Distribution and License Agreement

Exhibit 10.5

 

 

THE SYMBOL ‘***’ IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AS CONFIDENTIAL.

 

 

 

 

Confidential

 

 

Distribution and License Agreement

 

 

 

by and among

 

Angiotech Pharmaceuticals, Inc.

 

Angiotech International GmbH

 

Cohesion Technologies, Inc.

 

and

 

Baxter Healthcare Corporation

 

Baxter Healthcare, S. A.

 

 

 

 

 

 

 

 

 

 

 

 

Distribution and License Agreement

 

This Distribution and License Agreement (“Distribution and License Agreement”), dated as of April 1, 2003 (“Effective Date”), is entered into by and among:

 

Angiotech Pharmaceuticals, Inc. (“Angiotech”), a British Columbia corporation with principal offices at 1618 Station Street, Vancouver, British Columbia, Canada V6A 1B6;

 

Angiotech International GmbH ("Angiotech International"), which is organized and existing under the laws of Switzerland, and is a wholly-owned subsidiary (and an "Affiliate" as defined herein) of Angiotech;

 

Cohesion Technologies, Inc. (“Cohesion”), a Delaware corporation with principal offices at 2500 Faber Place, Palo Alto, California 94303, and a wholly-owned subsidiary (and an "Affiliate" as defined herein) of Angiotech (Angiotech, Angiotech International and Cohesion 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 has acquired Cohesion which Controls (defined below) certain biosurgical products, and particularly the CoSeal Sealant Unit, CoSeal Adhesion Prevention Unit (each as defined below) and their components, as well as certain CoSeal Accessory(ies);

 

WHEREAS, Angiotech and/or its subsidiaries, Cohesion and Angiotech International, have the right to grant certain rights and options pertaining to the CoSeal Sealant Unit and the CoSeal Adhesion Prevention Unit, components thereof, certain CoSeal Accessory(ies) and related information in the Territory, as set forth herein;

 

WHEREAS, Baxter has substantial expertise in distributing and commercializing medical products and devices worldwide, and wishes to obtain exclusive rights to exploit the CoSeal Sealant Unit in the Sealant Territory; exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory; exclusive rights to exploit certain CoSeal Accessory(ies) in the Territory for use with CoSeal Unit(s); and an option to obtain (a) exclusive rights to exploit the CoSeal Sealant Unit in Japan, and (b) exclusive rights to exploit the CoSeal Adhesion Prevention Unit in the United States; and

 

WHEREAS, AAC wishes to convey such exclusive rights and options to Baxter;

 

 

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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

Any capitalized terms not defined in this Distribution and License Agreement shall have the meaning given such term(s) in the Manufacturing Agreement.  Any references in this Distribution and License Agreement to “Sections” shall refer to Sections of this Distribution and License Agreement, unless specified to be referring to Sections of the Manufacturing Agreement.  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” shall mean, collectively, Angiotech, Angiotech International and Cohesion.

 

1.2

“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 use, sale or distribution of CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units, and shall expressly include AAC’s or its Affiliates’ communications with any Regulatory Authority regarding CoSeal Units 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.

 

1.3

“AAC Patents” shall mean (a) 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 CoSeal Units or components thereof or one or more CoSeal Accessories, or (ii) that cover processes directed to using one or more CoSeal Units or components thereof or one or more CoSeal Accessories, and (b) all Patent applications filed and Patents obtained for Improvements Controlled by AAC or its Affiliates directly relating to the CoSeal Sealant Unit, the CoSeal Adhesion Prevention Unit, any component of a CoSeal Unit, or any CoSeal Accessory 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, but excluding Joint Patents.  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 covering one or more CoSeal Units or components thereof or one or more CoSeal 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

 

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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.

 

1.4

“AAC Trademarks” shall mean the trademarks Controlled by AAC or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement that are used, or are intended to be used, in conjunction with distribution, promotion, marketing, sales, offers to sell, import, export or other exploitation of a CoSeal Unit(s) or CoSeal Accessory(ies).  The AAC Trademarks are identified in Schedule 1.4, as it may be amended by the Parties from time to time.

 

1.5

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

 

1.6

“Adhesion Prevention Territory” shall mean all countries of the world except the United States, prior to Baxter's exercise of the CoSeal Adhesion Prevention Option.  Upon Baxter's exercise of the CoSeal Adhesion Prevention Option, this term shall mean the world.

 

1.7

“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 marketed CoSeal Units and/or CoSeal 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 CoSeal Unit, such CoSeal Accessory or a similar CoSeal Unit or CoSeal 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 1.7, any report pertaining to a component of a CoSeal Unit shall be incorporated into a report on the corresponding CoSeal Unit(s).

 

1.8

“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 1.8, 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.

 

1.9

“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 CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units or components thereof, and shall expressly include Baxter’s or its Affiliates’ communications with any Regulatory Authority regarding CoSeal Accessories or CoSeal Units; provided, however, that such communications shall continue to be accorded the

 

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status of Confidential Information of Baxter during the term of this Distribution and License Agreement.

 

1.10

“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, but excluding Joint Patents.

 

1.11

“Baxter Trademarks” shall mean the trademarks Controlled by Baxter or its Affiliates as of the Effective Date and during the term of this Distribution and License Agreement that are used, or are intended to be used, in conjunction with distribution, promotion, marketing, sales, offers to sell, import, export or other exploitation of a CoSeal Unit(s) or CoSeal Accessory(ies), excluding any trademarks or service marks (a) containing the word “Baxter” or (b) which are not used solely on CoSeal Units or CoSeal Accessories.

 

1.12

“Business Day” shall mean any day on which banking institutions in both Palo Alto, California, and Chicago, Illinois, are open for business.

 

1.13

“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.

 

1.14

“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.

 

1.15

“CoSeal Accessory” shall mean any accessory item set forth in Schedule 1.15 that is sold for use with a CoSeal Unit.

 

1.16

“CoSeal Adhesion Prevention Device” shall mean a mechanical delivery device that is used in the application of the CoSeal Adhesion Prevention Product, when sold as a component of a CoSeal Adhesion Prevention Unit.

 

1.17

“CoSeal Adhesion Prevention Option” shall mean the option granted by AAC to Baxter to obtain certain exclusive rights pertaining to the CoSeal Adhesion Prevention Unit in the United States, as described in Section 2.2(b).

 

 

 

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1.18

“CoSeal Adhesion Prevention Product” shall mean a product containing the CoSeal Ingredients that (a) is the subject matter of a Regulatory Filing for use as an adhesion prevention barrier, (b) is approved by one or more Regulatory Authorities for use as an adhesion prevention barrier, or (c) is in development or sold for use as an adhesion prevention barrier.  The CoSeal Adhesion Prevention Product shall expressly include any Improvement(s) to the CoSeal Adhesion Prevention Product, but shall expressly exclude the CoSeal Sealant Product and any Drug-Loaded Product(s).

 

1.19

“CoSeal Adhesion Prevention Unit” shall mean a CoSeal Adhesion Prevention Product sold in combination with a CoSeal Adhesion Prevention Device.

 

1.20

“CoSeal Device(s)” shall mean, collectively, as the context requires, both or either of the CoSeal Adhesion Prevention Device(s) and/or the CoSeal Sealant Device(s).

 

1.21

“CoSeal Ingredients” shall mean the [***] ingredients, designated [***] and [***], as set forth in further detail in Schedule 1.21, including any Improvements thereto.  For purposes of this Distribution and License Agreement, Improvements to the CoSeal Ingredients are anticipated to include modifications of the [***] ingredients [***] or [***] in which: (a) [***] (b) [***] (c) [***] or (d) [***]

 

1.22

“CoSeal Sealant Device” shall mean a mechanical delivery device that is used in the application of the CoSeal Sealant Product, when sold as a component of a CoSeal Sealant Unit.

 

1.23

“CoSeal Sealant Option” shall mean the option granted by AAC to Baxter to obtain certain exclusive rights pertaining to the CoSeal Sealant Unit in Japan, as described in Section 2.1(c).

 

1.24

“CoSeal Sealant Product” shall mean a product containing the CoSeal Ingredients that (a) is the subject matter of a Regulatory Filing for use as a tissue sealant, adhesive or glue, (b) has been or is approved by one or more Regulatory Authorities for use as a tissue sealant, adhesive or glue, or (c) that is in development or sold for use as a tissue sealant, adhesive or glue.  The CoSeal Sealant Product shall expressly include both the formulation marketed as of the Effective Date and the “premix” formulation of the CoSeal Sealant Product, and any Improvement(s) to the CoSeal Sealant Product, but shall expressly exclude the CoSeal Adhesion Prevention Product(s) and any Drug-Loaded Product(s).

 

1.25

“CoSeal Sealant Unit” shall mean a CoSeal Sealant Product sold in combination with a CoSeal Sealant Device.

 

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1.26

“CoSeal Unit” shall mean, collectively, as the context requires, both or either of the CoSeal Sealant Unit and/or the CoSeal Adhesion Prevention Unit.

 

1.27

“Distribution and License Agreement” shall mean this 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.

 

1.28

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

 

1.29

“Drug-Loaded Product” shall mean, in a product with the CoSeal Ingredients, the inclusion of at least one ingredient for the primary purpose of [***]  For example, but not by way of limitation, the addition to CoSeal Ingredients of [***] shall not result in a Drug-Loaded Product.  As a further example, but not by way of limitation, the addition to CoSeal Ingredients of (a) [***] and (b) [***] shall result in a Drug-Loaded Product.  The Parties agree that the addition to CoSeal Ingredients of [***] shall result in a Drug-Loaded Product, except as set forth in Section 1.33.  Notwithstanding any provision to the contrary herein, any Drug-Loaded CoSeal Adhesion Prevention Product may be marketed or sold for use as an adhesion prevention barrier.

 

1.30

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

 

1.31

“Field” shall mean human therapeutic use for any and all tissue sealing, adhesive, glue or adhesion prevention barrier indications but shall specifically exclude any use: (i) [***]; (ii) [***]; (iii) [***]; (iv) [***]; or (v) [***].  In the event that Baxter does not exercise the Adhesion Prevention Option or Baxter’s rights to distribute, market and sale the CoSeal Adhesion Prevention Product are terminated, "Field" shall mean [***]

 

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1.32

“Hemostat” shall mean a product whose primary purpose is to stop bleeding through an activation of the coagulation cascade, and shall expressly include the CoStasis Surgical Hemostat product.

 

1.33

“Improvement” shall mean any enhancement, upgrade, addition or modification to: (a) the CoSeal Ingredients or the Product(s) that is designed (i) for the primary purpose of [***] in the CoSeal Sealant Product or CoSeal Sealant Unit, or (ii) for the primary purpose of [***] in the CoSeal Adhesion Prevention Product or CoSeal Adhesion Prevention Unit; or (b) the CoSeal Devices that is designed for the primary purpose of [***].  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 [***], or a [***], then such enhancement, upgrade, addition or modification shall not result in an Improvement.  In addition to the foregoing, if Baxter’s right to exercise the CoSeal Adhesion Prevention Option expires or is terminated, Baxter shall have no further right to make Improvements to the CoSeal Adhesion Prevention Product or CoSeal Adhesion Prevention Unit.  The Parties hereby agree that the addition or incorporation of (x) [***] to or with the CoSeal Ingredients, or (y) [***], shall result in an Improvement.  The Parties further agree that a Drug-Loaded Product is not an Improvement.

 

1.34

“Joint Patents” shall mean Patent applications filed and Patents obtained for Improvements and inventions directly relating to the CoSeal Ingredients, Product(s), CoSeal Devices, CoSeal Accessories or CoSeal Units that are jointly discovered, conceived and/or reduced to practice by Baxter (or its Affiliates) and AAC (or its Affiliates) during the term of this Distribution and License Agreement.

 

1.35

“Manufacturing Agreement” shall mean the Manufacturing and Supply Agreement by and among the Parties, dated as of the same date as this Distribution and License Agreement.

 

1.36

“Milestone” shall mean the occurrence of a particular event, as defined in this Distribution and License Agreement, that will impose one or more obligations on a Party to this Distribution and License Agreement.

 

1.37

“Net Sales” shall mean the actual amounts invoiced by Baxter (or, if not invoiced, actual amounts paid to Baxter) that are attributable to sales of CoSeal Unit(s) and AAC Patented Accessory(ies) to a non-Affiliate Third Party by Baxter (or an Affiliate of Baxter), less (whether or

 

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not such costs are invoiced separately) the sum of the following items (to the extent such items have not been previously accounted for in the invoiced amount or paid amount):

 

(a)

amounts refunded or credits actually given to purchasers for CoSeal Units and AAC Patented Accessories which were rejected, spoiled, damaged or returned and not replaced;

 

(b)

unless separately charged to the purchaser, freight, shipment and insurance costs incurred in transporting CoSeal Units and AAC Patented Accessories to the purchaser;

 

(c)

quantity, trade and cash discounts, rebates (including pursuant to governmental regulation), charge-backs, retroactive price reductions, credits or allowances actually allowed or taken;

 

(d)

taxes, tariffs, customs duties and surcharges and other governmental charges incurred in connection with the sale, exportation, or importation of the CoSeal Units and AAC Patented Accessories; and

 

(e)

applicable fees paid to group purchasing organizations.

 

The transfer of a CoSeal Unit or AAC Patented Accessory by Baxter (or an Affiliate of Baxter) to an Affiliate of Baxter (or by an Affiliate of Baxter to Baxter) shall not be considered a sale for the purpose of this Section 1.37.

 

1.38

“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.

 

1.39

“Post-Licensure Marketing Study” shall mean human clinical trials of a CoSeal Unit conducted or continued after Regulatory Approval has been achieved (such trials may be designed to provide information that will optimize or expand use of the CoSeal Unit and provide additional safety and effectiveness data for a specific procedure for which the CoSeal Unit is currently indicated for use).

 

1.40

“Product(s)” shall mean, collectively, as the context requires, both or either of the CoSeal Sealant Product and/or the CoSeal Adhesion Prevention Product.

 

1.41

“Regulatory Approval” shall mean all authorizations by the appropriate governmental entity or entities necessary for commercial sale of a CoSeal Unit 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.

 

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1.42

“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).

 

1.43

“Regulatory Filing” shall mean all activities relating to the filing for and procurement of Regulatory Approval for the marketing and sale of a CoSeal Unit from the relevant Regulatory Authorities.

 

1.44

“Sealant Territory” shall mean all countries of the world except Japan, prior to Baxter's exercise of the CoSeal Sealant Option or AAC's grant to Baxter of the rights thereunder in accordance with Section 9.2(b).  Upon Baxter’s exercise of the CoSeal Sealant Option or AAC's grant to Baxter of rights to the CoSeal Sealant Unit in Japan, this term shall mean the world.

 

1.45

“Territory” shall mean, collectively, as the context requires, both or either of the Sealant Territory and/or the Adhesion Prevention Territory.

 

1.46

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

 

1.47

“Third Party Rights” shall have the meaning ascribed to it in Section 2.1(b).

 

Article 2
Grant of Rights

2.1

CoSeal Sealant Unit(s) Exclusive Distribution, Sales and Marketing Rights .  

(a)

License Grants .

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:

 

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in the Sealant Territory; and

 

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in the Sealant Territory during the term of this Distribution and License Agreement.  Upon expiration or

 

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termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.1(a)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.1(a) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.1(a).  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.

 

(b)

Third Party Rights .  Notwithstanding the foregoing, the Parties acknowledge that the Third Parties set forth in Schedule 2.1(b) have certain distribution and other rights in the Field regarding the CoSeal Sealant Unit or the CoSeal Sealant Product in portions of the Sealant Territory and Japan as of the Effective Date, as described in Schedule 2.1(b) (“Third Party Rights”).  The parties acknowledge that these Third Party Rights do not include research use only rights and limited non-commercial rights granted to Third Parties pursuant to material transfer agreements or feasibility study agreements.  To the extent permitted under such Third Party Rights, and without breaching any agreements governing such Third Party Rights, AAC shall use its Commercially Reasonable Efforts to exercise its termination rights under such Third Party Rights; provided that such Third Party Rights shall be terminated no later than seven (7) months after the Effective Date.  Baxter recognizes and agrees that AAC may need to conduct a “winding down” process with respect to such terminated Third Party Rights, which may include (for instance) the right to sell inventory on hand and the like; provided, however, that such “winding down” process shall be completed not later than twelve (12) months after the Effective Date.  In the event that such Third Party Rights are terminated, AAC shall promptly transfer the corresponding rights to Baxter. The Parties shall determine procedures and activities to be undertaken by the Parties to ensure a transition of such CoSeal Sealant Unit distribution, sales and marketing rights to Baxter with minimal detrimental effect to the supply of CoSeal Sealant Unit(s) in the market place.  If such Third Party Rights cannot be terminated as set forth herein, then Baxter, at its option, may require AAC to assign all rights and benefits under such Third Party Rights to Baxter; provided, however, that Baxter will not assume, and AAC will retain, all duties and obligations owing under such Third Party Rights.

 

(c)

CoSeal Sealant Option .  Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates an option (the “CoSeal Sealant Option") to obtain for Baxter and its Affiliates:

 

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in Japan; and

 

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(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Sealant Units in Japan.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.1(c)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.1(c) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.1(c).  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(c) 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.

 

This CoSeal Sealant Option must be exercised by Baxter in writing within [***] following the last to occur of: (A) Baxter's receipt of written notice from AAC of [***] for the [***], or (B) the completed transfer [***] of [***] for the [***] that has been [***]

 

In the event that Baxter exercises its CoSeal Sealant Option pursuant to this Section 2.1(c), and upon delivery of the Japan Payment set forth in Section 9.2(b), the rights set forth in Section 2.1(c)(i) and (ii) shall automatically transfer to Baxter without necessity of further action by the Parties.

 

2.2

CoSeal Adhesion Prevention Unit(s) Exclusive Distribution, Sales and Marketing Rights .

(a)

Adhesion Prevention Territory .  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:

 

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the Adhesion Prevention Territory; and

 

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the Adhesion Prevention Territory during the term of this Distribution and License Agreement.  

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Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.2(a)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.2(a) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.2(a).  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 2.2(a) that is only incidental to the use, marketing, distribution, sale, export or import of products and devices for use as an adhesion prevention barrier by Baxter and its Affiliates.

 

In the event that Baxter declines to exercise the CoSeal Adhesion Prevention Option set forth in Section 2.2(b) below, then Baxter’s rights granted under this Section 2.2(a) shall terminate upon the earlier of: (A) Baxter’s written notice to AAC that it declines to exercise its CoSeal Adhesion Prevention Option, or (B) upon expiration of the CoSeal Adhesion Prevention Option exercise period set forth in Section 2.2(b).  Notwithstanding such termination, Baxter shall have the right to wind-up and sell-off any inventory of CoSeal Adhesion Prevention Units in accordance with Section 14.8.

 

(b)

CoSeal Adhesion Prevention Option .  Subject to the terms and conditions of this Distribution and License Agreement, AAC hereby grants to Baxter and its Affiliates an option (the “CoSeal Adhesion Prevention Option”) to obtain for Baxter and its Affiliates:

 

(i)

a sole and exclusive (even as to AAC and its Affiliates) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the United States; and

 

(ii)

a non-exclusive license, with right to sublicense in accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Adhesion Prevention Units in the United States.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.2(b)(ii) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.2(b) during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.2(b).  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 2.2(b) that is only incidental to the use, marketing,

 

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distribution, sale, export or import of products and devices for use as an adhesion prevention barrier by Baxter and its Affiliates.

 

This CoSeal Adhesion Prevention Option must be exercised in writing within [***] after the date that Baxter receives from AAC, in accordance with Section [***]  At Baxter’s request during this [***] period, AAC shall provide to Baxter appropriate AAC research program data and results that are directly related to AAC’s Drug-Loaded Product program for adhesion prevention barrier indications and that are in AAC’s possession at the time of such request.  This [***] period may be extended by mutual written agreement of the Parties.  In any event, Baxter must exercise the CoSeal Adhesion Prevention Option no later than [***].  If Baxter declines to exercise the CoSeal Adhesion Prevention Option, or if the [***] period expires without Baxter’s notice of exercise, all rights granted to Baxter with respect to the CoSeal Adhesion Prevention Unit(s) in the Adhesion Prevention Territory shall immediately terminate and revert to AAC without necessity of notice.

 

In the event that Baxter exercises its CoSeal Adhesion Prevention Option pursuant to this Section 2.2(b), and upon delivery of the option exercise payment set forth in Section 9.2(a), the rights set forth in Section 2.2(b)(i) and (ii) shall automatically transfer to Baxter without necessity of further action by the Parties.

 

2.3

CoSeal Accessories Exclusive Rights .

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) license, with right to sublicense in accordance with Section 2.4, under AAC Patents and AAC Trademarks to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import CoSeal Accessories in the Field in the Territory; and

 

(b)

a non-exclusive license, with right to sublicense accordance with Section 2.4, under AAC Know-How to use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import the CoSeal Accessory(ies) in the Field in the Territory.  Upon expiration or termination after the third anniversary of the Effective Date of this Distribution and License Agreement, the license granted in this Section 2.3(b) shall be deemed paid in full and irrevocable with regard to all AAC Know-How transferred to Baxter under this Section 2.3 during the term of this Distribution and License Agreement.  However, in the event that this Distribution and License Agreement is terminated before the third anniversary of the Effective Date, or is terminated by AAC pursuant to Section 5.5, 14.2 or 14.3, then Baxter shall have a fully paid and irrevocable license to all AAC Know-How (except AAC Know-How relating to Improvements or Proposals, as defined in Section 7.1(f)) transferred to Baxter under this Section 2.3.  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

 

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Know-How transferred under this Section 2.3 that is only incidental to the use, marketing, distribution, sale, export or import of products and devices in the Field by Baxter and its Affiliates.

 

Within twenty (20) Business Days after the Effective Date, AAC shall deliver to Baxter CoSeal Accessories in its possession that are not needed by AAC for its internal programs.  AAC shall invoice Baxter for such CoSeal Accessories as follows:  (i) [***] for the Air Enhanced Spray Accessory 5X (AES 500) and the Air Regulator System (ARS-530); and (ii) [***] for the CoSeal Extended Applicators 22 cm (FXP-060) and the CoSeal Replacement Applicators (FXP-069).  Thereafter, upon Baxter’s written request, AAC shall supply Baxter with a CoSeal Accessory(ies) under the same financial terms set forth above for a period of [***] from the Effective Date or until [***], whichever occurs later.  The Parties agree that Baxter shall have no obligation to pay to AAC a percentage of Net Sales on any CoSeal Accessory(ies) transferred to Baxter in accordance with the foregoing transfer prices.  If Baxter manufactures or obtains from a Third Party manufacturer [***] then Baxter shall pay to AAC a percentage of Net Sales of such AAC Patented Accessory(ies) as set forth in Section 9.4, and such Net Sales shall count toward Baxter’s Minimum Sales obligations.

 

 

Notwithstanding the foregoing, in the event that Baxter’s rights to distribute either one (but not both) of the CoSeal Units are terminated for any reason under this Distribution and License Agreement, then Baxter’s rights with respect to CoSeal Accessories under this Section 2.3 shall become non-exclusive and AAC and its Affiliates may use, have used, market, have marketed, distribute, have distributed, sell, have sold, offer for sale, export and import the CoSeal Accessories.

 

2.4

Sublicense; Subdistribution, Agent, Co Promotion Agreements .

(a)

Subject to Section 2.4(b), Baxter and its Affiliates shall have the right to grant a sublicense under the rights granted to Baxter and its Affiliates hereunder, or to appoint a subdistributor, agent or co-promoter, in connection with the performance of Baxter’s CoSeal Unit(s) distribution, sales and marketing obligations under this Distribution and License Agreement, upon fulfillment of the following conditions: (i) that Baxter shall not enter into any sublicense, subdistributor, agency or co-promotion agreement relating to distribution in the majority (as a percentage of Net Sales) of any of the following markets: United States, Australia, Canada, United Kingdom, Germany, France, Italy or Spain (“Major Markets”) without AAC’s prior written approval (which shall not be unreasonably withheld or delayed); (ii) that Baxter shall provide a copy of such agreement as set forth in condition (i) to AAC within ten (10) Business Days after execution; and (iii) that the execution and delivery by Baxter of any such agreement as set forth in condition (i) shall not in any way diminish, reduce or eliminate any of Baxter's obligations under this Distribution and License Agreement, and Baxter shall remain liable for such obligations.  Baxter shall obtain contractual undertakings from every such sublicensee, subdistributor, agent or co-promoter that will provide that the rights of such sublicensee, subdistributor, agent or co-promoter shall terminate upon termination of this Distribution and

 

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License Agreement.  Any sublicense granted by Baxter under this Section 2.4 with respect to AAC Know-How shall be limited solely to AAC Know-How that allows a subdistributor, agent or co-promoter to market, distribute or sell CoSeal Units and CoSeal Accessories, and shall expressly exclude any other AAC Know-How.

 

(b)

If Baxter intends to enter into a sublicense, subdistributor, agency or co-promotion agreement in any countries that are not included within Major Markets that would decrease the payments to AAC by Baxter under Section 9.4 by more than [***] as compared to the amount paid to AAC in the preceding calendar year, then (i) Baxter shall obtain AAC’s written consent prior to executing such agreement and (ii) Baxter shall provide to AAC a copy of such sublicense, subdistributor, agency or co-promotion agreement within ten (10) Business Days after execution.  Should Baxter, without AAC’s consent, enter into a sublicense, subdistributor, agency or co-promotion agreement in any country that is not included within Major Markets and that decreases the payments to AAC by Baxter under Section 9.4 by more than [***] as compared to the amount paid to AAC in the preceding calendar year, then AAC shall have the right to review such agreement and shall further have thirty (30) days from the date it receives such agreement to determine whether it desires to terminate this Distribution and License Agreement as to the country(ies) covered under the sublicense, subdistributor, agency or co-promotion agreement at issue; provided, however, that such termination shall become effective only if Baxter shall fail to remedy or cure its breach of this Section 2.4(b) to AAC’s satisfaction within a thirty (30) day period following written notice from AAC of termination under this Section 2.4(b).  Where Baxter enters into multiple sublicense, subdistributor, agency or co-promotion agreements in countries that are not included within Major Markets within any single twenty-four (24) month period that in the aggregate decrease payments to AAC by Baxter under Section 9.4 by more than [***] of the amount paid to AAC in the preceding calendar year, this Section 2.4(b) shall also apply.

 

2.5

Ownership of Intellectual Property; Retention of Certain Rights .

AAC retains all rights to all AAC Know-How, AAC Patents and AAC Trademarks, to the extent such rights are not explicitly granted to Baxter under Sections 2.1, 2.2 or 2.3, 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 CoSeal Ingredients, Product(s), CoSeal Device(s) CoSeal Accessory(ies) and CoSeal Unit(s) for all purposes other than those granted to Baxter hereunder, including (without limitation) the right to exploit the CoSeal Ingredients and the Product(s) as a component of Drug-Loaded Products.

 

2.6

Baxter’s Election To Cease Distribution .

(a)

Adhesion Prevention Unit .  Baxter may, at its option, provide no less than one hundred eighty (180) days written notice to AAC of its desire to cease distribution of the CoSeal Adhesion Prevention Unit(s) in the Adhesion Prevention Territory.  Upon the date set forth in such notice by Baxter, all of Baxter’s rights under Section 2.2 shall terminate, subject only to Baxter’s inventory sell off rights as set forth in Section 14.8.  In the event of the exercise by Baxter of the preceding election not to distribute the CoSeal Adhesion Prevention Unit, Baxter’s rights

 

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relative to distribution of the CoSeal Sealant Unit(s) shall remain in full force and effect in accordance with the terms hereof.

 

(b)

CoSeal Sealant Unit .  If Baxter elects to cease distribution of the CoSeal Sealant Unit (by providing no less than one hundred eighty (180) days written notice to AAC), then upon the date set forth in such notice by Baxter, this Distribution and License Agreement shall terminate, subject to Baxter’s inventory sell off rights set forth in Section 14.8.

 

2.7

Excluded Rights .

There are no rights granted to Baxter to (by way of example, but not limitation): (a) sell or otherwise exploit a Product only or a CoSeal Device only (for instance, Baxter may not sell a Product or CoSeal Device that is not also a component of a CoSeal Unit); (b) research, develop, test, sell or otherwise exploit within one delivery device either Tisseel ^® + Product,  FloSeal ^® + Product, drug + Product; or any product sold or Controlled by Baxter + Product; or (c) sell or otherwise exploit any product containing the CoSeal Ingredients that is not a CoSeal Unit, or an Improvement to a CoSeal Unit, or a CoSeal Accessory.

 

Article 3
Role of Program Directors

3.1

Communications and Decision-Making Process .

(a)

Objectives .  The Program Directors (as defined below) shall: (i) assist in monitoring clinical/ regulatory activities in the Territory relating to the CoSeal Unit(s); (ii) if applicable, assist in coordinating the relationship between Baxter and Third Parties, where one or more Third Parties manufacture Product(s), CoSeal Device(s), CoSeal Accessory(ies) or CoSeal Unit(s) for Baxter; (iii) act as the primary liaisons in coordinating the activities of AAC and Baxter under this Distribution and License Agreement and the Manufacturing Agreement; (iv) if required, coordinate the transition of customers to Baxter after AAC’s termination of its Third Party Rights; (v) manage the proper amount of CoSeal Sealant Unit and CoSeal Accessory inventory prepared by AAC for Baxter as part of the transfer of manufacturing technology under the Manufacturing Agreement; (vi) following the Second Commercialization Date (as defined in the Manufacturing Agreement), shall assume responsibility for ensuring that all of the CoSeal Sealant Unit inventory prepared by AAC for Baxter in accordance with the plan to manage inventory (referenced in this Section 3.1(a)(v), above) is transferred to Baxter in accordance with prior transfers of inventory under the Manufacturing Agreement, and for ensuring that AAC receives the Net Sales sharing payment set forth in Section 9.4(a) for any CoSeal Sealant Unit and CoSeal Accessory inventory manufactured at or for Cohesion; (vii) recommend allocation of the Parties’ responsibilities associated with the activities set forth in this Section 3.1(a)(i) and (a)(ii); and (viii) identify, recommend and approve future indications for the CoSeal Units pursuant to Section 3.3.

 

(b)

Program Directors .  Within thirty (30) days after the Effective Date, AAC and Baxter shall each designate a Program Director.  AAC and Baxter each retain the right to change its Program Director from time to time, upon written notice to the other Party, or to appoint one or more substitutes to serve in the place of an absent Program Director(s).  The Program Directors may select other employees, consultants or Third Parties that agree to be bound by the

 

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terms of this Distribution and License Agreement to form one or more teams in order to fulfill the objectives of the Parties under this Distribution and License Agreement.

 

(c)

Communications .  The Program Directors shall communicate regularly, and with respect to the Products, CoSeal Units and/or CoSeal Accessories, as applicable, shall report to each other their respective Party’s progress with respect to its clinical/regulatory activities (including, without limitation, clinical timelines; the status of patient enrollment; any documents, minutes, and reports relating to communications between the reporting Party and the Regulatory Authorities; as well as other relevant clinical activities conducted by the reporting Party and any pertinent issues being dealt with by the reporting Party).  For each Party, annual written reports with respect to the Products, CoSeal Units and/or CoSeal Accessories, as applicable, shall include: (i) progress and results of that Party since the previous year; (ii) critical issues or problems encountered or anticipated by that Party; and (iii) a statement of that Party’s goals for the scheduled activities.  

 

(d)

Decision-Making Process .  The Program Directors shall mutually agree upon decisions to be made under this Article 3.  In the event that the Program Directors are unable to reach consensus on a particular issue, then the matter shall be handled as further set forth in Sections 16.2 and 16.3 hereof.

 

3.2

Commercialization Plan .

Baxter will prepare a plan for the commercialization (“Commercialization Plan”) of the CoSeal Sealant Unit within six (6) months after the Effective Date, and the Program Directors shall review and, if acceptable, approve such CoSeal Sealant Unit Commercialization Plan.  If Baxter exercises the CoSeal Adhesion Prevention Option, a corresponding draft Commercialization Plan for the CoSeal Adhesion Prevention Unit shall be prepared by Baxter within six (6) months after the date that Baxter exercises the CoSeal Adhesion Prevention Option.  Within three (3) months after the date that Baxter receives notice from AAC of FDA approval of the CoSeal Adhesion Prevention Unit, Baxter shall prepare a final CoSeal Adhesion Prevention Unit Commercialization Plan, and the Program Directors shall review and, if acceptable, approve such CoSeal Adhesion Prevention Unit Commercialization Plan.

 

 

3.3

Future Indications for CoSeal Unit(s) .

Where a Party conceives of a future indication for a CoSeal Unit (excluding the [***] and [***] indications for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit), it shall present such indication to the Program Directors for a recommendation as to whether such future indication should be developed.  Should the Program Directors recommend that such future indication be developed, then such recommendation must be approved by Baxter, who shall have the right to prioritize and execute clinical trials in accordance with its internal research and development guidelines.  Baxter shall bear sole responsibility (as set forth in Sections 6.1(b) and (d)), including financial responsibility (as set forth in Section 6.1(f)(ii)), for all clinical trials and Regulatory Filings relating to all future indications (excluding only the [***] and [***] indications for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit, except as otherwise set forth in Sections 9.2 and 9.3).  Net Sales sharing for such future indications shall be in accordance with the provisions set forth in Section 9.4(a).

 

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Article 4
Employees

4.1

Hiring of Employees .

Baxter shall have the right, but not the obligation, to hire such Cohesion employees, including but not limited to sales and marketing employees, as are needed to facilitate the transfer of CoSeal Unit marketing knowledge and expertise to Baxter.  Any such hiring decisions, and the terms thereof, shall be solely at Baxter’s discretion.  AAC shall assist Baxter in making its hire/no hire decision regarding employees by providing Baxter with a list of key employees that have been designated by AAC as available for hiring by Baxter, including information regarding job titles, job descriptions, salary and benefit information, as well as access to such individuals for interviews and direct evaluations by Baxter.  Notwithstanding the foregoing, Baxter expressly agrees not to solicit for employment any AAC employees, other than those identified on such list of key employees, without AAC’s prior written consent; provided however, that nothing herein shall prohibit Baxter from hiring any AAC employees who respond to industry-wide or general employment solicitations, advertised employment opportunities, or other available employment opportunities at Baxter.

 

Article 5
Distribution Rights and Minimum Sales

5.1

Appointment .

Subject to the terms and conditions contained in this Distribution and License Agreement, AAC appoints Baxter and its Affiliates as its exclusive worldwide marketing, sales and distribution entity for the CoSeal Sealant Unit in the Sealant Territory, for the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory, and the related CoSeal Accessories in the Territory, and Baxter, on behalf of itself and its Affiliates, hereby accepts such appointment.  Subject to the terms and conditions contained in this Distribution and License Agreement, AAC shall not (itself or through or in connection with any of its Affiliates or any Third Party) market, sell or distribute CoSeal Units (or CoSeal Accessories in the Field) in any part of the Territory, so long as Baxter retains the exclusive distribution rights under any license granted to Baxter for that part of the Territory.

 

5.2

Minimum Sales .

Baxter shall meet the annual minimum sales commitments applicable to Baxter’s Net Sales for each CoSeal Unit, including AAC Patented Accessory(ies) (“Minimum Sales”).

 

(a)

CoSeal Sealant Unit .  Baxter shall meet the Minimum Sales for the CoSeal Sealant Unit, including AAC Patented Accessory(ies) (“CoSeal Sealant Unit Minimum Sales”), as set forth in Schedule 5.2(a).

 

(b)

CoSeal Adhesion Prevention Unit .   If Baxter exercises its CoSeal Adhesion Prevention Option, AAC and Baxter will establish a separate schedule of Minimum Sales for the CoSeal Adhesion Prevention Unit, including AAC Patented Accessory(ies) (“CoSeal Adhesion Prevention Unit Minimum Sales”), within [***] after receipt of written notice from AAC of [***].  When such CoSeal Adhesion Prevention Unit Minimum Sales have been agreed upon by the Parties in

 

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writing, this Distribution and License Agreement shall be amended to include such schedule of CoSeal Adhesion Prevention Unit Minimum Sales, and such schedule shall be attached hereto as Schedule 5.2(b).

 

5.3

Monetary Payment to Cure Deficiency in Minimum Sales .

In the event that Baxter fails to meet the Minimum Sales for a given CoSeal Unit in any calendar year, then within sixty (60) days after the end of such calendar year (and in Baxter’s sole discretion), Baxter may pay to Cohesion or its designee the appropriate percentage of Net Sales (as set forth in Section 9.4) that would have been paid to Cohesion or its designee on a Net Sales amount that equals the difference between (a) the Net Sales amount that Baxter received from [***] by Baxter; and (b) the Net Sales amount that Baxter [***], as applicable, in that calendar year. For example only, and not intended for definition, if in a given calendar year Baxter pays to Cohesion a percentage of Net Sales based on a [***] basis (as set forth in Section 9.4(c)), and if Baxter [***] Minimum Sales applicable to a CoSeal Unit in that calendar year, then Baxter may elect to pay [***] to Cohesion or its designee, as provided in this Section 5.3, and thereby fulfill its Minimum Sales obligations for that CoSeal Unit in that calendar year.

 

5.4

Adjustment of Minimum Sales Amounts .

(a)

Event Giving Rise To Adjustment.  If Baxter fails to meet Minimum Sales for a given CoSeal Unit(s) in a calendar year: (i) due to an event of Force Majeure (as defined in Section 16.5); (ii) in the event that an injunction issues against any Party or any of its respective Affiliates that prevents any Party or any of its respective Affiliates from manufacturing the Product(s), CoSeal Device(s) or the CoSeal Unit(s); (iii) in the event that an injunction issues against any Party or any of its respective Affiliates that prevents any Party or any of its respective Affiliates from selling, marketing, or distributing the CoSeal Unit(s); (iv) in the event that AAC fails to supply CoSeal Unit(s) in amounts equal to the forecast (as set forth in the Manufacturing Agreement); or (v) in the event that AAC has manufactured a defective CoSeal Unit(s), or that the CoSeal Unit(s) has been recalled, then to the extent that such event was the primary cause of Baxter’s failure to meet one or more Minimum Sales for that calendar year, then the affected Minimum Sales commitment shall be appropriately reduced, as determined by the Parties  (“Adjusted Minimum Sales”), and Baxter shall be required only to meet the Adjusted Minimum Sales for so long as the event giving rise to the adjustment of Minimum Sales under this Section 5.4(a) continues to preclude Baxter from meeting the unadjusted Minimum Sales commitment.

 

(b)

Process for Adjustment of Minimums .  Within thirty (30) days of the fourth (4 ^th ) anniversary of the Effective Date, the Program Directors shall meet to determine whether market or other conditions require that the CoSeal Sealant Unit Minimum Sales commitment(s) be increased or decreased for the remainder of the term of this Distribution and License Agreement.  If an adjustment to the CoSeal Sealant Unit Minimum Sales is necessary, but the Program Directors are unable to agree on an appropriate adjustment, the matter will be resolved in accordance with the procedures set forth in Section 16.2; provided, however, that if the Heads are unable to agree,

 

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the matter will not be submitted to arbitration in accordance with Section 16.3, but instead the matter will be submitted to a consulting firm with expertise in the field of market research (“Consulting Firm”) for a determination of such adjustment.  The Consulting Firm shall be selected by mutual agreement of the Parties.  In making its determination as to whether the CoSeal Sealant Unit Minimum Sales commitment(s) should be adjusted, the Consulting Firm shall take into account general market conditions, including but not limited to the following: (i) reimbursement factors and changes to the reimbursement environment; (ii) the competitive landscape of the CoSeal Sealant Unit(s), including pricing of competitive products and the presence of any new competitors in the marketplace; (iii) customer adoption rates with respect to the CoSeal Sealant Unit(s); (iv) level of growth of relevant procedures where the CoSeal Sealant Unit may be used; and (v) the effect of new technologies on the market for the CoSeal Sealant Unit(s).  Following its evaluation, the Consulting Firm shall provide written notification to the Parties of its findings and determination regarding the adjustment, if any, to the CoSeal Sealant Unit Minimum Sales commitment(s).  The Parties shall then have thirty (30) days to review the results and offer any additional, relevant information to the Consulting Firm.  The Consulting Firm shall then issue a final written report by which the Parties hereby agree to be bound.  The mechanism set forth in this Section 5.4(b) shall be the sole and exclusive remedy of the Parties relating to any dispute arising out of this process for adjustment of CoSeal Sealant Unit Minimum Sales commitment(s).  The costs of the evaluation and determination attributable to the Consulting Firm’s activities under this Section 5.4(b) shall be shared equally by the Parties.

 

5.5

AAC’s Right to Terminate Baxter’s Distribution Rights For Failure To Cure Deficiency In Minimum Sales .

(a)

In the event that Baxter fails to meet the Minimum Sales for a given CoSeal Unit(s) in a given calendar year, and Baxter fails to cure such deficiency in accordance with Section 5.3, then pursuant to the following procedure, AAC has the right, but not the obligation, to terminate Baxter’s marketing, sales, and distribution rights with respect to that given CoSeal Unit in accordance with the provisions set forth in this Section 5.5.  Within sixty (60) days after the end of the calendar year in which Baxter fails to meet such Minimum Sales for that given CoSeal Unit, Baxter shall provide to AAC a written memorandum outlining the reasons for that CoSeal Unit sales shortfall.  Within fifteen (15) days after receipt of such memorandum, the Parties shall meet to discuss the contents of the memorandum.  After such meeting, AAC shall have an additional sixty (60) days within which to reasonably consider Baxter’s reasons for the sales shortfall.  Should AAC decide to terminate (or not terminate) Baxter’s marketing, sales and distribution rights with respect to that given CoSeal Unit, it must provide Baxter with written notice of such decision to terminate (or not terminate) within such additional sixty (60) day period.  Should AAC fail to notify Baxter within such additional sixty (60) day period, AAC’s right to terminate Baxter’s marketing, sales and distribution rights with respect to that given CoSeal Unit by reason of Baxter’s sales shortfall for the prior calendar year shall be deemed waived, but only with respect to that prior calendar year.  If AAC elects not to terminate Baxter’s marketing, sales, and distribution rights with respect to that given CoSeal Unit(s) (or if AAC fails to notify Baxter of its termination of such rights within such additional sixty (60) day period), the Parties shall meet within thirty (30) days after AAC’s notice to Baxter of such election not to terminate (or after expiration of such

 

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additional sixty (60) day period) and determine the extent (if any) to which future Minimum Sales commitment(s) should be reduced.

 

(b)

If Baxter fails to meet CoSeal Adhesion Prevention Unit Minimum Sales in a given calendar year, then, in accordance with the procedures set forth in Section 5.5(a), AAC may terminate Baxter’s marketing, sales, and distribution rights with respect to such CoSeal Adhesion Prevention Unit, but may not terminate Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit or this Distribution and License Agreement (assuming that Baxter met Minimum Sales for the CoSeal Sealant Unit for that same calendar year).  However, if Baxter fails to meet CoSeal Sealant Unit Minimum Sales in a given calendar year, and AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit in accordance with the procedures set forth in Section 5.5(a), it shall also have the right, at its option, to terminate this Distribution and License Agreement by providing notice of such termination within the additional sixty (60) day period set forth in Section 5.5(a).

 

(c)

Notwithstanding anything to the contrary contained herein, AAC shall have no right to terminate Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit in calendar years 2003 or 2004 for failure to meet CoSeal Sealant Unit Minimum Sales.  

 

(d)

The remedies set forth in this Section 5.5(b) shall be AAC’s sole remedies for Baxter’s failure to meet its Minimum Sales obligation, and such failure shall not constitute a separately actionable breach of this Distribution and License Agreement.

 

5.6

Payments to Baxter if AAC Distributes the CoSeal Sealant Unit After Terminating Baxter’s Rights Under Section 5.5

(a)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and such termination occurs in the year 2005, AAC may elect to distribute (itself or through or in connection with an Affiliate or Third Party) or not to distribute that CoSeal Sealant Unit.

 

(i)

If AAC elects not to distribute such CoSeal Sealant Unit, AAC is not obligated to pay Baxter any amount under this Section 5.6(a).

 

(ii)

If AAC elects to distribute (itself or through or in connection with an Affiliate or Third Party) such CoSeal Sealant Unit, AAC shall pay to Baxter, at Baxter’s election, either (A) [***] of all upfront payments and milestones paid or payable to AAC in cash by its Third Party distributor of that CoSeal Sealant Unit during the first year of AAC’s agreement with such Third Party distributor (the “2005 Milestone”); or (B) [***]

 

(b)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and such termination occurs in the

 

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year 2006, AAC may elect to distribute (itself or through or in connection with an Affiliate or Third Party) or not to distribute that CoSeal Sealant Unit.

 

(i)

If AAC elects not to distribute such CoSeal Sealant Unit, AAC is not obligated to pay Baxter any amount under this Section 5.6(b).

 

(ii)

If AAC elects to distribute (itself or through or in connection with an Affiliate or Third Party) such CoSeal Sealant Unit, AAC shall pay to Baxter, at Baxter’s election, either (A) [***] of all upfront payments and milestones paid or payable to AAC in cash by its Third Party distributor of that CoSeal Sealant Unit during the first year of AAC’s agreement with such Third Party distributor (the “2006 Milestone”); or (B) [***]

 

(c)

Notwithstanding the foregoing, if Baxter has paid to Cohesion or its designee the CoSeal Sealant Unit [***] Milestone payment set forth in Section 9.3, and if Baxter has not had an opportunity period equal to six (6) months or longer in the calendar year for which Baxter was terminated under Section 5.5 to achieve sales attributable to the CoSeal Sealant Unit for the [***] indication, then the payments to Baxter (set forth above) for a termination by AAC in year 2005 or in year 2006 shall be [***]

 

(d)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and AAC elects to distribute such CoSeal Sealant Unit using a Third Party distributor, then AAC shall provide to Baxter a reasonable disclosure of information about the first year's cash payment terms of such Third Party distributor agreement to enable Baxter to decide whether to request (i) a percentage of such cash payments made by such Third Party distributor to AAC, or (ii) a fixed cash payment, as set forth in this Section 5.6(a-c).  Within fifteen (15) Business Days after AAC notifies Baxter in writing that it has executed such Third Party distributor agreement (which notification includes the reasonable disclosure of cash payment terms referenced above in this Section 5.6(d)), Baxter must decide whether to request (i’) a percentage of the first year's cash payments made by such Third Party distributor to AAC, or (ii’) a fixed cash payment.  Within fifteen (15) Business Days after receipt of written notice from Baxter of its election under this Section 5.6(d), AAC shall make the appropriate payment to Baxter.

 

(e)

If AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a), and AAC elects to distribute such CoSeal Sealant Unit itself, within fifteen (15) days after AAC publicly announces that it will distribute such CoSeal Sealant Unit itself or within fifteen (15) days after AAC’s first sale of such CoSeal Sealant Unit (whichever date is earlier), AAC shall pay to Baxter the appropriate fixed cash payment set forth in this Section 5.6(a-c).

 

(f)

Notwithstanding the foregoing, AAC shall not be obligated to make a payment to Baxter if more than two (2) years have passed between the date of termination of Baxter’s CoSeal Sealant Unit distribution rights and the date that AAC elects to distribute (itself or

 

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through a Third Party) such CoSeal Sealant Unit.  By way of example only, if AAC terminates Baxter’s marketing, sales, and distribution rights with respect to the CoSeal Sealant Unit pursuant to Section 5.5(a) in year 2006, but does not distribute such CoSeal Sealant Unit itself and does not enter into a Third Party distribution agreement concerning such CoSeal Sealant Unit until 2010, then AAC shall not be obligated to make any payment to Baxter under this Section 5.6.

 

Article 6
Clinical and Regulatory Rights and Obligations

6.1

Regulatory Approvals .

Baxter shall use its Commercially Reasonable Efforts to conduct the activities set forth in each Commercialization Plan (described in Section 3.2), including all Post-Licensure Marketing Studies of the CoSeal Sealant Unit in the Sealant Territory, and of the CoSeal Adhesion Prevention Unit in the Adhesion Prevention Territory.

 

(a)

[***] Indications for CoSeal Sealant Unit .  Baxter shall cooperate in AAC’s efforts to obtain Regulatory Approval for [***] indications for the CoSeal Sealant Unit in the Sealant Territory.  Prior to conducting any clinical studies, AAC shall obtain Baxter’s prior written approval of its clinical trial plan and clinical trial protocol pertaining to the clinical trial for the [***] indications.  If any clinical trial plan, clinical trial protocol or subsequent clinical trial, which has been approved by Baxter, does not achieve the anticipated clinical outcome, Baxter shall have no recourse against AAC for such failure to achieve a clinically significant result.  AAC shall prepare and draft regulatory documents and submit such documents, along with a written statement confirming the truth and accuracy of such documents, to Baxter for filing with the FDA.  In the event that the Parties do not agree upon any aspect of the regulatory documents, except where a change would nullify such written statement confirming the truth and accuracy of such documents, the final decision with respect to such aspect shall be made by Baxter.  However, nothing in this Section 6.1(a) shall be interpreted to require payment by Baxter of the Milestone payment set forth in Section 9.3 prior to or in the absence of FDA approval for the [***] indication.  

 

(b)

Future Indications for CoSeal Sealant Unit .  AAC shall cooperate in Baxter’s efforts to obtain Regulatory Approval for all other appropriate future indications for the CoSeal Sealant Unit in the Sealant 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.

 

(c)

[***] Indications for CoSeal Adhesion Prevention Unit .  Baxter shall cooperate in AAC’s efforts to obtain Regulatory Approval for [***] indications for the CoSeal Adhesion Prevention Unit.  If any clinical trial plan, clinical trial protocol or subsequent clinical trial does not achieve the anticipated clinical outcome, Baxter shall have no recourse against AAC for such failure to achieve a clinically significant result.  Prior to filing the Pre-Market Approval Application with the FDA, the Program Directors of AAC and Baxter shall decide whether to file a new Pre-Market Approval Application or a supplement to the existing Pre-Market Approval Application.  After such decision, AAC shall prepare and draft regulatory documents and submit such documents, along with a written statement confirming the truth and

 

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accuracy of such documents, to Baxter for filing with the FDA.  In the event that the Parties do not agree upon any aspect of the regulatory documents, except where a change would nullify such written statement confirming the truth and accuracy of such documents, the final decision with respect to such aspect shall be made by Baxter.  However, nothing in this Section 6.1(c) shall be interpreted [***].

 

(d)

Future Indications for CoSeal Adhesion Prevention Unit .  AAC shall cooperate in Baxter’s efforts to obtain Regulatory Approval for all other appropriate future indications for the CoSeal Adhesion Prevention Unit in the Adhesion Prevention 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.

 

(e)

Meeting Attendance .  Upon the request of Baxter and with AAC's prior agreement, such agreement not to be unreasonably withheld, and to the extent permitted by law, Baxter may elect to attend meetings between AAC and the applicable Regulatory Authorities concerning the [***] indication for the CoSeal Sealant Unit and the [***] indication for the CoSeal Adhesion Prevention Unit in a given country within the Territory.

 

(f)

Financial Responsibility .  

 

(i)  [***], [***] and [***] Indications.  AAC shall bear sole financial responsibility, including Regulatory Filing fees, and subject to Sections 6.1(a) and (c), shall be responsible for all development, clinical and regulatory activities relevant to the [***] indication for the CoSeal Sealant Unit, [***] indication for the CoSeal Adhesion Prevention Unit and [***] indications for the CoSeal Sealant Unit (whether related to the formulation marketed as of the Effective Date or “pre-mix” formulation of the CoSeal Sealant Product).  AAC shall be responsible for preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approval for the [***], [***] and [***] indications in the Territory.  (Baxter’s only financial obligation regarding such approvals shall be the Milestone payment set forth in Section 9.3, and in the event Baxter exercises its CoSeal Adhesion Prevention Option, the option payment set forth in Section 9.2(a)).

 

(ii)  Future Indications.  Baxter shall bear sole financial responsibility, including Regulatory Filing fees, for obtaining Regulatory Approval for all future indications for each CoSeal Unit, except as set forth in subsection 6.1(f)(i) above, and shall be responsible for all development, clinical and regulatory activities relevant to these future indications, and for the preparation of regulatory documents and any supplemental studies necessary to achieve Regulatory Approvals for such future indications in the Territory.

 

(g)

Post-Licensure Marketing Studies and Regulatory Approvals .  Baxter will be solely responsible for all Post-Licensure Marketing Studies of CoSeal Units in the Territory.  Additionally, subject to Section 5.2(a) of the Manufacturing Agreement, Baxter shall own and control, and shall be responsible for maintaining, all Regulatory Approvals related to the CoSeal Units and CoSeal Accessories in the Territory.

 

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6.2

Clinical and Regulatory Information .

(a)

General .  AAC shall own all data, information and other documentation that AAC (or its Affiliates) generates or derives in the course of its performance under this Distribution and License Agreement.  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.  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 CoSeal Accessory(ies) (if applicable) and the CoSeal Units.  All of the foregoing regulatory documents shall be forwarded to the requesting Party by the disclosing Party within 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 produced for the purpose of Regulatory Approval of CoSeal Accessory(ies) (if applicable) or CoSeal Units, as required by applicable regulatory requirements.  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 CoSeal Accessory(ies) (if applicable) and CoSeal Unit.

 

(b)

Disclosure of AAC Communications .  Within thirty (30) days after the Effective Date, and thereafter on an ongoing basis as is reasonably necessary to enable Baxter to exercise its rights and fulfill its obligations under this Distribution and License Agreement, AAC shall inform Baxter of AAC’s communications with all Regulatory Authorities pertaining to the CoSeal Accessory(ies) (if applicable) and the CoSeal Units (including, without limitation, providing Baxter with copies of documents, minutes, and reports constituting communications between AAC and the Regulatory Authority).

 

With respect to a copy of the complete original Pre-Market Approval Application documentation filed with the FDA that pertains to the CoSeal Adhesion Prevention Unit, AAC shall provide a copy of such complete original documentation within ten (10) days after submission of such documentation to the FDA.  Thereafter, to enable Baxter to determine whether it desires to exercise the CoSeal Adhesion Prevention Option, AAC shall make available to Baxter such personnel as are qualified to answer Baxter’s questions relating to the Pre-Market Approval Application, and shall provide such other documentation as Baxter may reasonably request.

 

(c)

Right to Reference .  AAC retains the right to reference any Regulatory Filing under this Distribution and License Agreement.

 

 

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6.3

Complaints and Adverse Events .

The Party responsible for all permits and licenses required by any Regulatory Authority with respect to a given CoSeal Accessory(ies) (if Regulatory Authority permits or licenses are applicable) or a given CoSeal Unit(s) under this 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 AAC shall not be required to communicate with customers of Baxter.  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.

 

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 CoSeal Units or CoSeal Accessory(ies) are distributed or sold.  The requirements of this Article 6 shall therefore be construed and interpreted to comply with all such law