9. Excusable Delay or Failure to Perform. Neither party will be liable
for a delay in performance of or failure to perform an obligation under this
Agreement (except an obligation to make payment promptly when due), if and to
the extent such delay or failure is attributable to any cause beyond the
reasonable control of such party to prevent. Such causes may include, but are
not limited to act of God, act of government, war or related actions, civil
insurrection, riot, sabotage, strike, epidemic, fire, flood, windstorm, or a
failure of suppliers, subcontractors or carriers, or inability to obtain
required materials or qualified labor, which are reasonably beyond the control
of the defaulting party to prevent. The party affected will give prompt notice
of the cause to the other party, and will resume performance with reasonable
diligence upon cessation of the cause of the delay or failure.
10. CMI's Representations and Warranties.
10.1 Performance of Obligations. CMI hereby represents and
warrants to Helix that CMI will faithfully perform all of the
obligations, covenants and agreements on its part to be performed as
set forth in this Agreement within the time limitations imposed with
respect to such obligations.
10.2 Disclaimer of Warranties. The parties acknowledge and
agree that components manufactured under this Agreement will be for
development purposes only and not manufactured in commercial
quantities. Therefore CMI makes no warranty of any kind. CMI EXPRESSLY
DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
SUCH COMPONENTS, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY.
11. Helix's Representations and Warranties. Helix will faithfully and
fully perform all of the obligations, covenants and agreements on its part to be
performed as set forth in this Agreement within the time limitations imposed
with respect to such obligations.
12. Use of Information Developed by Helix. The design, engineering,
research, technology and the like which may be developed solely by Helix in
connection with its continuing improvement of existing designs or development of
new designs for the Valve will belong exclusively to Helix and may be
incorporated in Helix's future specifications.
13. Helix's Covenants.
13.1 Non-Liability of CMI.
(a) Limitation on CMI's Responsibility. Under no
circumstances will CMI be liable or responsible for direct,
incidental, consequential and/or special damages arising out
of any breach of this Agreement or out of the use or
implantation of prostheses employing components supplied
hereunder including, but not limited to, damage to property of
Helix or of other persons, or for injury to or death of any
person.
(b) Helix's Responsibility. CMI will have no control
over the uses to which the components will be devoted, or over
the circumstances of their use, storage, handling,
distribution or application. Helix will assume full
responsibility with respect to the use of any Component or
information furnished by CMI hereunder, and it is mutually
agreed that CMI assumes no liabilities of any kind with
respect to the use by Helix or any third party of such
components or information.
(c) Hold Harmless. If Helix undertakes to supply the
components in any form to others, it does so in its own
discretion and upon its own judgment as to risk. Helix agrees,
at its own expense, to defend, indemnify and hold harmless CMI
from and against any and all claims, suits, actions, damages,
costs, losses, and expenses (including but not limited to
court costs, attorney's fees and all other expenses of
litigation) for injury to or death of any person, or for
damage to any property, arising from or out of or in
connection with the design, manufacture, sale, implantation or
use of any Component supplied under this Agreement, regardless
of whether such injury, death or damage are caused in whole or
in part by the negligence of CMI or whether CMI is held
strictly liable for such injury, death or damage. It is the
express intention of the parties hereto, both CMI and Helix,
that the indemnity obligations and liabilities assumed by
Helix in this paragraph be without monetary limit and without
regard to causes thereof including but not limited to any
failure to warn, strict liability, or the negligence of CMI,
its officers, agents or employees, whether the negligence be
sole, joint, or concurrent, active or passive.
Helix further agrees, at its own expense, to defend, indemnify and hold
harmless CMI from and against any and all claims, suits, actions, damages,
costs, proceedings, losses and expenses (including but not limited to attorney's
fees) based on any claim that a design or design modification developed by
Helix, alone or with CMI, infringes a patent of another.
CMI will, at its own expense, defend, indemnify and hold Helix harmless
from and against any and all claims, suits, actions, damages, costs,
proceedings, losses and expenses (including but not limited to attorney's fees)
based on any claim that CMI's manufacturing processes or the materials used in
the fabrication or coating of the components infringe the patent of any third
party.
(d) Product Liability Insurance. Helix and/or its successor
and assigns will maintain general liability insurance, written on an
occurrence basis, during the term of this Agreement in the minimum
amount of $5 million. Said insurance must be obtained by Helix before
any Valve components suitable for human implant will be delivered by
CMI to Helix. The product liability insurance so maintained will be
written by an insurance carrier acceptable to CMI, include CMI as an
additional insured, and contain an endorsement to provide CMI with at
least 30 days prior written notice of any cancellation, non-renewal, or
coverage reduction. This insurance coverage will survive termination of
this Agreement and will, in any event, provide coverage during the
period any components supplied by CMI under the terms of this Agreement
remain implanted in any living patient. CMI may demand evidence of
coverage at any time during the term of this Agreement and during the
period Helix is required to maintain coverage thereafter. In the event
Helix fails to provide CMI with evidence of the product liability
insurance required to be maintained pursuant to the provisions of this
paragraph and the failure continues for 10 business days following
Helix's receipt of a notice advising Helix of its failure to provide
such evidence, then at any time thereafter during the pendency of such
failure, CMI will have the option in its sole discretion to purchase
the insurance required herein and bill Helix for the entire cost of
such insurance or to terminate this Agreement.
13.2 Patent Infringement. Helix will in no manner infringe any
patent or claim to patent held or asserted by CMI except the patent
pertaining to the Licensed Product but only to the extent permitted in
the License Agreement.
13.3 Use of Information Developed by CMI. The procedures,
methodology, processes, techniques and the like which may be developed
or learned by CMI relating to the use of CMI's Proprietary Technology
in connection with its manufacture of components for Helix will belong
exclusively to CMI and may be incorporated in CMI's general
manufacturing operations. The tolerances and other information relating
to CMI's Proprietary Technology developed by CMI and incorporated in
the drawings developed by CMI for the manufacture of the components for
the Valve will remain the exclusive confidential and proprietary
property of CMI. All claims in the patent pertaining to the Licensed
Product remain the sole and exclusive property of CMI except to the
extent licensed to Helix under the License Agreement.
14. Infringement. Should any action be commenced alleging that the
claims in the patent pertaining to the Licensed Product infringe the claims of
any Letters Patent or that the patent is invalid, each party will have the
rights and obligations set out in the License Agreement.
15. Term and Termination.
15.1 Term. The term of this Agreement will commence on the
date first written above and will continue in effect until completion
of the Program.
15.2 Termination by Helix. Notwithstanding the foregoing,
Helix will have the right to terminate this Agreement on 30 days prior
written notice to CMI, subject to the survival of all confidentiality
and indemnification provisions, and of all monetary obligations for
work, services, and equipment previously performed or contracted by CMI
under the Development Agreement.
15.3 Termination by CMI. Each payment pursuant to Section 3 of
this Agreement is due and payable before CMI begins the activity for
which payment is allocated. If Helix fails to make any such payment and
such failure continues for 30 days after the date of CMI's invoice for
such payment, then CMI may terminate this Agreement immediately upon
written notice. If any other payment to CMI is in arrears for 15 days
after the due date, or if Helix defaults in performing any of the other
provisions of this Agreement and such default continues for a period of
30 days, or if Helix is adjudicated bankrupt or becomes insolvent, or
enters into a composition with creditors, or if a receiver is
appointed, then CMI will have the right to terminate this Agreement
immediately upon written notice to Helix.
16. Relationship of Parties. The relationship between CMI and Helix as
established by this Agreement is that of independent contractors. As such,
subject to the provisions of this Agreement, CMI and Helix each will conduct
their respective business at their own initiative, responsibility and expense,
and each will have no authority to incur any obligation on behalf of the other.
17. Miscellaneous.
17.1 Assignment. Helix will have the right to assign its
rights or delegate its obligations under this Agreement, either in
whole or in part to any company controlling, controlled by or under
common control with Helix or succeeding to the entire business of
Helix. Assignment of rights and obligations by Helix is contingent upon
the successor's agreement in writing to CMI to continue the development
project for the Licensed Product per this Development Agreement and
specifically as it pertains to the work and payment schedules set forth
in Exhibit B. It is the intent of Helix and CMI, barring any unforeseen
technical difficulties, the development project will proceed in a
rapid, continuous manner to successfully develop the Licensed Product.
Failure of the successor to Helix to reaffirm this intent in writing
will constitute a default under this Agreement. CMI may freely assign
this Agreement to any entity controlling, controlled by or under co on
control with CMI or to a successor of the entire business of CMI.
17.2 Choice of Law. This Agreement has been entered into in
Travis County, Texas, and will be deemed made under the laws of the
State of Texas and for all purposes will be governed by, enforced under
and construed in accordance with the laws of said state, without regard
to principles of conflicts of law. In the event that any action is ever
commenced by CMI or Helix with respect to matters which are the subject
of this Agreement, Helix covenants and agrees to commence such action
only within the State of Texas if it is the plaintiff. Helix agrees and
hereby does submit to the jurisdiction of the State of Texas in the
event that it is the defendant in any such action and hereby
constitutes and appoints the Secretary of State for the State of Texas
as its agent for service of process in connection with the bringing of
any such litigation by CMI.
17.3 Setoffs. CMI reserves the right to set off any amounts it
owes Helix against any amounts Helix owes it.
17.4 Waiver and Delay. No delay or omission by any party in
enforcing any of the terms or conditions of this Agreement will be
construed as a waiver thereof, and no waiver of any conditions, breach
or default will be construed or determined to be a waiver of any other
or subsequent conditions, breach or default or a bar to the enforcement
of such terms and conditions on any future occasion.
17.5 Notices. All notices required or permitted hereunder,
will be effective upon their receipt and will be given in writing and
delivered in person or by certified or registered mail, postage
prepaid, addressed to the attention of the president of each respective
company at the respective address first above written or such other
address as may be given by notice.
17.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and
valid under the applicable law, but if such provision is or becomes
invalid or unenforceable under such law, then such provision will be
reformed in order to conform to applicable law. If such reformation is
not possible, then such provision will be ineffective only to the
extent of such unenforceability or invalidity, and the remainder of the
Agreement will continue to be binding and in full force and effect.
17.7 Merger. This Agreement, together with the License, Supply
and Option Agreements, constitutes the entire understanding of the
parties with respect to this subject matter and supersedes all prior
agreements, understandings, discussions, and communication between the
parties respecting such subject matter. No modification of this
Agreement will be effective unless made in writing and signed by a duly
authorized officer of each party.
17.8 Benefit. This Agreement will be binding upon and will
inure to the benefit of the parties, their legal representatives,
successors and assigns, provided that the provisions with respect to
assignment and delegation are fully complied with.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HELIX BIOCORE, INC. CARBOMEDICS, INC.
By:/S/ M.A. Villafana By: /S/ Terry Marlatt
Title: CEO Terry Marlatt, President
Printed Name: M.A. Villafana
GMP DEVELOPMENT VALVE COMPONENT SET
[*]
EXHIBIT A
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[*] Denotes confidential information omitted pursuant to Rule 24b-2 of the
Securities and Exchange Act of 1934, as amended. The Securities and
Exchange Commission granted the company's confidential treatment
request in connection with this information.
PROGRAM AND PAYMENT SCHEDULE
[*]
EXHIBIT B
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[*] Denotes confidential information omitted pursuant to Rule 24b-2 of the
Securities and Exchange Act of 1934, as amended. The Securities and
Exchange Commission granted the company's confidential treatment
request in connection with this information.