Amended and Restated Distribution and License Agreement

EXHIBIT 10.1

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE

THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL

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Amended and Restated

Distribution and License Agreement

by and among

Angiotech Pharmaceuticals (US), Inc.

Angiodevice International GmbH

and

Baxter Healthcare Corporation

Baxter Healthcare, S. A.

 

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Distribution and License Agreement

This Amended and Restated Distribution and License Agreement (“Distribution and License Agreement”), dated as of January 1, 2009 (“Effective Date”), is entered into by and among:

Angiotech Pharmaceuticals (US), Inc. (“Angiotech US”), a Washington Corporation with principal offices at 101 W. North Bend Way, Suite 201, North Bend, WA 98045;

Angiodevice International GmbH (“Angiodevice”), which is organized and existing under the laws of Switzerland (Angiotech US and Angiodevice shall be collectively referred to herein as “AAC”);

Baxter Healthcare Corporation (“Baxter Healthcare”), a Delaware corporation with principal offices at One Baxter Parkway, Deerfield, Illinois 60015; and

Baxter Healthcare, S. A. (“BHSA”), which is organized and existing under the laws of Switzerland (Baxter Healthcare and BHSA shall be collectively referred to herein as “Baxter”).

RECITALS

WHEREAS, Angiotech Pharmaceuticals, Inc, Angiotech International GmbH, Cohesion Technologies, Inc. and Baxter have previously executed a Distribution and License Agreement dated April 1, 2003; and Amendment No.1 to Distribution and License Agreement dated December 23, 2004; and Angiodevice International GmbH (as assignee of Angiotech Pharmaceuticals, Inc, Angiotech International GmbH and Cohesion Technologies, Inc.) and Baxter have previously executed Amendment No.2 to Distribution and License Agreement dated October 8, 2007 (together, the “Original Distribution and License Agreement”);

WHEREAS, Angiotech Pharmaceuticals, Inc, Angiotech International GmbH, Cohesion Technologies, Inc. and Baxter have previously executed a Manufacturing and Supply Agreement dated April 1, 2003 and Amendment No.1 to Manufacturing and Supply Agreement dated January 21, 2005 (together, the “Original Manufacturing and Supply Agreement”);

WHEREAS, all rights and obligations of Angiotech Pharmaceuticals, Inc, Angiotech International GmbH, Cohesion Technologies, Inc. under the Original Distribution and License Agreement and the Original Manufacturing and Supply Agreement have been assigned to Angiodevice;

WHEREAS, Angiodevice and Baxter wish to terminate the Original Manufacturing and Supply Agreement and amend and restate their rights and obligations under the Original Distribution and License Agreement; and

 

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WHEREAS, each of Angiotech US and Angiodevice have certain payment obligations (through one or more intermediaries) to Angiotech Pharmaceuticals, Inc. (of which each is a wholly-owned subsidiary) that each intends to satisfy with the execution fee payable by Baxter hereunder, and Baxter Healthcare will make its execution fee payment on behalf of Baxter;

NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the sufficiency of which is hereby acknowledged, AAC and Baxter (individually referred to as “Party” and collectively as “Parties”) hereby agree as follows:

Article 1

Definitions

For purposes of this Distribution and License Agreement, the following capitalized terms in this Distribution and License Agreement, whether used in the singular or plural, shall have the following meanings:

1.1 “ AAC Know-How ” shall mean information, materials, formulations, trade secrets and data: (a) that are Controlled by AAC or its Affiliates during the term of this Distribution and License Agreement, and (b) that are transferred to Baxter and are necessary or used for the manufacture, registration, use, sale or distribution of Ingredients, Product(s), Devices, or Accessories, and shall expressly include AAC’s or its Affiliates’ communications with any Regulatory Authority regarding Products or components thereof; provided, however, that such communications shall continue to be accorded the status of Confidential Information of AAC during the term of this Distribution and License Agreement.

1.2 “ AAC Patents ” shall mean the Patents Controlled by AAC or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement having one or more valid and unexpired claims (i) that cover one or more Products, Ingredients, Accessories and/or Devices or components thereof, or (ii) that cover processes directed to making or using one or more Products, Ingredients, Accessories and/or Devices or components thereof, and (b) all Patent applications filed and Patents obtained for Improvements Controlled by AAC or its Affiliates directly relating to the Ingredients and/or Products that are discovered, conceived or reduced to practice by AAC and/or its Affiliates (or on their behalf) during the term of this Distribution and License Agreement. For purposes of this Distribution and License Agreement, the phrase “valid and unexpired claim” shall mean a composition of matter, method or device claim (or equivalent thereof) of an issued and unexpired AAC Patent, or a composition of matter, method or device claim (or equivalent thereof) of a pending application within the AAC Patents in the Territory

 

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covering one or more Products or components thereof or one or more Accessories, which (y) has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal; and (z) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise. AAC Patents shall expressly include the Patents Controlled by AAC that are set forth in Schedule 1.3, as it may be amended by the Parties from time to time.

1.3 “ AAC Trademarks ” shall mean the trademarks and domain names Controlled by AAC or its Affiliates as of the Effective date, and as set forth in Schedule 1.3.

1.4 “ Act ” shall mean the Federal Food, Drug and Cosmetic Act, as it may be amended from time to time.

1.5 “ Adverse Event ” shall mean an event about which either Party receives or becomes aware of information from any source that reasonably suggests that one of the Ingredients, Products and/or Accessories (a) may have caused or contributed to a death or serious injury, or serious deterioration in the state of health of a patient, or (b) may have malfunctioned in a manner that, if the malfunction were to recur, the Ingredient, the Product, such Accessory or a similar Ingredient, Product or Accessory would be likely to cause or contribute to a death, serious injury, or serious deterioration in the state of health of a patient. For purposes of this Section 1.5, any report pertaining to a component of a Product shall be incorporated into a report on the corresponding Product(s).

1.6 “ Affiliate ” of a Party shall mean any entity (a) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, that Party, but only for so long as the relationship exists; or (b) wherein more than fifty percent (50%) of the voting capital stock (or such lesser maximum percentage permitted by applicable law), or, in the case of a non-corporate entity, more than fifty percent (50%) of the equity interest, is beneficially owned or held by that Party or any of such Party’s subsidiaries or parents. As used in this Section 1.6, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of an entity (other than a natural person), whether through the ownership of voting capital stock, by contract or otherwise.

1.7 “ Baxter Know-How ” shall mean any information, materials, formulations, trade secrets and data: (a) that are Controlled by Baxter or its Affiliates during the term of this Distribution and License Agreement, and (b) that are transferred to AAC and are necessary or used for the use, sale or distribution of one or more Ingredients, Products, Devices, Accessories or components thereof.

 

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1.8 “ Baxter Patents ” shall mean Patent applications filed and Patents obtained for Improvements that are discovered, conceived or reduced to practice by Baxter and/or its Affiliates (or on their behalf) during the term of this Distribution and License Agreement.

1.9 “ Biologic ” shall mean a [***] material and derivatives thereof (which may be recombinantly produced) including but not limited to those used for [***] and/or [***], which have [***]. Biologic includes but is not limited to [***]. For the avoidance of doubt, [***] and [***] are explicitly excluded as a Biologic.

1.10 “ Business Day ” shall mean any day on which banking institutions in Chicago, Illinois, are open for business.

1.11 “ Commercially Reasonable Efforts ” shall mean continuous and diligent efforts of a degree and kind, including the level of attention and care and providing of funding and manpower, as are consistent with industry custom and practice and with the then current stage of product life cycle, and such efforts will in no event be less than the efforts that a Party applies with respect to its other products of similar commercial potential to the maximum extent feasible, consistent with the exercise of good business judgment for the attainment of said goals and for the maximization of profits for both Parties. Notwithstanding the foregoing, neither Party shall be required to institute litigation or arbitration as part of its Commercially Reasonable Efforts nor shall either Party be required to expend funds other than as expressly set forth herein on counsel, consultants or representatives, nor incur any expense not justified in relation to the expected return.

1.12 “ Controlled ” or “ Controls ”, when used in reference to intellectual property or regulatory documentation, shall mean the (a) ownership of intellectual property rights or rights in regulatory documentation, or (b) legal authority or right of a Party hereto (or any of its Affiliates)

(i) to transfer intellectual property rights or rights in regulatory documentation to another party, or

(ii) to otherwise disclose proprietary or trade secret or regulatory information to such other party.

1.13 “ Accessory ” shall mean any accessory item set forth in Schedule 1.13.

 

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1.14 “ Device(s) ” shall mean a mechanical delivery device that is used in the application of a Product.

1.15 “ Ingredients ” shall mean [***] including those designated [***] and [***] as set forth in further detail in Schedule 1.15, including any Improvements thereto. For purposes of this Distribution and License Agreement, Improvements to the Ingredients are anticipated to include modifications of the [***] in which: (a) [***]; (b) [***]; (c) [***]; or (d) [***]

1.16 “ Distribution and License Agreement ” shall mean this Amended and Restated Distribution and License Agreement together with all exhibits, schedules, and appendices attached to this Distribution and License Agreement, all as respectively amended, modified or supplemented by the Parties in accordance with the terms of this Distribution and License Agreement.

1.17 “ Dollars ” shall mean the lawful currency of the United States of America.

1.18 “ Drug ” shall mean an ingredient intended to [***] and that [***]. For the avoidance of doubt, a Biologic is not a Drug. Representative and non-limiting examples of Drugs include [***]

1.19 “ Drug-Loaded Product ” shall mean, in a product with the Ingredients, the inclusion of at least one Drug.

1.20 “ FDA ” shall mean the United States Food and Drug Administration, or any successor entity thereto performing similar functions.

1.21 “ Field ” shall mean human therapeutic use for any and all tissue sealing, adhesive, glue, Hemostat or adhesion prevention barrier indications but shall specifically exclude any use: (i) [***]; (ii) [***]

 

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[***]; (iii) [***]; (iv) [***]; (v) [***]; or (vi) [***]

1.22 “ Hemostat ” shall mean a product whose primary purpose is to stop bleeding, including but not limited to, through an activation of the coagulation cascade.

1.23 “ Improvement ” shall mean any enhancement, upgrade, addition or modification to the Ingredients, or the Products, that is designed (i) for the primary purpose of [***] of the Ingredients or Products, or (ii) for the primary purpose of [***] of the Ingredients or Products. The foregoing definition shall apply to any enhancement, upgrade, addition or modification, whether patented, patentable or not, conceived or first reduced to practice prior to and during the term of this Distribution and License Agreement and any and all intellectual property rights therein and thereto. If any such enhancement, upgrade, addition or modification is developed to achieve a [***] then such enhancement, upgrade, addition or modification shall not result in an Improvement. The Parties hereby agree that the addition or incorporation of (x) [***] to or with the Ingredients to [***] or (y) [***] to or with the Ingredients, shall result in an Improvement. The Parties further agree that a Drug-Loaded Product is not an Improvement.

1.24 “ Patents ” shall mean all existing patents and patent applications and all patent applications hereafter filed, including any continuations, continuations-in-part, divisions, provisionals or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental patent certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing.

 

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1.25 “ Product ” shall mean a product comprising one or more Ingredients alone or in combination with other materials or substances, including, without limitation, one or more Biologics, but excluding all Drug(s).

1.26 “ Regulatory Approval ” shall mean all authorizations by the appropriate governmental entity or entities necessary for commercial sale of a Product in a country in the Territory including, without limitation and where applicable, approval of labeling, price (including National Health Insurance price for Japan), reimbursement and manufacturing.

1.27 “ Regulatory Authority ” shall mean, with respect to any particular country, territory or union, the governmental authority, body, commission, agency or other instrumentality of such country, territory or union with the primary responsibility for the evaluation or approval of medical products before such medical product can be tested, marketed, promoted, distributed or sold in such country, including such governmental bodies that have jurisdiction over the pricing of such medical product. The term “Regulatory Authority” includes, but is not limited to the FDA, the European Agency for the Evaluation of Medicinal Products (EMEA), European Member State Competent Authorities and the Ministry of Health, Labour and Welfare (MHLW).

1.30 “ Territory ” shall mean all countries of the world.

1.31 “ Third Party ” shall mean any person or entity other than AAC, Baxter or their respective Affiliates.

Article 2

Grant of Rights

2.1 Distribution, Sales and Marketing Rights License Grant. Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates, and Baxter, on behalf of itself and its Affiliates, hereby accepts:

(a) a sole and exclusive (even as to AAC and its Affiliates) fully-paid up, perpetual, royalty-free license, with right to sublicense in accordance with Section 2.2, under the AAC Patents to use, have used, market, have marketed, distribute, have distributed, make, have made, sell, have sold, offer for sale, export and import Ingredients, Devices, Products and/or Accessories in the Field in the Territory;

(b) a fully-paid up, perpetual, irrevocable, royalty-free, non-exclusive license, with right to sublicense in accordance with Section 2.2, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, make, have made, sell, have sold, offer for sale,

 

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export and import Ingredients, Devices, Products and/or Accessories in the Field in the Territory. Upon any termination of this Distribution and License Agreement, AAC hereby agrees not to sue, seek an injunction or initiate other legal action against Baxter for the practice of AAC Know-How transferred under this Section 2.1(a) that is only incidental to the use, marketing, distribution, sale, export or import of products and devices for use as a tissue sealant, adhesive or glue by Baxter and its Affiliates; and

(c) a sole and exclusive (even as to AAC and its Affiliates) fully paid-up, perpetual, irrevocable, royalty-free license, with right to sublicense in accordance with Section 2.2, under the AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, make, have made, sell, have sold, offer for sale, export and import products of any and all types in the Territory.

2.2 Sublicense; Subdistribution, Agent, Co Promotion Agreements. Baxter and its Affiliates shall have the right to grant one or more sublicenses under the rights granted to Baxter and its Affiliates hereunder. Baxter shall further have the right to appoint one or more subdistributors, agents or co-promoters, in connection with the performance of Baxter’s distribution, sales and marketing obligations under this Distribution and License Agreement.

2.3 Ownership of Intellectual Property; Retention of Certain Rights . AAC retains all rights to all AAC Know-How and AAC Patents, to the extent such rights are not explicitly granted to Baxter under Section 2.1 above. The Parties acknowledge that AAC retains the right to make, have made, use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import Ingredients, Product(s), Device(s) and Accessory(ies) for all purposes other than those granted to Baxter hereunder, including (without limitation) the right to exploit the Ingredients and the Product(s) as a component of Drug-Loaded Products.

Article 3

AAC’s Right to Purchase Ingredients and Products

3.1 AAC’s Right to Purchase Ingredients and Products . During the term of this Agreement, Baxter shall supply and sell to AAC raw Ingredients at [***]; formulated Ingredients at [***]; and finished Products at [***] provided that AAC shall use such raw Ingredients, formulated Ingredients and finished Products solely for AAC’s research, development and/or clinical trial purposes, and shall not resell such supplied Products into the surgical/ hospital environment in any geographical market or transfer such raw Ingredients, formulated Ingredients and/or Products to a

 

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Third Party except in connection with performing research, development and/or clinical trial activities for or in cooperation with AAC. AAC shall indemnify Baxter for any Third-Party claims that may arise from AAC’s use or exploitation of the supplied Ingredients and Products. AAC shall communicate its supply needs in connection with this Section 3.1 at least (a) sixty (60) days in advance of the requested delivery date for orders of raw Ingredients, formulated Ingredients and/or Products of less than or equal to [***], [***], or [***], respectively, in a given calendar quarter and Baxter shall use commercially reasonable, good faith efforts to meet AAC’s supply needs in such amounts each calendar quarter; (b) at least ninety (90) days in advance for orders greater than the amounts set forth in subsection (a) but less than or equal to [***], [***], or [***], respectively, in a given calendar quarter and Baxter shall use commercially reasonable, good faith efforts to meet AAC’s supply needs; and (c) at least ninety (90) days in advance of the requested deliver date for orders greater than the maximum amounts set forth in subsection (b) in a given calendar quarter, in which case Baxter shall, in its sole judgment, determine whether it is able and/or willing to provide such additional quantities of raw Ingredients, formulated Ingredients and/or Products and, if so, the Parties can discuss an appropriate lead time and delivery date for such increased quantity of raw Ingredients, formulated Ingredients or finished Products (as applicable).

Article 4

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Article 5

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Article 6

Clinical and Regulatory Rights and Obligations

6.1 Regulatory Approvals.

(a) Regulatory Activities by Baxter. Baxter shall use its Commercially Reasonable Efforts to conduct any regulatory activities, as it deems necessary in its sole judgment.

(b) Future Indications. At the reasonable request of Baxter, AAC shall cooperate in Baxter’s efforts to obtain Regulatory Approval for any future indications for the Ingredients, Devices, Accessories and/or Products in the Field in the Territory. Baxter shall prepare and approve all clinical plans and clinical protocols and shall conduct all clinical trials. Baxter shall be responsible for preparing and filing all regulatory documents.

 

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(c) Regulatory Approvals. Baxter shall own and control, and shall be responsible for maintaining, all Regulatory Approvals related to the Ingredients, Devices, Products and Accessories in the Field in the Territory.

6.2 Clinical and Regulatory Information. AAC shall own all data, information and other documentation that AAC (or its Affiliates) generates or derives. Baxter shall own all data, information and other documentation that Baxter (or its Affiliates) generates or derives in the course of its performance under this Distribution and License Agreement. Upon written request, each Party will be entitled to (i) receive, keep and use for regulatory purposes all trial protocols, registration applications, and other substantive regulatory documents including, but not limited to, all toxicological and clinical data that have been validated in accordance with standard operating procedures of each Party for quality assurance and quality control, and (ii) access and reference all regulatory dossiers and filings produced by the other Party and its Affiliates pertaining to the Accessory(ies) (if applicable) or the Ingredients or Products. All of the foregoing regulatory documents shall be forwarded to the requesting Party by the disclosing Party no less than thirty (30) days after such written request by the requesting Party. Such documents and information to be provided by AAC and Baxter shall be limited to those documents that are both reasonably relevant to the Parties’ respective rights hereunder and were produced for the purpose of Regulatory Approval of Accessory(ies) (if applicable) and the Ingredients or Products, as required by applicable regulatory requirements, and the requesting Party shall reimburse the other party for reasonable costs and expenses of locating, duplicating and providing such documents and information. All summary clinical trial reports, Adverse Event reports and other safety data and information (as set forth in Section 6.3) shall be provided in English, and other documents requested by either Party, such as protocols and summary study reports, shall be provided to the requesting Party in the most recent form available at the time of the requesting Party’s request. Each Party shall comply in all material respects with the requirements of the applicable Regulatory Authority that relate to each Accessory(ies) (if applicable) and Ingredients or Products. When providing information pursuant to this Article 6, the providing Party shall certify such information to be truthful and accurate for purposes of regulatory submissions.

6.3 Complaints and Adverse Events . The Party responsible for all permits and licenses required by any Regulatory Authority with respect to a given Accessory(ies) (if Regulatory Authority permits or licenses are applicable) or a given Ingredient(s) or Product(s) under this

 

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Distribution and License Agreement, including any product licenses, applications and amendments in connection therewith, shall be responsible for evaluating and investigating complaints and for reporting all Adverse Events to Regulatory Authorities in the applicable Territory. If the responsible Party becomes aware of any Adverse Events, it shall evaluate, investigate and determine the necessity of reporting all information in its possession regarding such Adverse Event as soon as practicable, in order to fulfill regulatory reporting obligations within the time frames required by Regulatory Authorities and law; provided, however, that neither Party shall be required to communicate with customers of the other Party. The Parties will comply with all applicable reporting laws, rules and regulations governing Adverse Events. Baxter and AAC agree to supply all complaint information including, Adverse Event information, to the responsible Party within five (5) Business Days of learning of a complaint or Adverse Event; to cooperate with investigations and corrective actions; and to comply with all applicable reporting laws, rules and regulations governing Adverse Events. To the extent reasonably relevant to the other Party’s activities in connection with its rights hereunder, the responsible Party will provide the other Party with written notice upon filing an Adverse Event and copies of all related complaint information.

6.4 Compliance. The obligations of AAC and Baxter set forth in this Article 6 are intended to comply with the laws, rules and regulations of each country in the Territory in which the Ingredients, Devices, Products or Accessory(ies) are distributed or sold. The requirements of this Article 6 shall therefore be construed and interpreted to comply with all such laws, rules and regulations. To the extent provisions of this Article 6 do not adequately reflect any such law, rule or regulation, such provisions shall be revised to the extent reasonably necessary to make such provisions legal and valid in accordance with such laws, rules and regulations.

Article 7

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Article 8

Product Marking and Trademarks

8.1 Product Markings.

(a) Notice of License and Patents. Each Product and Accessory marketed and sold by Baxter or its Affiliates, subdistributors, agents or co-promoters under this Distribution and License Agreement shall be marked (to the extent not prohibited by law) with a notice that such Product or Accessory (as applicable) is sold by Baxter under a license from AAC.

 

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(b) AAC’s CoSeal and Adhibit Trademarks. Pursuant to Section 2.1(c), AAC has licensed the AAC Trademarks to Baxter. As soon as permitted under AAC’s and its Affiliates’ current and existing credit and indenture agreements, AAC will execute any and all documents necessary to assign the AAC Trademarks to Baxter and will cooperate with Baxter to effect the assignment of such trademarks. All costs for the prosecution and maintenance of the AAC Trademarks shall be borne by AAC until the AAC Trademarks are assigned to Baxter.

(c) Use of Baxter Name. Baxter may use and distribute the Ingredients, Devices, Products and Accessory(ies) utilizing the Baxter name and any Baxter Trademarks, including trademarks incorporating the term or designation Baxter. All use of the Baxter Trademarks, the Baxter name or trademarks incorporating the word “Baxter” shall inure solely to the benefit of Baxter, and no rights therein are granted hereunder to AAC.

Article 9

Fees and Payments

9.1 Distribution and License Execution Fee. Within five (5) Business Days following execution of this Distribution and License Agreement, Baxter shall pay to AAC or its designee a Distribution and License Agreement execution fee in the amount of Twenty-Five Million Dollars ($25,000,000) as follows: Two Hundred Thousand Dollars ($200,000) to Angiotech US or its designee and Twenty-Four Million Eight Hundred Thousand Dollars ($24,800,000) to Angiodevice or its designee. This amount is in addition to (a) the Eight Million Dollars ($8,000,000) previously paid by Baxter to AAC in April, 2003 in connection with the Original Distribution and License Agreement and (b) the Four Million Dollars ($4,000,000) paid in 2004 in connection with the transfer of manufacturing know-how and related FDA and EU regulatory approvals, the receipt of which is hereby acknowledged by AAC.

9.2 Currency. Unless otherwise agreed by the Parties in writing, all amounts paid by Baxter under this Distribution and License Agreement shall be paid to AAC in Dollars by wire transfer to a financial institution to be designated by AAC. Written or electronic notice of each such transaction shall be promptly provided to such financial employee or officer as is designated by AAC. Conversion of foreign currency to Dollars shall be made at the quarterly average conversion rate determined by adding the conversion rates existing in the United States (as reported in The Wall Street Journal) on the last working day of each month in the quarter and dividing by

 

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three (3). Subject to Section 9.4, such payments shall be without deduction of exchange, collection, wire transfer or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes.

9.3 Interest Due. In case of any delay in payment by Baxter to AAC or its designee not occasioned by Force Majeure (as set forth in Section 16.5), interest on the overdue payment shall accrue at an annual interest rate equal to the lesser of: (a) the prime rate as reported in the Money Rates set forth in The Wall Street Journal, plus three (3) percentage points, as determined for each month on the last Business Day of the previous month, or (b) the maximum amount permitted by law, in either instance assessed from the date that payment was initially due. The foregoing interest shall be due from Baxter without any special notice, and shall be in addition to any other remedies that AAC may have pursuant to this Distribution and License Agreement.

9.4 Taxes. The Parties agree that any taxes that either Party is required by law to withhold from amounts payable to the other Party under this Distribution and License Agreement (whether under this Article 9 or otherwise) shall be deducted by the paying Party from the amounts paid to the non-paying Party hereunder at the rate(s) required by applicable law, and shall be promptly paid to the appropriate governmental authority on behalf of the non-paying Party. The paying Party shall promptly provide to the non-paying Party receipts from the government or taxing authority evidencing payment of such taxes, if available, or other written proof of payment if official receipts are not available, and shall provide reasonable assistance to the non-paying Party to obtain tax credits therefor. If the non-paying Party qualifies for a reduction in, or exemption from, withholding taxes under an applicable tax treaty, the non-paying Party shall provide the paying Party on a timely basis with Form W-8BEN or such other documentation as may be required to support such reduction or exemption.

9.5 Reporting and Audit .

(a) Record Maintenance and Retention . Baxter and its Affiliates shall maintain complete and accurate books and records relating to the rights and obligations of the Parties under the Original Distribution and License Agreement, and to any amounts payable to AAC in relation to the Original Distribution and License Agreement, which books and records shall contain sufficient information to permit AAC to determine the accuracy of any reports delivered by Baxter to AAC. Baxter and its Affiliates shall retain such books and records for at least two (2) years following the reporting period to which they pertain.

 

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(b) Audit of Records . On or before December 31, 2009 and upon thirty (30) days prior written notice to Baxter, AAC, through its designated independent CPA firm, shall have the one-time right (at the expense of AAC) to audit such books and records for the period from January 1, 2007 through December 31, 2008during normal business hours for the sole purpose of verifying reports and payments made under the Original Distribution and License Agreement. Baxter and its Affiliates shall provide the independent CPA firm with any requested information as is necessary to conduct such audit. Within thirty (30) days from the date that AAC receives a final written report of the audit conducted by the independent CPA firm, but in no event later than the date upon which AAC requests remittance of any underpayment under Section 9.5(c), AAC shall provide to Baxter a copy of such report.

(c) Effects of Underpayment . If the independent CPA firm makes a determination of underpayment by Baxter, Baxter shall remit to AAC, within thirty (30) days of receiving notice from AAC, any underreported percentage of Net Sales (as defined in the Original Distribution and License Agreement) amounts or other amounts due to AAC, together with interest from the original due date for payment, as provided in Section 9.3. If Baxter contests such determination of underpayment, it may withhold only the disputed portion of the underreported percentage of Net Sales amount due to AAC. Additionally, if an audit under this Section 9.5 has revealed an uncontested underreporting or underpayment in excess of five percent (5%) of the total amount due to AAC pursuant to Section 9.4 of the Original Distribution and License Agreement for the calendar year under audit, then Baxter shall pay to AAC within such thirty (30) day period the cost of such audit attributable to the independent CPA firm. If a contested amount is ultimately determined to be due to AAC, Baxter shall pay to AAC such contested amount due to AAC, together with interest from the original due date of any such contested amount due to AAC, promptly following resolution of any such dispute. In addition, if such contested amount due to AAC combined with the uncontested amount due is an aggregate underpayment in excess of five percent (5%) of the total amount due to AAC under Section 9.4 of the Original Distribution and License Agreement for the calendar year under audit, Baxter shall bear the cost of such audit attributable to the independent CPA firm, plus interest from the date of Baxter’s receipt of an invoice from AAC setting forth the cost of the audit.

(d) Effects of Overpayment . If the independent CPA firm makes a determination of overpayment by Baxter, AAC shall remit to Baxter any overpaid amounts, within thirty (30) days of receiving written notice from Baxter of such overpayment. In such instance, AAC shall not be required to pay interest to Baxter on any overpayment received by AAC from Baxter. If AAC contests such determination of overpayment, it may withhold only the disputed

 

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portion of the overpaid percentage of Net Sales amount owed to Baxter. If contested amounts are ultimately determined to be due to Baxter, AAC shall pay to Baxter such contested amounts due to Baxter, together with interest from the date which is thirty (30) days after AAC received such written notice from Baxter of such overpayment, promptly following resolution of any such dispute.

Article 10

Intellectual Property

10.1 Patentable Inventions and Know-How.

(a) Improvements and Inventions . Each party shall inform and keep the other party fully advised of any Improvements, including any inventions and know-how directly relating to such Improvements, during the term of this Distribution and License Agreement.

(b) Patent Prosecution. Subject to Section 10.1(e), Baxter shall assume control of the preparation, prosecution and maintenance of the AAC Patents. Baxter will consult with AAC and will keep AAC informed of all matters relating to the preparation, filing, prosecution and maintenance of all AAC Patents relating to the subject matter of this Distribution and License Agreement, and shall reasonably consider AAC’s comments with respect to such activities. Baxter and AAC [***]; provided however, in the event that an AAC Patent benefits only one Party, that Party shall be responsible for all costs related to such AAC Patent. Baxter shall bill AAC for its share of costs at reasonable intervals. AAC shall pay any invoices within thirty (30) days of receipt. Costs exclude internal costs of a Party.

(i) All Patent applications that are solely invented by AAC shall be filed in the name of AAC or its Affiliates, and shall be owned by AAC or its Affiliates. All Patent applications that are solely invented by Baxter shall be filed in the name of Baxter or its Affiliates, and shall be owned by Baxter or its Affiliates.

(ii) Baxter shall endeavor in good faith to coordinate its efforts with those of AAC.

(iii) To the extent practicable, Baxter shall provide AAC with a copy of any AAC Patent application prior to filing the first of such application in any jurisdiction, for review and comment by AAC or its designees.

 

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(iv) Baxter shall provide AAC copies of all material correspondence with the relevant patent office(s).

(c) Additional Obligations Related to Patents. AAC will not seek to invalidate the Baxter Patents through any judicial or administrative proceeding. Baxter will not seek to invalidate the AAC Patents through any judicial or administrative proceeding.

(d) Discontinuance. If either Party, in its sole discretion, does not intend to file for Patent protection for an AAC Improvement hereunder, or if either Party does not wish to continue preparation, prosecution, or maintenance of any AAC Patent, then such Party shall give at least sixty (60) days advance written notice (and in no event less than a reasonable period of time for the other Party to act in its stead) to the other Party of any decision to cease preparation, filing, prosecution and maintenance of that Patent in any jurisdiction (an “AAC Discontinued Patent”). In such case, the other Party may elect at its sole discretion to continue preparation, filing, prosecution and/or maintenance of the AAC Discontinued Patent at its sole expense. Discontinuance may be elected by a Party on a country-by-country basis, and on an individual Patent or a Patent family basis. If the other Party elects to continue preparation, filing, prosecution and/or maintenance of such AAC Discontinued Patent, then such Party shall have ownership of such AAC Discontinued Patent, and Baxter shall continue to have those rights to practice such AAC Discontinued Patent as are granted under this Distribution and License Agreement.

(e) Discontinuance by Baxter . In addition to Baxter’s rights of discontinuance pursuant to Section 10.1(d), under no circumstances will Baxter be required to prepare, prosecute or maintain claims or Patents for inventions for which it does not have license rights.

10.2 Infringement Claims by Third Parties.

(a) Third Party Claims. If the use or sale of an Ingredient, Product, Device, or Accessory in the Field under the AAC Patents or AAC Know-How results in a claim or a threatened claim by a Third Party against a Party hereto for patent or trademark infringement, or for inducing or contributing to patent or trademark infringement, in any part of the Territory (“Infringement Claim”), the Party first having notice of an Infringement Claim shall promptly notify the other Party in writing. The notice shall set forth the facts of the Infringement Claim in reasonable detail. Baxter shall have the right to control such litigation including the right to retain independent counsel, direct the defense, and settle all claims; however, AAC shall cooperate in its respective defense to the extent allowed by law, and shall notify Baxter as to the particulars of any agreement settling an Infringement Claim. Unless otherwise agreed in writing, Baxter will be responsible for any costs of litigating an Infringement Claim under this Agreement, including all damages, fees and expenses, including reasonable attorneys’ fees and expenses.

 

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10.3 Infringement Claims Against Third Parties. Each Party shall promptly inform the other Party of any suspected infringement that may arise in connection with this Distribution and License Agreement in any part of the Territory of any AAC Patent(s) or Baxter Patent(s) by a Third Party. Baxter shall have the right (either solely or jointly with AAC, as described below) to institute an action for infringement in the Field in the Territory (“Third Party Infringement Suit”) against such Third Party.

(a) Baxter, in its sole judgment, may propose to AAC to file a Third Party Infringement Suit jointly. To the extent permitted by law, if AAC and Baxter agree to institute a Third Party Infringement Suit jointly, such suit shall be brought in the names of both AAC and Baxter, the out-of-pocket costs thereof shall be borne [***], and any recovery settlement shall be shared [***] to AAC and [***] to Baxter. AAC and Baxter shall work together to manage such litigation, with Baxter having primary responsibility for controlling such suits. AAC may, if it so desires, be represented by separate counsel of its own selection, and the fees for such counsel shall be paid by AAC.

(b) In the absence of an agreement between AAC and Baxter to institute a Third Party Infringement Suit jointly, Baxter shall have the right, but not the obligation, to institute such suit, and at its option, permit AAC to join as a party plaintiff; provided that Baxter shall bear the entire cost of such litigation, including attorneys’ fees, and shall be entitled to retain the entire amount of recovery or settlement.

(c) To the extent permitted by law, should Baxter commence a Third Party Infringement Suit under the provisions