EXHIBIT 10.3
EXCLUSIVE DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT
THIS EXCLUSIVE DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT ("Agreement")
is made and entered into effective as of June 23, 2005 (the "Effective Date") by
and between GENESEE BIOMEDICAL, INC., a corporation organized under the laws of
the state of Colorado ("GBI"), with an address at 1308 South Jason Street,
Denver, Colorado 80223, and ATS MEDICAL, INC., a Minnesota corporation ("ATS"),
with an address at 3905 Annapolis Lane, Minneapolis, Minnesota 55447,
(hereinafter sometimes individually or collectively referred to as a "Party" or
the "Parties," respectively).
RECITALS
A. ATS and GBI are engaged in the design, development, manufacture and sale of
products for use in cardiac surgery.
B. GBI has special knowledge and expertise relating to the design, development
and manufacture of cardiac surgical products, including annuloplasty repair
rings, c-rings and accessories, and ATS has a distribution network that is
capable of marketing and selling such products.
C. ATS and GBI previously agreed in principal to certain non-binding terms and
conditions regarding the development of the Products (the "Term Sheet") and
after executing the Term Sheet market input data generated by the Parties'
investigations have affected certain commercial considerations reflected in
the Term Sheet.
D. GBI desires to manufacture the Products for ATS and to supply such
quantities of Products as ATS desires, and ATS desires to obtain from GBI a
supply of the Products after it has complied with the necessary FDA
requirements so that ATS can exclusively distribute the Products worldwide.
E. ATS and GBI desire to formalize their relationship by entering into this
Exclusive Development, Supply and Distribution Agreement for the purpose of
developing, manufacturing, supplying and distributing the Products, on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
representations, warranties, covenants and agreements contained herein, the
Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Act shall mean the United States Food, Drug and Cosmetic Act and the
regulations promulgated thereunder, as amended from time to time.
** The appearance of a double asterisk denotes confidential information that
has been omitted from the exhibit and filed separately, accompanied by a
confidential treatment request, with the Securities and Exchange Commission
pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.
1.2. Additional Product shall mean all improvements to, modifications of or
subsequent generations of the Products that do not affect the form, fit or
function of the Product and any support product(s) developed by GBI during
the term of this Agreement.
1.3. Affiliates shall mean, with respect to either Party, those entities
controlled by, in control of, or under common control with such person. For
the purposes of this definition, "control" means ownership or control,
direct or indirect, of more than fifty percent (50%) of the voting capital
or equity participation of an entity.
1.4. ATS Confidential Information shall mean any non-public information about
ATS, its development of intellectual property and its operations including,
but not limited to, any non-public information or scientific or technical
data, know-how, or expertise of ATS relating to the Products, existing as
of the Effective Date or developed during the term of this Agreement
(excluding Joint Inventions) and non-public information that relates to its
financial statements, marketing or finances, market research, customers,
markets, product plans, business plans, services, software, developments,
inventions, processes, procedures, methods, know-how, designs, data,
programs, drawings, and engineering information.
1.5. ATS Invention shall mean any invention (excluding Joint Inventions),
whether or not patentable, conceived or developed without the use of any
GBI Confidential Information by employees of ATS, alone or together with
any third Party (including Affiliates, agents and consultants of ATS or a
person or entity working in any fashion on behalf of ATS but excluding
GBI), during the term of this Agreement, or prior to the Effective Date,
specifically related to the development of the Product.
1.6. Change in Control shall mean (i) any consolidation or merger of either
Party with or into any other corporation or other entity or person, or any
other corporate reorganization, in which the stockholders of such Party
immediately prior to such consolidation, merger or reorganization, own less
than fifty percent (50%) of such Party's voting power immediately after
such consolidation, merger or reorganization, or any transaction or series
of related transactions to which either is a Party in which in excess of
fifty percent (50%) of such Party's voting power is transferred; or (ii) a
sale, lease or other disposition of all or substantially all the assets of
either Party.
1.7. Demonstration Products shall have the meaning ascribed thereto in Section
3.1.
1.8. Development Period shall mean the period commencing on the Effective date
and ending upon passage of necessary notice periods with no further
comments from the FDA under Section 510(k) of the Act, as more particularly
set forth in the Development Plan.
1.9. Development Plan shall mean the description of development activities for
the Products, the responsibilities of each of the Parties in developing the
Products, and the schedule for performing such activities including timing,
milestone schedules, scope of work, specifications, general quality and
regulatory requirements and other relevant terms and information as more
particularly set forth in Exhibit A attached hereto, which the Parties may
amend from time to time by mutual written agreement.
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1.10. Distribution Fee shall have the meaning ascribed thereto in Section 10.5.
1.11. FDA shall mean the Food and Drug Administration of the U.S. Department of
Health and Human Services.
1.12. GBI Confidential Information shall mean any non-public information about
GBI, its development of intellectual property, and its operations
including, but not limited to, any non-public information or scientific or
technical data, know-how, or expertise of GBI relating to the Products
existing as of the Effective Date or developed during the term of this
Agreement (excluding Joint Inventions) and non-public information that
relates to its financial statements, marketing or finances, market
research, customers, markets, product plans, business plans, services,
software, developments, inventions, processes, procedures, methods,
know-how, designs, data, programs, drawings, and engineering information.
1.13. GBI Invention(s) shall mean any invention (excluding Joint Inventions),
whether or not patentable, conceived or developed without the use of any
ATS Confidential Information by employees of GBI, alone or together with
any third Party (including affiliates, agents or consultants of GBI or a
person or entity working in any fashion on the behalf of GBI excluding
ATS), during the term of this Agreement, or prior to the Effective Date,
specifically related to the development of the Product.
1.14. GMP/QSR Regulations shall mean the Good Manufacturing Practices/Quality
System Regulations set forth in 21 C.F.R. Section 820.
1.15. Joint Invention shall mean any invention, discovery or idea, whether or
not patentable, conceived or developed jointly by both Parties, their
employees, agents or consultants (i) in the course of performing work
related to this Agreement but prior to the Effective Date; (ii) in the
course of performing the work contemplated under this Agreement including
performance of the Development Plan; (iii) arising out of the development
of the Products whether before or after the Effective Date; or (iv) that
utilizes, or is a modification of, derived from or based upon an GBI
Invention, GBI Confidential Information, ATS Invention, or ATS Confidential
Information. Joint Inventions shall include, but shall not be limited to,
the four Products identified in Section 1.22(i)-(iv).
1.16. Manufacturer of Record shall mean the Party who owns the Premarket
Notification and is responsible for compliance with conditions of approval
of the Premarket Notification. For purposes of this Agreement, GBI shall be
the Manufacturer of Record for all Products.
1.17. Net Sales means the aggregate amount of net sales reported by ATS or any
of its Affiliates from the sales of the Products to third parties,
recognized in accordance with GAAP by ATS in a manner consistent with its
recognition of net sales across all similar product lines, in connection
with the preparation of ATS' financial statements, as publicly-reported. In
addition to the foregoing, the following shall apply:
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The term "Net Sales" shall not include revenue received by ATS (or any
of its Affiliates) from transactions with an Affiliate of ATS unless
such Affiliate is the end user of the Product.
1.18. New Product shall mean (i) any improvement to or modification of the
Product that affects the form, fit or function and for which a new
regulatory submission is required; and (ii) any and all products for heart
valve repair.
1.19. Non-Product Joint Inventions shall have the meaning ascribed thereto in
Section 6.2.
1.20. Preliminary Specifications shall mean the documents describing the form,
fit, and function of the initial test quantities of Products as the case
may be, at various milestones during the development process, and shall be
superseded by the Specifications upon Premarket Notification to the FDA.
1.21. Premarket Notification shall mean the date on which a Product obtains FDA
clearance of GBI's 510(k) Premarket Notification submission for the
Products under Section 510(k) of the Act.
1.22. Product(s) shall mean annuloplasty repair rings, c-rings and accessories,
including without limitation the following four annuloplasty repair
products: (i) a flexible ring, (ii) a flexible c-ring, (iii) a semi-rigid
ring, and (iv) a rigid ring, and related tools and accessories, as further
developed by the Parties during the Development Period, and all
improvements, modifications or subsequent generations of such products
developed by GBI or jointly by the Parties during the term of this
Agreement. "Accessories" include relevant sizers and sterilization trays.
1.23. Profit Sharing Payments shall have the meaning ascribed thereto in Section
10.6.
1.24. Remedial Action shall have the meaning ascribed thereto in Section 4.5.
1.25. Specifications shall mean the documents describing the form, fit and
function of the Products that obtain clearance of its Premarket
Notification by FDA under Section 510(k) of the Act.
1.26. Territory shall mean the world.
1.27. Transfer Prices shall have the meaning ascribed thereto in Section 10.1.
1.28. Unit shall mean an individual item of Product.
1.29. Vigilance Report shall mean the incident report for death or serious
injury required under the post market surveillance system as defined by the
European Council Directive 93/42/EEC or the relevant and applicable
equivalent of any other regulatory body.
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ARTICLE 2
DEVELOPMENT
2.1. Development and Preliminary Specifications.
(a) Prior to the Effective Date GBI, either alone or jointly with ATS,
developed certain technical data and Preliminary Specifications for
the Product. During the Development Period ATS and GBI shall (i)
continue to collaborate to further develop the Products, the
Preliminary Specifications, the Specifications, and the manufacturing
process for the Products and (ii) conduct the activities set forth in
the Development Plan, attached hereto as Exhibit A. Notwithstanding
the foregoing, ATS shall have the right to approve the Preliminary
Specifications, Specifications and further modifications, if any.
(b) ATS and GBI agree that the priority for development and regulatory
approval of the Products is for the U.S. market. Notwithstanding, both
Parties intend that the Products be marketed in additional countries,
including Europe, and that the Products will be developed to maximize
the opportunity for such future market expansion.
2.2. Exclusivity. In consideration of entering into this Agreement and for other
good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, GBI and ATS each agree that it shall not enter into a
development or distribution agreement or otherwise undertake any
development project to develop a product or manufacture or distribute any
product for itself or for any third Party that competes, either directly or
indirectly, with the Products.
2.3. GBI Obligations. GBI shall use its commercially reasonable efforts to
develop the Products in accordance with the Development Plan including but
not limited to the following activities:
(a) Develop Preliminary Specifications and Specifications for the Products
based on (i) design inputs and marketing requirements approved by ATS;
and (ii) data collected during the testing of the Products;
(b) On its own, or jointly with ATS, develop the technical know-how and
manufacturing processes for manufacturing both clinical and commercial
quantities of the Products, including final assembly, packaging,
labeling and sterilization procedures, and quality control release
specifications for the Products;
(c) Provide status reports to ATS in writing on a monthly basis (or more
frequently, but not more often than weekly, as reasonably required by
ATS) on the progress of the Development Plan; any delays in developing
the test quantities of Products;
(d) Provide project management by participating in and attending meetings,
by teleconference or otherwise, of GBI's design control process for
the Products;
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(e) Establish and install, at GBI's sole cost and expense (except as
otherwise provided by Section 5.2), all equipment and facilities
necessary to effectuate the Development Plan;
(f) Deliver to ATS on the delivery date specified in the Development Plan
such test quantities of Products to be agreed upon by the Parties to
permit testing to determine whether such Products meet the Preliminary
Specifications or Specifications, as the case may be, under Section
3.1;
(g) Produce the quantities of Products ordered by ATS, as more
particularly set forth in Article 9;
(h) Comply with all applicable laws and regulations regarding the conduct
of work performed under the Development Plan including complying with
all current governmental regulatory requirements concerning good
Laboratory Practices (21 C.R.R. Part 58), GMP/QSR Regulations, and
with all other federal, state and local laws and regulations as are
applicable to the Development Plan for the manufacture of the
Products.
(i) Provide at least one individual employed by GBI, who will be named as
co- Program Director and whose responsibility will be for the
oversight of the relationship between the Parties, the Development
Plan and the commercialization of the Products.
(j) Fund at its sole cost and expense, except as otherwise provided in
Section 5.2, the development of the Products.
(k) Conduct all necessary meetings and discussions with FDA and obtain all
necessary IDE and IRB approvals to test the Products and obtain 510(k)
clearance from the FDA for the Products.
2.4. ATS Obligations. ATS shall use its commercially reasonable efforts to
assist GBI in performing its activities under the Development Plan,
including but not limited to:
(a) Furnish to GBI in accordance with the schedule as set forth in the
Development Plan, marketing requirements and design inputs and such
other data as may be necessary to allow GBI to develop the Preliminary
Specifications and Specifications for the Product. Notwithstanding the
foregoing, ATS shall have the right to approve the design of the
Products and the Specifications;
(b) Review design decisions during development of the test quantities of
Products by participating in design review meeting according to the
Development Plan and approve design documents at designation
intervals;
(c) Participate in and attend meetings of, by teleconference or otherwise,
GBI's design control process for the test quantities of the Products
and approve the design of the test Products during such meetings;
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(d) Provide at least one individual employed by ATS, who will be named as
co-Program Director and whose responsibility will be for the oversight
of the relationship between the Parties, the Development Plan and the
commercialization of the Products.
(e) Provide to GBI any required parameters or standards for the Products
to allow GBI to develop protocols to be used in verifications and
validation of the Products.
2.5. Joint Obligations of ATS and GBI. During the Development Period ATS and GBI
shall (a) within 120 days of the Effective Date jointly develop the
Development Plan, which shall be attached as Exhibit A and become part of
this Agreement; and (b) perform the activities set forth in the Development
Plan including but not limited to: (i) develop a comprehensive test plan to
ensure verification and validation of the Products; and (ii) jointly
compile the technical file necessary to obtain CE marking. If a Development
Plan that is mutually acceptable to both Parties cannot be developed within
such 120-day period, either Party may terminate this Agreement upon thirty
(30) days prior written notice to the other.
2.6. Changes to Products Specifications. From time to time during the
Development Period, ATS may change the requirements for the Products as a
result of data generated from the Pilot Study, Pivotal Clinical Trial, and
preclinical or other testing, and shall forward such revised requirements
to GBI. GBI shall modify the then current Preliminary Specifications to
reflect the revised requirements. ATS shall then have the opportunity to
review the revised Preliminary Specifications, and test Products made in
accordance with the revised Preliminary Specifications under Section 3.1.
ARTICLE 3
DEMONSTRATION PRODUCTS
3.1. Demonstration Products. During the Development Period, GBI shall
manufacture quantities of clinical test grade Products for use as
demonstration Products (a "Demonstration Product") by ATS. The Development
Plan shall set forth the dates when Demonstration Products shall be
available to be delivered to ATS for testing. Shipments of Demonstration
Products shall contain detailed Preliminary Specifications for the
Products.
3.2. Acceptance. ATS shall be deemed to have accepted the Preliminary
Specifications for the Products being tested as provided in the Development
Plan upon ATS' written notification to GBI of its acceptance. Upon
acceptance, GBI shall commence the manufacture of the Products and
Demonstration Products, as the case may be, in accordance with orders
placed by ATS under Sections 9.1 and 9.3, respectively.
3.3. Testing and Documentation. With each lot of Products manufactured by GBI,
GBI shall supply to ATS documentation certifying in writing that each
shipment of Products complies with (i) the then current Specifications and
with the testing procedures described therein; and (ii) all other
documentation agreed to by ATS and GBI.
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ARTICLE 4
REGULATORY SUBMISSIONS
4.1. Medical Device Establishment Registration. GBI shall maintain a Medical
Device Establishment Registration (as defined under the Act) as
manufacturer and Specifications developer for the Products, as is required.
4.2. U.S. Approval. GBI shall be responsible, at its expense, for filing and
obtaining and maintaining all necessary authorizations from regulatory
authorities of the U.S. federal government, including the FDA, or of the
various states necessary for the sale of the Products in the United States
or export to foreign countries. GBI's obligations under this Section 4.2
shall include the preparation and filing of any required submissions and
the establishment and oversight of any required clinical investigations and
clinical follow-up relating to future commercial sale of the Products. GBI
will provide ATS with drafts of all proposed filings for U.S. federal or
state regulatory authorization for review and comment by ATS in advance of
filing with the applicable authority. ATS shall support the process of all
regulatory filings and registrations by GBI by providing to GBI all
documentation reasonably requested by GBI from ATS including, without
limitation, clinical and technical information.
4.3. Foreign Approvals. GBI shall be responsible, on a timely basis, for filing,
obtaining and maintaining all necessary "device" or "medical" regulatory
approvals from foreign regulatory authorities necessary for the commercial
sale of the Products in those foreign countries ("Foreign Approvals") into
which the Parties mutually agree Products will be sold. The expense for
obtaining such approvals shall be divided evenly between the Parties. If
ATS desires to obtain Foreign Approvals for a country and GBI reasonably
disagrees that such Foreign Approval is too costly for the anticipated
sales in such country, GBI shall proceed to obtain such approval provided
ATS agrees to bear the full expense of obtaining such Foreign Approval. All
Foreign Approvals shall, to the extent permitted, be in GBI's name. GBI
shall obtain the CE Mark in such foreign countries as ATS may determine.
GBI and ATS shall work together to establish the strategy for obtaining in
the most timely and efficient manner the Foreign Approvals to be obtained
pursuant to this Section 4.3. GBI's obligations under this Section 4.3
shall include assisting in the preparation and filing of any required
submissions relating to future commercial sale of the Products. Except as
otherwise required by law or agreed by the Parties, GBI shall be primarily
responsible for all dealings with the appropriate competent authority such
as notification, medical device vigilance and national labeling issues, and
GBI shall bear final legal responsibility for the content of all its own
labeling.
4.4. Manufacturing Compliance. GBI represents and warrants to ATS that all
Products manufactured and sold under this Agreement will have been
manufactured, labeled, packaged and sold to ATS in accordance with ATS
approved Specifications and all applicable international federal, state and
local laws and regulations pertaining to medical devices including, but not
limited to, the Act and GMP/QSR Regulations. GBI represents and warrants to
ATS that GBI's manufacturing facility is in compliance with all GMP/QSR
Regulations and ISO 13485:1996, EN 46001 requirements and that GBI has all
approvals and consents required to mark the Products with the CE mark.
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4.5. Remedial Actions. Each party will notify the other immediately, and
promptly confirm such notice in writing, if it obtains information
indicating that any of the Products may be subject to any recall, field
corrective action or other regulatory action (other than a corrective and
preventive action ("CAPA") under the Act) with respect to a Product taken
either by virtue of applicable federal, state, foreign or other law or
regulation or good business judgment (a "Remedial Action"). The Parties
will assist each other in gathering and evaluating such information as is
necessary to determine the necessity of conducting Remedial Action;
provided that ATS shall have sole responsibility for collecting information
from its customers, including customer complaints. ATS will determine
whether to commence any Remedial Action with respect to the Product. Each
Party will maintain adequate records to permit the Parties to trace the
manufacture of the Product and the distribution and use of the Product. In
the event ATS determines that any Remedial Action with respect to the
Product should be commenced or Remedial Action is required by any
governmental authority having jurisdiction over the matter, ATS will
control and coordinate all efforts necessary to conduct such Remedial
Action. If ATS conducts any Remedial Action related to the Product and GBI
is determined to be (either by mutual agreement or by arbitration pursuant
to the terms of this Agreement) responsible for the problem requiring the
Remedial Action (i.e., a problem arises from faulty manufacture), GBI, at
ATS' option, will either issue a credit to ATS or reimburse ATS for the
sales price of all ATS devices recalled in such Remedial Action and the
other reasonable costs of conducting such Remedial Action. GBI shall have
sole responsibility for handling any CAPA's. ATS shall cooperate with GBI
to the extent reasonably requested by GBI in handling any CAPA.
4.6. Complaints and Medical Device Reporting. Each party will comply with
applicable provisions of the Medical Device Reporting systems, including
the requirements of 21 CFR Part 803, and each party will cooperate with the
other for the efficient compliance therewith. ATS and GBI agree to notify
the other within two (2) business days of receipt from any customer of any
complaint or Medical Device Report ("MDR") filable complaint relating to
the Product. ATS will investigate such complaint or MDRs/Vigilance Reports
and forward to GBI all information relating to any defects in the
performance, design, or quality of the Products. GBI shall investigate all
instances of product failure or inadequacy documented by ATS and forwarded
by ATS for investigation. GBI shall provide a written summary of the
findings from such investigation to ATS within seven days following the
date that GBI is informed of such complaint or MDR. ATS shall have sole
responsibility for filing the MDR with the appropriate regulatory agency.
4.7. Vigilance Reporting. ATS will notify GBI in writing if a Vigilance Report
is required to be filed with respect to the Product. ATS, at its sole cost
and expense, will be responsible for complying with Vigilance Reporting
requirements for the Product in cooperation with GBI as the manufacturer of
the Product. GBI will remain responsible for any and all Product
investigation as provided in Section 4.6.
4.8. ATS Audits. GBI will give ATS reasonable access to its records to allow ATS
to conduct full compliance audits relating to the Product, at ATS' expense,
as reasonably deemed necessary by ATS, but no more frequently than once in
any twelve (12) month
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period. The audit may include, without limitation, records relating to
manufacturing compliance with the Specifications, compliance with quality
control and inspection reports procedures, compliance with GMP/QSR
Regulations, CE mark certification records and procedures, regulatory
compliance, and after the following certifications have been obtained
compliance with ISO 13485:1996 and EN 46001 requirements. Such audits will
be conducted during GBI's normal business hours, after two (2) weeks prior
written notice to GBI by ATS, and at times mutually agreeable to the
parties. GBI will make its regulatory compliance and quality assurance
personnel reasonably available to ATS in connection with such audits. If
ATS recommends any corrective actions to GBI in connection with such
audits, GBI will take any corrective action recommended by ATS within
thirty (30) days of receipt of any corrective action recommendations, if
possible, or will inform ATS in writing of the reasons why GBI believes
such corrective action is not required or cannot be completed within such
30-day period. ATS will be given access to audit any corrective action.
4.9. Regulatory Inspections. GBI will promptly notify ATS of any inspection of
its facilities manufacturing the Product or any component part of a Product
by the FDA, ISO, CE mark certification organization or other federal,
state, or local regulatory agency which relates to the manufacture,
assembly, or packaging of the Product and provide ATS with information
about the progress and outcome of such inspection, including, without
limitation, copies of any notice of observations or warnings, requests for
Remedial Action, CAPA's or other adverse findings.
ARTICLE 5
RESEARCH AND DEVELOPMENTS COSTS
5.1. Research and Development Costs. Except as otherwise provided in Section
5.2, GBI shall fund the development of the Products at its sole cost and
expense as more particularly set forth in the Development Plan attached as
Exhibit A. Upon commercialization of the Products, GBI shall provide, at
its own cost and expense, on-going research and development and training
support of the Products, as more specifically provided in Sections 12.2 and
12.3 of this Agreement.
5.2. **
ARTICLE 6
INTELLECTUAL PROPERTY
The Parties contemplate that inventions may be developed or conceived by either
Party alone or by the Parties jointly in furtherance of the development set
forth in this Agreement and agree with respect to such inventions as follows:
6.1. Ownership Generally. Except as otherwise specifically set forth in this
Article 6 and subject to the licenses granted in this Agreement, GBI shall
own all right, title and interest in and to GBI Confidential Information
and GBI Inventions and ATS shall own all right, title and interest in and
to ATS Confidential Information and ATS Inventions. The ownership of Joint
Inventions shall be as set forth in Section 6.2.
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6.2. Patenting Joint Inventions.
(a) Except as otherwise set forth in this Agreement, if the Parties
develop, invent or conceive a Joint Invention during the term of this
Agreement, the Joint Invention(s) shall have joint ownership. Each
Party shall promptly provide notice to the other and shall disclose
any Joint Invention to the other in sufficient technical detail to
allow the other Party to evaluate such Joint Invention. In addition,
GBI shall provide ATS with sufficient information to file a patent
application on the Joint Invention, if desired. ATS shall have the
exclusive right (except as set forth below) to prosecute (or not
prosecute and maintain as trade secret information) and maintain all
patent applications related to Joint Inventions, provided the Parties
are identified as co-owners of such Joint Invention, and any patents
issuing therefrom and to enforce and defend such patents and/or any
and all intellectual property rights arising from such Joint
Inventions. Each Party represents and warrants to the other that all
employees and consultants of such Party have agreements with such
Party assigning rights in all inventions to ATS or GBI, as applicable.
(b) All patent maintenance fees related to Joint Inventions shall be paid
by ATS no later than thirty (30) days before the due date. ATS will
notify GBI regarding each maintenance fee payment that has been made
by ATS no later than fifteen (15) days before the due date. If ATS
does not pay the maintenance fee for any patent as required hereby, or
if ATS does not notify GBI of such payment, GBI shall have the right
to pay the fee and be reimbursed by ATS for such fee and any expenses
incurred (including reasonable attorneys' fees) in arranging for
proper filing and payment of such fee and in seeking reimbursement
from ATS.
(c) If ATS fails to take reasonable actions to defend patents and/or
intellectual property rights arising from Joint Inventions within
sixty (60) days following a written demand made by GBI (or sooner if
any statute of limitation or other enforceability right will expire),
then GBI may commence action to defend and protect such rights. ATS
shall reimburse GBI for any expenses (including reasonable attorneys'
fees) incurred in such action.
(d) Any amount recovered in any action to defend or enforce patents or
intellectual property rights arising from Joint Inventions shall first
be applied to the expenses of pursuing such action. Any excess
recovery shall be split equally between the Parties.
6.3. Marketing Joint Inventions. Joint Inventions which constitute Products
shall be manufactured and distributed pursuant to the terms of this
Agreement. With respect to each Joint Invention which is not a Product (a
"Non-Product Joint Invention") either Party may notify the other of its
desire to further develop and commercialize such Non-Product Joint
Invention. For a period of ninety (90) days after the date of delivery of
such notice, the Parties shall negotiate in good faith with respect to the
terms of the further development and commercialization of such Non-Product
Joint Invention. During such 90-day period, neither party will enter into
an agreement with any third party for the
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development, distribution, supply or other commercialization of such
Non-Product Joint Invention and none of ATS, GBI or any officer, director,
employee or representative of ATS or GBI shall solicit or conduct any
discussions or negotiations with, or provide information to, any third
party with respect to the Non-Product Joint Invention. Each Party will
promptly communicate to the other the terms of any proposal or inquiry it
receives from any third party or attempts to initiate such discussions or
negotiations by any third party with respect to such a transaction. If
during such 90-day period, ATS and GBI are unable to agree upon mutually
acceptable terms and conditions for the development of such Non-Product
Joint Invention, and such time period has not been extended by mutual
agreement, then each Party shall have the right to pursue development and
commercialization of the Non-Product Joint Invention pursuant to the profit
sharing rights set forth in Section 6.4.
6.4. Profit Sharing from Non-Product Joint Inventions. Except as otherwise
agreed in writing, any net profits made by either Party from the sale,
transfer or other commercialization of a Non-Product Joint Invention shall
be split evenly between the Parties. Within thirty (30) days after each
calendar quarter, in which a Party has gross receipts from commercializing
a Non-Product Joint Invention, such Party shall submit a report to the
other Party identifying gross receipts from Non-Product Joint Inventions
and a net profit calculation with a reasonably detailed explanation of the
amounts deducted from gross receipts accompanied by payment of fifty
percent (50%) of the net profit amount, if any.
ARTICLE 7
AUDIT RIGHTS
7.1. Each Party and its respective Affiliates, subdistributors, agents and
sublicensees shall maintain accurate books and records in accordance with
generally accepted accounting principals and showing sales of the Products
and Non-Product Joint Inventions by such Party and its Affiliates,
subdistributors, agents and sublicensees in sufficient detail to enable Net
Sales and/or net profits pursuant to Section 6.4 payable hereunder to be
determined and to otherwise enable each Party to monitor compliance by the
other with the terms of this Agreement. Each Party (or its accountants)
shall have the right to inspect such books and records at reasonable
intervals (but no more frequently than once in any twelve (12) month
period) and upon reasonable prior written notice. Such inspections shall
occur during normal business hours at the offices of the Party being
inspected and at the expense of the inspecting Party; provided, however,
that if such inspection shall reveal an underpayment by a Party of amounts
actually due of more than five percent (5%), then the Party being inspected
shall bear the expense of such inspection. Any deficiencies in payment
shall be immediately due and payable together with interest at the rate of
eighteen percent (18%) per annum from the date or dates such amounts should
have been paid.
ARTICLE 8
APPOINTMENT AS EXCLUSIVE DISTRIBUTOR
8.1. Scope. Subject to the terms and conditions of this Agreement, GBI grants to
ATS and its Affiliates the exclusive right to market, sell and distribute
the Products in the Territory.
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8.2. Exclusivity. ATS' distribution rights under this Agreement shall be
exclusive in the Territory for the Products. GBI represents and warrants to
ATS that GBI has not entered into any other agreements, written or oral,
with any third party permitting the sale or distribution of Products in the
Territory, and covenants and agrees that during the term of this Agreement,
GBI will not enter into any such agreement or itself sell or distribute any
Products in the Territory.
8.3. Subdistributors and Subagents. ATS may appoint subdistributors or subagents
for distribution of the Products in the Territory, and will provide to GBI
a list of such subdistributors from time to time. Notwithstanding such
appointment of subdistributors, ATS shall remain fully responsible for the
performance of all of its covenants and obligations hereunder, and any
sales by GBI to such subdistributor shall be billed by GBI to ATS directly.
8.4. Additional Products. ATS' right to distribute Products under this Agreement
includes the right to distribute Additional Products. If GBI, individually
or jointly with ATS, develops Additional Products during the term of this
Agreement, GBI shall notify ATS in writing promptly after GBI estimates the
date that such Additional Product will be available for commercial sale in
the Territory, and this Agreement shall automatically be amended to include
any such Additional Products.
8.5. New Products.
(a) If GBI or ATS develops a New Product (excluding a Joint Invention)
during the term of this Agreement, GBI or ATS, as applicable, shall
notify the other Party in writing (a "New Product Development Notice")
promptly after GBI or ATS, as applicable, estimates the date that such
New Product will be available for commercial sale in the Territory,
and (i) if GBI develops a New Product, ATS will have the right for a
period of ninety (90) days after the date ATS receives the New Product
Development Notice to negotiate distribution rights, transfer pricing,
and other terms and conditions applicable to such New Product on terms
that are substantially consistent with this Agreement and (ii) if ATS
develops a New Product, GBI will have the right for a period of ninety
(90) days after GBI receives the New Product Development Notice to
negotiate manufacturing rights and other terms and conditions
applicable to such New Product on terms that are substantially
consistent with this Agreement. During such 90-day period, GBI or ATS,
as applicable, will not enter into an agreement with any other party
for the distribution or manufacture, as applicable, of such product in
the Territory and neither GBI or ATS, as applicable, nor any officer,
director, employee or representative of GBI or ATS, as applicable,
shall solicit or conduct any discussions or negotiations with, or
provide information to, any third party with respect to the grant by
GBI of distribution rights or by ATS of manufacturing rights for the
New Products, or the grant by GBI or ATS, as applicable, of license or
sublicense rights to use, make or sell the Product. GBI or ATS, as
applicable, will promptly communicate the terms of any proposal or
inquiry it receives from any third party, or attempts to initiate such
discussions or negotiations by any third party with respect to such a
transaction.
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(b) If during such 90-day period, GBI and ATS are unable to agree upon
mutually acceptable terms and conditions for the distribution or
manufacture of New Products, and such time period has not been
extended by mutual written agreement, the notifying Party shall have
no further obligation to the other under this Section 8.5 and such
notifying Party may then at any time thereafter and from time to time,
grant distribution or manufacturing rights, as applicable, to such New
Product to any one or more third parties on such terms as may then be
acceptable to the notifying Party.
(c) Notwithstanding the foregoing, each New Product (excluding a Joint
Invention) that is developed by GBI or ATS shall require that a New
Product Development Notice be provided to the other Party with the
rights of first negotiation contained in this Section 8.5.
ARTICLE 9
SUPPLY AND ORDERS FOR PRODUCTS
9.1. Purchase Orders. ATS shall submit purchase orders to GBI for the Products
at the time that each forecast is updated pursuant to Section 9.3. Each
purchase order shall cover the portion of the forecast that has become a
firm order under Section 9.3 of this Agreement and shall, at a minimum,
include: (a) identification of the Products ordered; (b) quantity; (c)
requested delivery date; and (d) shipping instructions and shipping
address.
9.2. Acceptance of Orders. Except as otherwise provided in Section 9.4, all
purchase orders issued in accordance with this Agreement shall be
automatically accepted by GBI. Purchase orders for the Products must be
received by GBI at least sixty (60) days prior to delivery date requested.
Each purchase order shall be deemed to be an offer by ATS to purchase the
Products pursuant to the terms of this Agreement and shall give rise to a
contract between ATS and GBI for the sale of the Products ordered and shall
be subject to and governed by the terms of this Agreement. The terms and
conditions of this Agreement shall govern and supersede any additional or
contrary terms set forth in ATS' purchase order or any GBI or ATS
acceptance, confirmation, invoice or other document, unless the specific
additional or contrary terms are stated in writing and duly signed by an
officer of ATS and an officer of GBI.
9.3. Forecasts. Commencing on the Effective Date of this Agreement, ATS shall
furnish to GBI within ten (10) days of the end of each month thereafter a
written rolling 12-month forecast of its expected orders of Products in the
Territory. The first forecast delivered as of or following the Effective
Date shall be mutually agreed upon by the Parties. Thereafter, forecasts
may not be increased by more than thirty percent (30%) in any month or
fifty percent (50%) in any 12-month period without discussing the same with
GBI and providing GBI with a reasonable amount of time to increase its
manufacturing capabilities to satisfy the increased demand. The first three
months of each forecast shall constitute a firm order to purchase the units
of the Products specified in the forecast. The last nine months of each
forecast shall constitute a non-binding good faith estimate of expected
orders for Products.
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9.4. Order Limitations. GBI shall not be required to deliver quantities in
excess of [120%] of forecasted requirements unless GBI has been given at
least 90-days advance written notice of the quantities to be delivered
which exceed the forecasted amounts; provided, however, that GBI shall use
all commercially reasonable efforts to supply such excess. If GBI incurs
additional expenses, such as overtime for employees to deliver quantities
in excess of [120%] of the forecasted requirements, such expenses will be
passed on to ATS in the Transfer Prices.
9.5. Modification of Orders. Except as otherwise provided in Section 9.4, no
purchase order shall be modified or canceled except upon the mutual
agreement of the parties, which shall not be unreasonably withheld by
either party. Mutually agreed change orders shall be subject to all
provisions of this Agreement, whether or not the changed purchase order so
states. Notwithstanding the foregoing, any purchase order may be canceled
by ATS as to any Products which are not delivered within thirty (30) days
of the delivery date requested by ATS pursuant to a purchase order
submitted to GBI under Section 9.1 and accepted by GBI under Section 9.2
(the "Requested Delivery Date"), and any such cancellation shall not limit
or affect any contract remedies available to ATS with respect thereto. Any
such cancellation by ATS must be by written notice to GBI given within 45
days following the requested delivery date and shall be effective as of the
date received by GBI.
9.6. Shipment. All Products sold by GBI to ATS shall be shipped by GBI free on
board ("F.O.B.") GBI's facility (the "Shipping Point") addressed to ATS'
address set forth on the first page of this Agreement (the Shipping
Point"). GBI shall bear all risk of loss prior to GBI's delivery of the
Products to a common carrier at the Shipping Point, and shall have no
further responsibility for the Products after it has delivered the Products
to the common carrier. ATS assumes all risk of loss upon GBI's delivery of
the Products to a common carrier at the Shipping Point. ATS shall pay all
loading, freight, shipping, insurance, forwarding and handling charges,
taxes, fees, storage, and all other charges applicable to the Products
after they are delivered by GBI to the common carrier at the Shipping
Point. If ATS requests any expedited shipping due to a modification of its
purchase order pursuant to Section 9.5, ATS shall be responsible for all
such expedited shipping costs.
9.7. Inspection.
(a) GBI will inspect and test the Product as required by the
Specifications; however, ATS shall be responsible for testing of or
obligated to test the Product. ATS will inspect all incoming Product.
Upon notification to GBI, ATS will have the right to reject any lot
that contains Product that does not meet the Specifications
("Nonconforming Product"). ATS will provide GBI with information as to
the reason for the rejection of the Nonconforming Product including a
description of the test procedure and results, if any, on which the
rejection is based within 45 days of receipt therefor. GBI will
instruct ATS as to the disposal or return of Nonconforming Product. If
GBI instructs ATS to return Nonconforming Product, GBI will be
responsible for such return shipping charges. At ATS' option, GBI will
either (i) replace the Nonconforming Product, including units of
Product that
15
may have been damaged in the inspection process, without additional
cost to ATS, permit ATS to issue a debit memorandum to GBI for the
purchase price of the Nonconforming Product, and will re-invoice ATS
for the Product shipped to replace the Nonconforming Product at the
time of shipment of the replacement product; or (ii) credit ATS for
the purchase price of Nonconforming Product after receipt of ATS'
debit memorandum related to such Nonconforming Product.
(b) Any claims for shipping damage shall be submitted by ATS to the common
carrier.
9.8. Process or Material Changes. No material changes, modifications, deviations
or exceptions to the Specifications, materials or fabrication manufacturing
or packaging processes may be made without 60-days prior written notice to
ATS by GBI. Any such material changes to the Specifications, materials,
fabrication, manufacturing or packaging processes proposed to be
implemented by GBI shall be subject to the prior review by ATS for safety
and efficacy and shall not be implemented for at least such 60-day period.
GBI shall also provide, at its sole cost and expense, a limited number of
samples of the Product incorporating the proposed change for such prior
evaluation during the 60-day period. If ATS objects to the changes based on
safety and efficacy reasons, ATS shall provide a written explanation of
such objections to GBI and if the parties cannot agree to a solution,
either party may terminate this Agreement upon 30-days prior written notice
unless ATS waives its objection. If ATS does not respond to the notice, GBI
may implement any such material changes after expiration of the 60-day
period.
9.9. Packaging, Sterilization and Labeling. GBI shall be responsible for
packaging, labeling, instructions for use, and any necessary sterilization
of Products purchased under this Agreement. GBI shall deliver the text of
proposed packaging, labeling, instructions for use to ATS for its review
and comment prior to printing. GBI shall prepare packaging, labeling and
instructions for use in all foreign languages that ATS reasonably requests
at GBI's sole cost and expense, except that ATS will pay fifty percent
(50%) of the cost of translating the instructions for use into any foreign
language. The Products will be labeled as "Manufacturer: GBI" and
"Distributor: ATS or ATS Medical, Inc." ATS hereby grants GBI a limited,
non-exclusive, license to use ATS' name in accordance with ATS'
instructions, solely for purposes of packaging and labeling Products sold
by GBI to ATS or its Affiliates under this Agreement.
9.10. Subcontracts and Suppliers. If ATS is required to place its CE mark
certification on the Product, GBI will promptly supply ATS a list of GBI's
subcontractors and suppliers contributing to the manufacture of the
Product. After GBI has supplied ATS with such list, GBI shall provide ATS
with at least 30-days notice of any proposed change in such subcontractors
and suppliers.
ARTICLE 10
PRICES AND PAYMENTS
10.1. **.
16
10.2. **
10.3. Taxes. The transfer prices for Products set forth in Exhibit C do not
include any sales, use, value added or similar taxes, customs duties, or
tariffs imposed by any governmental authority or agency on Products or any
components thereof that are imposed on ATS by any country in the Territory.
ATS shall pay or reimburse GBI for all such amounts incurred in connection
with ATS' purchase of Products; provided, however, that GBI shall pay all
income or franchise taxes imposed upon the income of GBI.
10.4. Resale Prices. ATS may resell the Products at such prices, as ATS in its
sole discretion, shall determine.
10.5. **
10.6. **
**
**
ARTICLE 11
GENERAL RIGHTS AND OBLIGATIONS OF ATS
11.1. Sales and Marketing. ATS will provide its standard level of sales and
marketing support for the Products and will use commercially reasonable
efforts to further the promotion, marketing, sale and other distribution of
the Products in the Territory. ATS will develop and produce brochures and
other marketing and sales literature for the Product.
11.2. Post-Marketing Studies. ATS may, in its sole discretion and at its
expense, pursue authorship and publication of post-marketing or white paper
studies to increase market awareness of the Products. GBI will assist ATS
by providing marketing materials and manufacturing information reasonably
necessary to support such studies. ATS shall provide GBI with sufficient
opportunity to review any such proposed publications and ATS shall agree
not to publish GBI Confidential Information or publish any information that
will affect GBI's ability to seek patent protection.
11.3. Marketing Materials. ATS shall be responsible for the preparation of sale
and marketing materials for the marketing and sale of the Products,
including the translation, adaptation and/or modification of GBI's sales
and marketing materials, as deemed appropriate by ATS, to reflect local
culture or business practices and languages, and to reflect ATS as the
exclusive distributor of the Product. GBI will cooperate with ATS in the
preparation of ATS' sales and marketing materials. ATS shall submit all
marketing material to GBI for GBI's prior approval, which approval shall
not be unreasonably withheld.
11.4. Training. ATS shall provide its sales force with all reasonably necessary
and appropriate training and support regarding the use of the Products.
17
11.5. Alteration of Products. ATS, its Affiliates and agents shall not, in any
way, alter the Products or remove, cover, change, alter or add to the
labels attached to the Products by GBI, except with GBI's prior written
approval.
11.6. Import Approvals. ATS shall be responsible for obtaining all import
licenses and permits (other than regulatory approvals described in Article
4) as may be required to import the Products into such countries as are
selected by ATS in accordance with then prevailing laws and regulations of
such countries. All such filings and registrations of the Products shall be
in the name of ATS, whenever feasible in accordance with prevailing laws
and regulations. GBI shall cooperate fully with ATS in its efforts to
obtain any such approvals.
ARTICLE 12
GENERAL RIGHTS AND OBLIGATIONS OF GBI
12.1. Manufacture and Supply of Products. During the term of this Agreement, GBI
shall manufacture and sell Products to ATS in accordance with the
Specifications and the terms and conditions set forth in this Agreement. If
GBI fails to manufacture the Products in accordance with the Specification
or is unable meet the volume requirements established in accordance with
this Agreement, GBI shall promptly notify ATS in writing of such
manufacturing deficiency. In addition, if ATS becomes aware of any such
manufacturing deficiency, ATS shall have the right provide written notice
to GBI of such manufacturing deficiency. If GBI is not able to cure the
deficiency within three months of notice from either GBI or ATS will be
automatically granted the right to manufacture the Products and GBI shall
provide all documentation and assistance necessary for ATS to manufacture
the Products.
12.2. Training and Support. GBI shall (a) assist, at no charge, in the training
of ATS' sales personnel representing the Products with respect to the
promotion and use of the Products; and (b) travel, at ATS' sole cost and
expense, with ATS' sales personnel to assist in problem solving, market
needs identification and general market development, in each case as may be
reasonably requested by ATS.
12.3. Research and Development. GBI will continue its product development
programs, at its sole expense, and will not materially reduce its spending
on research and development from current levels. ATS will provide GBI
feedback from ATS' sales force with regard to market needs and GBI will use
commercially reasonable efforts to develop product enhancements to meet
these needs.
12.4. Marketing Samples. GBI will provide to ATS, at no charge, the number of
non-sterile samples of the Products set forth on Exhibit D in the first
year of this Agreement. ATS will provide such samples to its sales force
and customers at no charge. At ATS' request, GBI shall sell to ATS
additional non-sterile samples at the price per Unit set forth on Exhibit
D. Exhibit D shall be updated as Additional Products are added to this
Agreement and annually by mutual agreement of the Parties.
12.5. Sales Leads. GBI shall forward to ATS all leads for sales of Products in
the Territory.
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12.6. Export. GBI shall be responsible for obtaining all required export
licenses and other authorizations and permits from the United States
Government for the sale of the Products to ATS. ATS shall cooperate fully
with GBI in its efforts to obtain any such approvals.
ARTICLE 13
TERM AND TERMINATION
13.1. Term. This Agreement shall take effect as of the date first above written
and shall continue in force for a period of five years (the "Initial Term")
from the Effective Date. Thereafter, this Agreement shall automatically
renew for consecutive one year terms for an indefinite number of additional
one year terms (each a "Renewal Period"), unless either ATS or GBI gives
written notice of termination to the other at least six months prior to the
end of the Initial Term or a Renewal Period, as applicable.
13.2. Termination. Notwithstanding the provisions of Section 13.1, this
Agreement may be terminated in accordance with the following provisions:
(a) Either Party may terminate this Agreement at any time by giving notice
in writing to the other Party, which notice shall be effective upon
dispatch, should the other Party file a petition of any type as to its
bankruptcy, be declared bankrupt, become insolvent, make an assignment
for the benefit of creditors, go into liquidation or receivership, or
otherwise lose legal control of its business.
(b) Either Party may terminate this Agreement by giving notice in writing
to the other Party should an event of Force Majeure, as defined below,
continue for more than six months.
(c) Either Party may terminate this Agreement by giving notice in writing
to the other Party in the event the other Party is in material breach
of this Agreement and shall have failed to cure such breach within
sixty (60) days of receipt of written notice thereof specifying the
breach in detail from the non-breaching Party, unless such breach
cannot be cured within such 60-day period, in which case the breaching
Party shall have undertaken good faith effort to cure such breach
within such 60-day period.
(d) ATS may terminate this Agreement by giving thirty (30) days notice in
writing to GBI, which notice shall be effective upon dispatch, should
ATS exercise its right of first refusal option as provided in Section
19.1 or if there shall occur a Change in Control of GBI.
13.3. Rights and Obligations on Termination. In the event of termination of this
Agreement for any reason, the parties shall have the following rights and
obligations:
(a) Termination of this Agreement shall not release either party from the
obligation to make payment of all amounts then or thereafter due and
payable.
19
(b) The terminating party shall have the right, at its option, to cancel
any or all purchase orders that provide for delivery after the
effective date of termination.
(c) ATS shall be permitted to resell any inventory of Products on hand at
the time of termination.
(d) ATS' and GBI's obligations pursuant to Sections 10.6, 15.1, 15.3 and
15.4 and Articles 6, 7, 14, 16 and 17 shall survive termination of
this Agreement. All other provisions of this Agreement shall terminate
upon termination of this Agreement.
ARTICLE 14
PRODUCT WARRANTIES
14.1. Warranty. GBI warrants to ATS that the Products sold to ATS under this
Agreement will meet the then current Preliminary Specifications or
Specifications for Products, as the case may be, and will be free from
defects in design, manufacturing, materials and workmanship under normal
intended use and service, in accordance with all applicable FDA, QSR, and
CE standards and requirements for a period of twelve (12) months from the
date of delivery to ATS. During the 12-month period, GBI will repair or
replace, at GBI's sole option, any defective Product at no charge to ATS
provided that ATS returns the Product to the Shipping Point at GBI's
expense, properly packed, and further provided, in all cases, that such
repair or replacement is conditioned upon a finding by GBI that the repair
or replacement is attributable solely to a defect in materials or
workmanship and not to improper use, accidents, fault or negligence of ATS
or user, or other causes. Replacement shall mean furnishing a new shipment
(F.O.B. place of original shipment) of the Product in an amount sufficient
to replace any Product found to be defective. Prior to returning any
Products alleged to be defective, ATS shall notify GBI in writing of the
claimed defect and shall include the lot and serial number of such
Products, as well as the number and date of the invoice therefor. Any
Products that does not otherwise appear defective but is deemed defective
by a physician using the Products shall be replaced by GBI at a cost to ATS
of 50% of the then applicable Transfer Price for such Product.
14.2. Limited Warranty and Limitation of Liability. THE WARRANTIES SET FORTH IN
SECTION 14.1 ARE INTENDED SOLELY FOR THE BENEFIT OF ATS. ALL CLAIMS
HEREUNDER SHALL BE MADE BY ATS AND MAY NOT BE MADE BY ATS' CUSTOMERS. THE
WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY GBI, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PARTICULAR
PURPOSE. THE SOLE AND EXCLUSIVE REMEDIES OF ATS FOR BREACH OF PRODUCT
WARRANTY SHALL BE LIMITED TO THE REMEDIES PROVIDED IN THIS AGREEMENT. IN NO
EVENT SHALL GBI BE LIABLE FOR ANY LOST PROFITS OR SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND, FOR ANY REASON
WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, CHARGES BASED ON NEGLIGENCE,
BREACH OF WARRANTY, STRICT LIABILITY, OR ANY OTHER THEORY, EVEN IF GBI
20
SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR
DAMAGE.
14.3. ATS Warranty Obligations. ATS shall not make any representations or
warranties with respect to Products or GBI's liability therefore except as
set forth in this Article.
ARTICLE 15
REPRESENTATIONS, WARRANTIES
AND INDEMNIFICATION
15.1. Indemnification.
(a) Cross Indemnity. GBI and ATS hereby agree to indemnify, defend and
hold each other harmless from and against all suits, actions, claims,
demands, causes of action, judgments, liabilities and expenses
(including court costs and reasonable attorneys' fees) which arise or
result from their respective misrepresentations of any representation
contained herein, or default in the observance or performance of any
term or provision hereof. Further, each Party agrees to indemnify,
defend and hold the other Party harmless from and against all suits,
actions, claims, demands, causes of action, judgments, liabilities and
expenses (including court costs and reasonable attorneys' fees) which
arise or result from activities on the part of the Other Party in
carrying out clinical studies, where a third party may sue the first
Party based on alleged violations by the other Party of HIPPA, or
other statutory regulations related to carrying out a clinical
activity. In addition, ATS shall indemnify, defend and hold GBI
harmless from and against all suits, actions, claims, demands, causes
of action, judgments, liabilities and expenses (including court costs
and reasonable attorneys' fees) which are the result of ATS'
relationship with an Affiliate, subdistributor of ATS or any other
third parties appointed by ATS to distribute the Product.
(b) Products Liability. GBI hereby agrees to defend, indemnify and hold
ATS and its Affiliates (each an "ATS Indemnified Party") harmless from
and against all suits, actions, claims, demands, causes of action,
judgments, liabilities and expenses (including court costs and
reasonable attorneys' fees) which arise out of or result from personal
injury incident to the use of any Products to the extent resulting
from the failure of GBI to manufacture the Products to meet the
Preliminary Specifications or Specifications, as the case may be. As a
condition precedent to GBI's obligation under this Section 15.1(b),
the ATS Indemnified Party charged in such suit shall promptly notify
GBI and shall not settle any suit in which it seeks indemnification
hereunder without GBI's prior written approval and GBI shall have the
right to defend such actions at its sole expense.
ATS hereby agrees to defend, indemnify and hold GBI and its Affiliates
(each a "GBI Indemnified Party") harmless from and against all suits,
actions, claims, demands, causes of action, judgments, liabilities and
expenses (including court costs and reasonable attorneys' fees) which
arise out of or result from personal injury incident to the use of any
Products to the extent resulting from a defect in
21
the Preliminary Specifications or Specifications, as the case may be.
As a condition precedent to ATS' obligations under this Section
15.1(b), the GBI Indemnified Party charged in such suit shall promptly
notify ATS and shall not settle same without ATS' prior written
approval and ATS shall have the right to defend such actions at its
sole expense.
15.2. Insurance Requirements.
(a) GBI Insurance Requirements. GBI will carry product liability insurance
covering any loss, damage, expense or liability incurred or suffered
by any Party other than GBI arising out of any use of a Product. Such
policy or policies shall (i) have aggregate limits of liability of not
less than $1,000,000 with respect to any incident or occurrence and of
not less than $2,000,000 in the aggregate on the Effective Date; (ii)
name ATS as an additional insured Party; (iii) provide for a
deductible or retained amount of not more than $100,000; and (iv)
provide that such policy may not be canceled except upon not less than
30 days' written notice to both GBI and ATS. Upon request, GBI shall
provide such evidence of the effectiveness of such insurance to ATS.
GBI shall use commercially reasonable efforts to increase such
insurance to $10,000,000 in the aggregate before the first date
clinical quality Products are delivered pursuant to this Agreement.
(b) ATS Insurance Requirements. ATS will carry product liability insurance
covering any loss, damage, expense or liability incurred or suffered
by a Party other than ATS arising out of any use of a Product. Such
policy or policies shall (a) have aggregate limits of liability of not
less than $1,000,000 with respect to any incident or occurrence and of
not less than $10,000,000 in the aggregate; (b) name GBI as an
additional insured Party; (c) provide for a deductible or retained
amount of not more than $1,000,000; and (d) provide that such policy
may not be canceled except upon not less than 30 days' written notice
to both GBI and ATS. Upon request, ATS shall provide evidence of the
effectiveness of such insurance to GBI.
15.3. Third Party Claims. If a claim by a third party is made against an
indemnified Party and if the indemnified Party intends to seek indemnity
with respect thereto under this Article 15, such indemnified Party shall
promptly notify the indemnifying Party of such claim; provided, however,
that the failure to give timely notice shall not affect the rights of the
indemnified Party so long as such failure to give timely notice does not
adversely affect the indemnifying Party's ability to defend such claim
against a third Party. The indemnifying Party shall be entitled to assume
the defense thereof, with counsel selected by the indemnifying Party and
reasonably satisfactory to the indemnified Party. The indemnifying Party
shall have control of the defense of any such action, including any appeals
and negotiations for the settlement or compromise thereof and shall have
full authority to enter into a binding settlement or compromise; provided
that, the indemnifying Party shall not enter into any settlement or
compromise which may adversely affect the indemnified Party without the
indemnified Party's consent, which consent shall not be unreasonably
withheld. If the indemnifying Party assumes the defense of such claim, the
indemnifying Party shall not be responsible for any legal or
22
other expenses subsequently incurred by such indemnified Party in
connection with the defense thereof. The indemnified Party may participate,
at its own cost and expense, in the defense of any such claim; provided,
however, that such defense shall be controlled by the indemnifying Party.
15.4. Cooperation as to Indemnified Liability. Each Party hereto shall cooperate
fully with other Parties with respect to access to books, records, or other
documentation within such Party's control, if deemed reasonably necessary
or appropriate by any Party in the defense of any claim, which may give
rise to indemnification hereunder.
15.5. ATS' Representations and Warranties. ATS hereby represents and warrants to
GBI that as of the date hereof:
(a) ATS is a corporation duly organized, validly existing and in good
standing under the laws of Minnesota, and this Agreement has been duly
authorized by all necessary corporate action.
(b) This Agreement is the legal, valid and binding obligation of ATS,
enforceable against ATS in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
compliance with the terms and conditions hereof will conflict with,
result in a breach or violation by ATS of or constitute a default
under any of the terms, conditions or provisions of any contract,
agreement or other instrument to which ATS is or may be bound or
affected.
(d) ATS is the sole and exclusive owner of the ATS Inventions and ATS
Confidential Information, free and clear of any security interests,
claims, encumbrances or charges of any kind, and has full right, power
and authority to enter into this Agreement and to grant to GBI the
rights granted and to be granted hereunder.
(e) To the best of ATS' knowledge, ATS Inventions are valid and
enforceable, and the rights and licenses granted under this Agreement
do not infringe any patent, copyright, trademark, license or other
intellectual property right of any third party and do not
misappropriate any trade secret of any third party.
(f) There is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature, judgment, decree, decision,
injunction, writ or order pending or, to the knowledge of ATS,
threatened or contemplated by or against or involving ATS or its
shareholders, directors or officers (but only in their capacity as
such), ATS Inventions, ATS Confidential Information or this Agreement,
whether at law or in equity, before or by any person, entity
governmental or quasi-governmental, administrative or regulatory
agency or any court.
(g) All proprietary technical information developed by and belonging to
ATS that has not been patented has been kept confidential.
23
(h) Except as otherwise set forth on Exhibit B, ATS has not patented or
applied for patent protection on any the technology it proposes to use
in developing the Product.
(i) ATS is not under any obligations inconsistent with the provisions of
this Agreement.
15.6. GBI's Representations and Warranties. GBI hereby represents and warrants
to ATS that as of the date hereof:
(a) GBI is a corporation duly organized, validly existing and in good
standing under the laws of Colorado, and this Agreement has been duly
authorized by all necessary corporate action.
(b) This Agreement is the legal, valid and binding obligation of GBI,
enforceable against GBI in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
compliance with the terms and conditions hereof will conflict with,
result in a breach or violation by GBI of or constitute a default
under any of the terms, conditions or provisions of any contract,
agreement or other instrument to which GBI is or may be bound or
affected.
(d) GBI is the sole and exclusive owner of the GBI Inventions and GBI
Confidential Information, free and clear of any security interests,
claims, encumbrances or charges of any kind other than a term loan
with Community Banks of Colorado, and has full right, power and
authority to enter into this Agreement and to grant to ATS the rights
granted and to be granted hereunder.
(e) To the best of GBI's knowledge, GBI Inventions are valid and
enforceable, and the rights and licenses granted under this Agreement
do not infringe any patent, copyright, trademark, license or other
intellectual property right of any third party and do not
misappropriate any trade secret of any third party.
(f) There is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature, judgment, decree, decision,
injunction, writ or order pending or, to the knowledge of GBI,
threatened or contemplated by or against or involving GBI or its
shareholders, directors or officers (but only in their capacity as
such), GBI Inventions, GBI Confidential Information or this Agreement,
whether at law or in equity, before or by any person, entity
governmental or quasi-governmental, administrative or regulatory
agency or any court.
(g) All proprietary technical information developed by and belonging to
GBI that has not been patented has been kept confidential.
(h) Except as otherwise set forth on Exhibit B, GBI has not patented or
applied for patent protection on any the technology it proposes to use
in developing the Product.
24
(i) GBI is not under any obligations inconsistent with the provisions of
this Agreement.
ARTICLE 16
CONFIDENTIAL INFORMATION
16.1. Confidentiality. Except as otherwise specifically provided in this
Agreement, ATS and GBI each agree that during the term of this Agreement
and for a period of five (5) years thereafter, it will not use any GBI
Confidential Information or ATS Confidential Information, respectively, for
any purpose other than as permitted or required for performance by such
Party under this Agreement and not to disclose or provide any Confidential
Information to any third Party and to take all reasonably necessary
measures to prevent any such disclosure by its employees, agents,
contractors or consultants. Upon request of the other Party or termination
of this Agreement, each Party shall return all such Confidential
Information to the other Party.
16.2. Existence of Agreement. The existence of this Agreement and the
participation of the Parties in it shall be deemed to be confidential
information subject to the provisions of this Article 16. Any publication,
public reference or other transfer of information into the public sector
regarding the relationship as defined in the Agreement or any of the terms
contained in the Agreement shall be prohibited without prior written
consent of the other Party.
16.3. Exclusions to Confidential Information. Confidential Information of either
Party shall exclude information that:
(a) was already in the possession of receiving Party prior to its receipt
from the disclosing Party (provided that the receiving Party is able
to provide the disclosing Party with reasonable documentary proof
thereof);
(b) is or becomes part of the public domain by reason of acts not
attributable to the receiving Party;
(c) is or becomes available to receiving Party from a source other than
the disclosing Party which source, to the best of receiving Party's
knowledge, has rightfully obtained such information and has no
obligation of non-disclosure or confidentiality to the disclosure
Party with respect thereto;
(d) is made available by the disclosing Party to a third Party
unaffiliated with the disclosing Party on an unrestricted basis;
(e) is independently developed by the receiving Party completely without
reference to any Confidential Information of the disclosing Party, as
evidenced by the receiving Party's written records; or
(f) has been or must be publicly disclosed by reason of legal accounting
or regulatory requirements beyond the reasonable control, and despite
the reasonable efforts of the receiving Party.
25
All Confidential Information disclosed by one Party to the other under this
Agreement shall be in writing and bear a legend "Proprietary,"
"Confidential" or words of similar import or, if disclosed in any manner
other than writing, shall be preceded by an oral statement indicating that
the information is proprietary or confidential.
ARTICLE 17
PATENTS AND INTELLECTUAL PROPERTY RIGHTS
17.1. Defense of Claims. Except with regard to Joint Inventions covering the
Product, GBI shall, at its own expense, defend any suit instituted against
ATS which is based on an allegation that any Product constitutes an
infringement of any patent or any other intellectual property right
protected under the laws of the United States, any State of the United
States, or any other nation. GBI shall have control of the defense of any
such action, including any appeals and negotiations for the settlement or
compromise thereof and shall have full authority to enter into a binding
settlement or compromise; provided that, GBI shall not enter into any
settlement or compromise which may adversely affect ATS without ATS'
consent, which consent shall not be unreasonably withheld. GBI shall
indemnify ATS against any award of damages and costs made against ATS as a
result of any such action.
17.2. Limitation of Liability. GBI shall have no liability of any kind to ATS
under Section 17.1 or based upon any other claim ATS may have to the extent
any such claim is based upon or arises out of (a) the use of any Product in
combination with an apparatus or device not manufactured, supplied or
approved by GBI, (b) the use of any Product in a manner for which it was
not designed or intended to be used, or (c) any modification of any Product
by ATS or any third party which causes it to become infringing.
17.3. Replacement Product. In order to avoid or limit any liability for
infringement, GBI may, at any time and irrespective of whether it shall be
obligated to do so by order of any court, at its expense and option replace
any Product with a non-infringing item providing substantially the same
performance and has received all necessary regulatory approvals.
17.4. Intellectual Property. GBI represents and warrants to ATS that: (a) Except
with respect to Joint Inventions, GBI owns or possesses licenses or other
rights to use all Intellectual Property used in the development,
manufacture or sale of the Products ("GBI Intellectual Property"); (b) no
claim is pending or threatened to the effect that the Product or GBI's use
of GBI Intellectual Property infringes upon or conflicts with the valid
rights of any other person under any Intellectual Property, and, to the
best of GBI's knowledge, there is no basis for any such claim; (c) no claim
is pending or threatened to the effect that any such GBI Intellectual
Property is invalid or unenforceable by GBI, and, to the best of GBI's
knowledge, there is no basis for any such claim (whether or not pending or
threatened) and (d) all proprietary technical information developed by and
belonging to GBI which has not been patented has been kept confidential.
17.5. Protection of GBI's Intellectual Property and Improvements. GBI shall be
responsible for filing and prosecuting all U.S. and foreign patent,
copyright and mask work applications it deems necessary or appropriate to
protect GBI Intellectual Property.
26
ARTICLE 18
TRADEMARKS
18.1. License. GBI hereby grants to ATS a non-exclusive, non-transferable, and
royalty-free right and license to use GBI's trademarks, trade names and
logotypes in connection with the sale, distribution, promotion and
advertising of the Products as long as such trademarks are used by ATS in
accordance with GBI's standards, specifications and instructions, but in no
event beyond the term of this Agreement. ATS shall not acquire any right,
title or interest under the laws of any nation in such trademarks, trade
names or logotypes of GBI other than the foregoing limited license and
shall not attempt to assert or register any such right, title or interest.
ATS shall not use any of GBI's trademarks, trade names or logotypes as part
of ATS' corporate or trade names or permit any third party to do so without
the prior written consent of GBI. ATS shall permit GBI to inspect any
material on which GBI's trademarks, trade names and logo types appear, and
ATS agrees to make any changes reasonably required by GBI. ATS shall in
addition have the right to promote and sell the Products under trademarks,
trade names and logotypes of ATS selected by ATS, which trademarks, trade
names and logotypes shall be and shall remain the property of ATS.
18.2. Infringement. ATS shall promptly notify GBI of any use by any third party
of GBI's trademarks, trade names or logotypes or any use by such third
parties of similar marks which may constitute an infringement or passing
off of GBI's trademarks, trade names or logotypes of which ATS has
knowledge. GBI reserves the right in its sole discretion to institute any
proceedings against such third party infringers and ATS shall refrain from
doing so. ATS agrees to cooperate fully with GBI in any action taken by GBI
against such third parties, provided that all expenses of such action shall
be borne by GBI and all damages which may be awarded or agreed upon in
settlement of such action shall accrue to GBI.
18.3. Termination of Use. ATS acknowledges GBI's proprietary rights in and to
GBI's trademarks, trade names and logotypes, and ATS hereby waives all
right to any trademarks, trade names and logotypes now or hereafter
originated by GBI. ATS shall not adopt, use or register any words, phrases
or symbols which are identical to or confusingly similar to any of GBI's
trademarks. Upon termination of this Agreement, ATS shall cease using GBI's
trademarks, trade names and logotypes in any manner, subject to ATS' right,
if any, to continue to sell Products held in inventory.
ARTICLE 19
**
19.1. **
(a) **
(b) **
(c) **
27
19.2. **
ARTICLE 20
ARBITRATION
20.1. Disputes. Any dispute, controversy or claim arising out of or relating to
this Agreement, or the breach, termination or invalidity thereof, shall be
finally settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the
date of this Agreement by a single arbitrator who shall be experienced in
the medical device industry and who shall be appointed in accordance with
such rules. The place of arbitration shall be Minneapolis, Minnesota.
20.2. Governing Law. This Agreement shall be governed by, and interpreted and
construed in accordance with the laws of the State of Minnesota.
ARTICLE 21
FORCE MAJEURE
21.1. Definition. Force Majeure shall mean any event or condition, not existing
as of the date of this Agreement, not reasonably foreseeable as of such
date and not reasonably within the control of either Party, which prevents
in whole or in material part the performance by one of the Parties of its
obligations hereunder or which renders the performance of such obligations
so difficult or costly as to make such performance commercially
unreasonable. Without limiting the foregoing, the following shall
constitute events or conditions of Force Majeure: riots, civil or military
disturbances, war, strikes, lockouts, labor slowdowns or stoppages,
prolonged shortage of energy supplies, epidemics, fire, flood, hurricane,
typhoon, earthquake, lightning, and explosion.
21.2. Notice. Upon giving notice to the other Party, a Party affected by an
event of Force Majeure shall be released without any liability on its part
from the performance of its obligations under this Agreement, except for
the obligation to pay any amounts due and owing hereunder, but only to the
extent and only for the period that its performance of such obligations is
prevented by the event of Force Majeure. Such notice shall include a
description of the nature of the event of Force Majeure, its cause and
possible consequences. The Party claiming Force Majeure shall promptly
notify the other Party of the termination of such event.
21.3. Suspension of Performance. During the period that the performance by one
of the Parties of its obligations under this Agreement has been suspended
by reason of an event of Force Majeure, the other Party may likewise
suspend the performance of all or part of its obligations hereunder, except
for the obligation to pay any amounts due and owing hereunder, to the
extent that such suspension is commercially reasonable.
ARTICLE 22
MISCELLANEOUS
22.1. Relationship. This Agreement does not make either Party the employee,
agent or legal representative of the other for any purpose whatsoever.
Neither Party is granted any right
28
or authority to assume or to create any obligation or responsibility,
express or implied, on behalf of or in the name of the other Party. In
fulfilling its obligations pursuant to this Agreement each Party shall be
acting as an independent contractor.
22.2. Assignment. Except as otherwise provided in this Agreement, neither Party
may assign or otherwise transfer its rights and obligations under this
Agreement without the prior written consent of the other Party.
Notwithstanding any other provision in this Agreement to the contrary, and
subject to ATS' rights as set forth in Article 19, either Party may assign
this Agreement to its successor in connection with a Change in Control of
such Party. Any prohibited assignment shall be null and void. All terms and
conditions of this Agreement shall be binding on and inure to the benefit
of the successors and permitted assigns of the Parties.
22.3. Notices. Notice permitted or required to be given under this Agreement
shall be deemed sufficient if given in writing by facsimile, commercial air
delivery service or by registered or certified air mail, postage prepaid,
return receipt requested, addressed to the respective addresses of the
Parties set forth below or at such other address as the respective Parties
may designate by like notice from time to time. Notices so given shall be
effective upon the earlier of: (a) receipt by the Party to which notice is
given (which, in the instance of a facsimile, shall be deemed to have
occurred at the time that the machine transmitting the facsimile verifies a
successful transmission of the facsimile); (b) on the seventh business day
following the date such notice was deposited in the mail; or (c) on the
second business day following the date such notice was delivered to a
commercial air delivery service. Notices shall be given as follows:
If to GBI: Genesee Biomedical, Inc.
1308 South Jason Street,
Denver, Colorado 80223
Attn: John T.M. Wright
Woodrow G. Mathison
Fax: (303) 777-8866
With a copy to: Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
Attn: Wanda J. Abel
Fax: (303) 893-1379
If to ATS: ATS Medical, Inc.
3905 Annapolis Lane North
Minneapolis, Minnesota 55447
Attn: Vice President, Marketing
and Business Development
Fax: (763) 553-1492
29
With a copy to: Oppenheimer Wolff & Donnelly LLP
3300 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Thomas A. Letscher
Fax: (612) 607-7100
22.4. Entire Agreement. This Agreement, including the exhibits and schedules
attached hereto and incorporated as an integral part of this Agreement,
constitutes the entire agreement of the Parties with respect to the subject
matter hereof, and supersedes all previous proposals, oral or written, and
all negotiations, conversations or discussions heretofore had between the
Parties related to this Agreement.
22.5. Amendment. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, other than by
written amendment signed by the Parties hereto, except as expressly
provided in this Agreement.
22.6. Severability. In the event that any of the terms of this Agreement are in
conflict with any rule of law or statutory provision or otherwise
unenforceable under the laws or regulations of any government or
subdivision thereof, such terms shall be deemed stricken from this
Agreement, but such invalidity or unenforceability shall not invalidate any
of the other terms of this Agreement and this Agreement shall continue in
force, unless the invalidity or unenforceability of any such provisions of
this Agreement substantially violates, comprises an integral part of or is
otherwise inseparable from the remainder of this Agreement.
22.7. Counterparts. This Agreement shall be executed in two or more
counterparts, and each such counterpart shall be deemed an original hereof.
22.8. Waiver. No failure by either Party to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the
continuation or repetition of the circumstances giving rise to such right.
22.9. Publications. GBI and ATS may pursue publication of the results of any
clinical study or trial conducted with respect to Products including white
paper publications by ATS to expand market usage for Products. The Party
seeking to publish shall provide the non-publishing Party with sufficient
opportunity to review any such proposed publications and make
recommendations as to revisions to any such proposed publication.
Notwithstanding the foregoing, neither Party shall publish the other
Party's Confidential Information, without the express written consent of
the non-publishing Party, or publish any information that will affect the
non-publishing Party's ability to seek patent protection.
[Following Page is the Signature Page]
30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the
date first above written.
ATS MEDICAL, INC. GENESEE BIOMEDICAL, INC.
By /s/ Michael Dale By /s/ John T.M. Wright
---------------------------------- -------------------------------------
Its President/CEO Its CEO
--------------------------------- ------------------------------------
31
EXHIBIT A
DEVELOPMENT PLAN
[To be agreed upon.]
EXHIBIT B
GBI INVENTIONS
U.S. Patents Issued and Assigned to Genesee BioMedical, Inc.,
Concerning Annuloplasty Rings
6,187,040 02/13/2001 Mitral and Tricuspid Annuloplasty Rings
**
5,674,279 10/07/1997 Annuloplasty and Suture Rings
**
5,522,884 06/04/1906 Holder for Adjustable Mitral & Tricuspid
Annuloplasty Rings
**
5,305,296 04/26/1994 Annuloplasty and Suture Rings
**
5,201,880 04/13/1993 Mitral and Tricuspid Annuloplasty Rings
**
European Patent Issued and Assigned to Genesee BioMedical, Inc., Concerning
Annuloplasty Rings
EP 0 624 080 B1 12/12/2001 Annuloplasty and Suture Rings
**
1
EXHIBIT C
TRANSFER PRICES
(See Section 10.1)
[To be agreed upon.]
EXHIBIT D
SAMPLES
(See Section 12.4)
Number of non-sterile samples in year one _______________
Transfer price of additional non-sterile marketing samples to
be provided by GBI to ATS $______________