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EXHIBIT 10.44
EXCLUSIVE DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT
THIS
EXCLUSIVE DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT
("Agreement")
is made and entered into effective as of June 23, 2005 (the
"Effective Date") by
and between Genesee BioMedical, Inc., a corporation organized under
the laws of
the state of Colorado ("GBI"), with an address at 1308 South Jason
Street,
Denver, Colorado 80223, and ATS Medical, Inc., a Minnesota
corporation ("ATS"),
with an address at 3905 Annapolis Lane, Minneapolis, Minnesota
55447,
(hereinafter sometimes individually or collectively referred to as
a "Party" or
the "Parties," respectively).
RECITALS
A. ATS and GBI
are engaged in the design, development, manufacture and sale of
products for use in cardiac surgery.
B. GBI has
special knowledge and expertise relating to the design,
development
and
manufacture of cardiac surgical products, including annuloplasty
repair
rings, c-rings and accessories, and ATS has a distribution network
that is
capable of marketing and selling such products.
C. ATS and GBI
previously agreed in principal to certain non-binding terms and
conditions regarding the development of the Products (the "Term
Sheet") and
after executing the Term Sheet market input data generated by the
Parties'
investigations have affected certain commercial considerations
reflected in
the
Term Sheet.
D. GBI desires
to manufacture the Products for ATS and to supply such
quantities of Products as ATS desires, and ATS desires to obtain
from GBI a
supply of the Products after it has complied with the necessary
FDA
requirements so that ATS can exclusively distribute the Products
worldwide.
E. ATS and GBI
desire to formalize their relationship by entering into this
Exclusive Development, Supply and Distribution Agreement for the
purpose of
developing, manufacturing, supplying and distributing the Products,
on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual
representations, warranties, covenants and agreements contained
herein, the
Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Act shall mean the United States Food, Drug and Cosmetic Act
and the
regulations promulgated thereunder, as amended from time to
time.
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1.2. Additional Product shall mean all improvements to,
modifications of or
subsequent generations of the Products that do not affect the form,
fit or
function of the Product and any support product(s) developed by GBI
during
the
term of this Agreement.
1.3. Affiliates shall mean, with respect to either Party, those
entities
controlled by, in control of, or under common control with such
person. For
the
purposes of this definition, "control" means ownership or
control,
direct or indirect, of more than fifty percent (50%) of the voting
capital
or
equity participation of an entity.
1.4. ATS Confidential Information shall mean any non-public
information about
ATS,
its development of intellectual property and its operations
including,
but
not limited to, any non-public information or scientific or
technical
data, know-how, or expertise of ATS relating to the Products,
existing as
of
the Effective Date or developed during the term of this
Agreement
(excluding Joint Inventions) and non-public information that
relates to its
financial statements, marketing or finances, market research,
customers,
markets, product plans, business plans, services, software,
developments,
inventions, processes, procedures, methods, know-how, designs,
data,
programs, drawings, and engineering information.
1.5. ATS Invention shall mean any invention (excluding Joint
Inventions),
whether or not patentable, conceived or developed without the use
of any
GBI
Confidential Information by employees of ATS, alone or together
with
any
third Party (including Affiliates, agents and consultants of ATS or
a
person or entity working in any fashion on behalf of ATS but
excluding
GBI), during the term of this Agreement, or prior to the Effective
Date,
specifically related to the development of the Product.
1.6. Change in Control shall mean (i) any consolidation or merger
of either
Party with or into any other corporation or other entity or person,
or any
other corporate reorganization, in which the stockholders of such
Party
immediately prior to such consolidation, merger or reorganization,
own less
than
fifty percent (50%) of such Party's voting power immediately
after
such
consolidation, merger or reorganization, or any transaction or
series
of
related transactions to which either is a Party in which in excess
of
fifty percent (50%) of such Party's voting power is transferred; or
(ii) a
sale, lease or other disposition of all or substantially all the
assets of
either Party.
1.7. Demonstration Products shall have the meaning ascribed thereto
in Section
3.1.
1.8. Development Period shall mean the period commencing on the
Effective date
and
ending upon passage of necessary notice periods with no further
comments from the FDA under Section 510(k) of the Act, as more
particularly
set
forth in the Development Plan.
1.9. Development Plan shall mean the description of development
activities for
the
Products, the responsibilities of each of the Parties in developing
the
Products, and the schedule for performing such activities including
timing,
milestone schedules, scope of work, specifications, general quality
and
regulatory requirements and other relevant terms and information as
more
particularly set forth in Exhibit A attached hereto, which the
Parties may
amend from time to time by mutual written agreement.
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1.10. Distribution Fee shall have the meaning ascribed thereto in
Section 10.5.
1.11. FDA shall mean the Food and Drug Administration of the U.S.
Department of
Health and Human Services.
1.12. GBI Confidential Information shall mean any non-public
information about
GBI,
its development of intellectual property, and its operations
including, but not limited to, any non-public information or
scientific or
technical data, know-how, or expertise of GBI relating to the
Products
existing as of the Effective Date or developed during the term of
this
Agreement (excluding Joint Inventions) and non-public information
that
relates to its financial statements, marketing or finances,
market
research, customers, markets, product plans, business plans,
services,
software, developments, inventions, processes, procedures,
methods,
know-how, designs, data, programs, drawings, and engineering
information.
1.13. GBI Invention(s) shall mean any invention (excluding Joint
Inventions),
whether or not patentable, conceived or developed without the use
of any
ATS
Confidential Information by employees of GBI, alone or together
with
any
third Party (including affiliates, agents or consultants of GBI or
a
person or entity working in any fashion on the behalf of GBI
excluding
ATS), during the term of this Agreement, or prior to the Effective
Date,
specifically related to the development of the Product.
1.14. GMP/QSR Regulations shall mean the Good Manufacturing
Practices/Quality
System Regulations set forth in 21 C.F.R. Section 820.
1.15. Joint Invention shall mean any invention, discovery or idea,
whether or
not
patentable, conceived or developed jointly by both Parties,
their
employees, agents or consultants (i) in the course of performing
work
related to this Agreement but prior to the Effective Date; (ii) in
the
course of performing the work contemplated under this Agreement
including
performance of the Development Plan; (iii) arising out of the
development
of
the Products whether before or after the Effective Date; or (iv)
that
utilizes, or is a modification of, derived from or based upon an
GBI
Invention, GBI Confidential Information, ATS Invention, or ATS
Confidential
Information. Joint Inventions shall include, but shall not be
limited to,
the
four Products identified in Section 1.22(i)-(iv).
1.16. Manufacturer of Record shall mean the Party who owns the
Premarket
Notification and is responsible for compliance with conditions of
approval
of
the Premarket Notification. For purposes of this Agreement, GBI
shall be
the
Manufacturer of Record for all Products.
1.17. Net Sales means the aggregate amount of net sales reported by
ATS or any
of
its Affiliates from the sales of the Products to third parties,
recognized in accordance with GAAP by ATS in a manner consistent
with its
recognition of net sales across all similar product lines, in
connection
with
the preparation of ATS' financial statements, as publicly-reported.
In
addition to the foregoing, the following shall apply:
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The term "Net Sales" shall not include revenue received by ATS (or
any
of its Affiliates) from transactions with an Affiliate of ATS
unless
such Affiliate is the end user of the Product.
1.18. New Product shall mean (i) any improvement to or modification
of the
Product that affects the form, fit or function and for which a
new
regulatory submission is required; and (ii) any and all products
for heart
valve repair.
1.19. Non-Product Joint Inventions shall have the meaning ascribed
thereto in
Section 6.2.
1.20. Preliminary Specifications shall mean the documents
describing the form,
fit,
and function of the initial test quantities of Products as the
case
may
be, at various milestones during the development process, and shall
be
superseded by the Specifications upon Premarket Notification to the
FDA.
1.21. Premarket Notification shall mean the date on which a Product
obtains FDA
clearance of GBI's 510(k) Premarket Notification submission for
the
Products under Section 510(k) of the Act.
1.22. Product(s) shall mean annuloplasty repair rings, c-rings and
accessories,
including without limitation the following four annuloplasty
repair
products: (i) a flexible ring, (ii) a flexible c-ring, (iii) a
semi-rigid
ring, and (iv) a rigid ring, and related tools and accessories, as
further
developed by the Parties during the Development Period, and all
improvements, modifications or subsequent generations of such
products
developed by GBI or jointly by the Parties during the term of
this
Agreement. "Accessories" include relevant sizers and sterilization
trays.
1.23. Profit Sharing Payments shall have the meaning ascribed
thereto in Section
10.6.
1.24. Remedial Action shall have the meaning ascribed thereto in
Section 4.5.
1.25. Specifications shall mean the documents describing the form,
fit and
function of the
Products that obtain clearance of its Premarket
Notification by FDA under Section 510(k) of the Act.
1.26. Territory shall mean the world.
1.27. Transfer Prices shall have the meaning ascribed thereto in
Section 10.1.
1.28. Unit shall mean an individual item of Product.
1.29. Vigilance Report shall mean the incident report for death or
serious
injury required under the post market surveillance system as
defined by the
European Council Directive 93/42/EEC or the relevant and
applicable
equivalent of any other regulatory body.
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ARTICLE 2
DEVELOPMENT
2.1. Development and Preliminary Specifications.
(a)
Prior to the Effective
Date GBI, either alone or jointly with ATS,
developed certain technical data and Preliminary Specifications
for
the Product. During the Development Period ATS and GBI shall
(i)
continue to collaborate to further develop the Products, the
Preliminary Specifications, the Specifications, and the
manufacturing
process for the Products and (ii) conduct the activities set forth
in
the Development Plan, attached hereto as Exhibit A.
Notwithstanding
the foregoing, ATS shall have the right to approve the
Preliminary
Specifications, Specifications and further modifications, if
any.
(b)
ATS and GBI agree that
the priority for development and regulatory
approval of the Products is for the U.S. market. Notwithstanding,
both
Parties intend that the Products be marketed in additional
countries,
including Europe, and that the Products will be developed to
maximize
the opportunity for
such future market expansion.
2.2. Exclusivity. In consideration of entering into this Agreement
and for other
good
and valuable consideration the receipt and sufficiency of which
are
hereby acknowledged, GBI and ATS each agree that it shall not enter
into a
development or distribution agreement or otherwise undertake
any
development project to develop a product or manufacture or
distribute any
product for itself or for any third Party that competes, either
directly or
indirectly, with the Products.
2.3. GBI Obligations. GBI shall use its commercially reasonable
efforts to
develop the Products in accordance with the Development Plan
including but
not
limited to the following activities:
(a)
Develop Preliminary
Specifications and Specifications for the Products
based on (i) design inputs and marketing requirements approved by
ATS;
and (ii) data collected during the testing of the Products;
(b)
On its own, or jointly
with ATS, develop the technical know-how and
manufacturing processes for manufacturing both clinical and
commercial
quantities of the Products, including final assembly,
packaging,
labeling and sterilization procedures, and quality control
release
specifications for the Products;
(c)
Provide status reports
to ATS in writing on a monthly basis (or more
frequently, but not more often than weekly, as reasonably required
by
ATS) on the progress of the Development Plan; any delays in
developing
the test quantities of Products;
(d)
Provide project
management by participating in and attending meetings,
by teleconference or otherwise, of GBI's design control process
for
the Products;
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(e)
Establish and install,
at GBI's sole cost and expense (except as
otherwise provided by Section 5.2), all equipment and
facilities
necessary to effectuate the Development Plan;
(f)
Deliver to ATS on the
delivery date specified in the Development Plan
such test quantities of Products to be agreed upon by the Parties
to
permit testing to determine whether such Products meet the
Preliminary
Specifications or Specifications, as the case may be, under
Section
3.1;
(g)
Produce the quantities
of Products ordered by ATS, as more
particularly set forth in Article 9;
(h)
Comply with all
applicable laws and regulations regarding the conduct
of work performed under the Development Plan including complying
with
all current governmental regulatory requirements concerning
good
Laboratory Practices (21 C.R.R. Part 58), GMP/QSR Regulations,
and
with all other federal, state and local laws and regulations as
are
applicable to the Development Plan for the manufacture of the
Products.
(i)
Provide at least one
individual employed by GBI, who will be named as
co- Program Director and whose responsibility will be for the
oversight of the relationship between the Parties, the
Development
Plan and the commercialization of the Products.
(j)
Fund at its sole cost
and expense, except as otherwise provided in
Section 5.2, the development of the Products.
(k)
Conduct all necessary
meetings and discussions with FDA and obtain all
necessary IDE and IRB approvals to test the Products and obtain
510(k)
clearance from the FDA for the Products.
2.4. ATS Obligations. ATS shall use its commercially reasonable
efforts to
assist GBI in performing its activities under the Development
Plan,
including but not limited to:
(a)
Furnish to GBI in
accordance with the schedule as set forth in the
Development Plan, marketing requirements and design inputs and
such
other data as may be necessary to allow GBI to develop the
Preliminary
Specifications and Specifications for the Product. Notwithstanding
the
foregoing, ATS shall have the right to approve the design of
the
Products and the Specifications;
(b)
Review design
decisions during development of the test quantities of
Products by
participating in design review meeting according to the
Development Plan and approve design documents at designation
intervals;
(c)
Participate in and
attend meetings of, by teleconference or otherwise,
GBI's design control process for the test quantities of the
Products
and approve the design of the test Products during such
meetings;
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(d)
Provide at least one
individual employed by ATS, who will be named as
co-Program Director and whose responsibility will be for the
oversight
of the relationship between the Parties, the Development Plan and
the
commercialization of the Products.
(e)
Provide to GBI any
required parameters or standards for the Products
to allow GBI to develop protocols to be used in verifications
and
validation of the Products.
2.5. Joint Obligations of ATS and GBI. During the Development
Period ATS and GBI
shall (a) within 120 days of the Effective Date jointly develop
the
Development Plan, which shall be attached as Exhibit A and become
part of
this
Agreement; and (b) perform the activities set forth in the
Development
Plan
including but not limited to: (i) develop a comprehensive test plan
to
ensure verification and validation of the Products; and (ii)
jointly
compile the technical file necessary to obtain CE marking. If a
Development
Plan
that is mutually acceptable to both Parties cannot be developed
within
such
120-day period, either Party may terminate this Agreement upon
thirty
(30)
days prior written notice to the other.
2.6. Changes to Products Specifications. From time to time during
the
Development Period, ATS may change the requirements for the
Products as a
result of data generated from the Pilot Study, Pivotal Clinical
Trial, and
preclinical or other testing, and shall forward such revised
requirements
to
GBI. GBI shall modify the then current Preliminary Specifications
to
reflect the revised requirements. ATS shall then have the
opportunity to
review the revised Preliminary Specifications, and test Products
made in
accordance with the revised Preliminary Specifications under
Section 3.1.
ARTICLE 3
DEMONSTRATION PRODUCTS
3.1. Demonstration Products. During the Development Period, GBI
shall
manufacture quantities of clinical test grade Products for use
as
demonstration Products
(a "Demonstration Product") by ATS. The Development
Plan
shall set forth the dates when Demonstration Products shall be
available to be delivered to ATS for testing. Shipments of
Demonstration
Products shall contain detailed Preliminary Specifications for
the
Products.
3.2. Acceptance. ATS shall be deemed to have accepted the
Preliminary
Specifications for the Products being tested as provided in the
Development
Plan
upon ATS' written notification to GBI of its acceptance. Upon
acceptance, GBI shall commence the manufacture of the Products
and
Demonstration Products, as the case may be, in accordance with
orders
placed by ATS under Sections 9.1 and 9.3, respectively.
3.3. Testing and Documentation. With each lot of Products
manufactured by GBI,
GBI
shall supply to ATS documentation certifying in writing that
each
shipment of Products complies with (i) the then current
Specifications and
with
the testing procedures described therein; and (ii) all other
documentation agreed to by ATS and GBI.
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ARTICLE 4
REGULATORY SUBMISSIONS
4.1. Medical Device Establishment Registration. GBI shall maintain
a Medical
Device Establishment Registration (as defined under the Act) as
manufacturer and Specifications developer for the Products, as is
required.
4.2. U.S. Approval. GBI shall be responsible, at its expense, for
filing and
obtaining and maintaining all necessary authorizations from
regulatory
authorities of the U.S. federal government, including the FDA, or
of the
various states necessary for the sale of the Products in the United
States
or export to foreign
countries. GBI's obligations under this Section 4.2
shall include the preparation and filing of any required
submissions and
the
establishment and oversight of any required clinical investigations
and
clinical follow-up relating to future commercial sale of the
Products. GBI
will
provide ATS with drafts of all proposed filings for U.S. federal
or
state regulatory authorization for review and comment by ATS in
advance of
filing with the applicable authority. ATS shall support the process
of all
regulatory filings and registrations by GBI by providing to GBI
all
documentation reasonably requested by GBI from ATS including,
without
limitation, clinical and technical information.
4.3. Foreign Approvals. GBI shall be responsible, on a timely
basis, for filing,
obtaining and maintaining all necessary "device" or "medical"
regulatory
approvals from foreign regulatory authorities necessary for the
commercial
sale
of the Products in those foreign countries ("Foreign Approvals")
into
which the Parties mutually agree Products will be sold. The expense
for
obtaining such approvals shall be divided evenly between the
Parties. If
ATS
desires to obtain Foreign Approvals for a country and GBI
reasonably
disagrees that such Foreign Approval is too costly for the
anticipated
sales in such country, GBI shall proceed to obtain such approval
provided
ATS
agrees to bear the full expense of obtaining such Foreign Approval.
All
Foreign Approvals shall, to the extent permitted, be in GBI's name.
GBI
shall obtain the CE Mark in such foreign countries as ATS may
determine.
GBI
and ATS shall work together to establish the strategy for obtaining
in
the
most timely and efficient manner the Foreign Approvals to be
obtained
pursuant to this Section 4.3. GBI's obligations under this Section
4.3
shall include assisting in the preparation and filing of any
required
submissions relating to future commercial sale of the Products.
Except as
otherwise required by law or agreed by the Parties, GBI shall be
primarily
responsible for all dealings with the appropriate competent
authority such
as
notification, medical device vigilance and national labeling
issues, and
GBI
shall bear final legal responsibility for the content of all its
own
labeling.
4.4. Manufacturing Compliance. GBI represents and warrants to ATS
that all
Products manufactured and sold under this Agreement will have
been
manufactured, labeled, packaged and sold to ATS in accordance with
ATS
approved Specifications and all applicable international federal,
state and
local laws and regulations pertaining to medical devices including,
but not
limited to, the Act and GMP/QSR Regulations. GBI represents and
warrants to
ATS
that GBI's manufacturing facility is in compliance with all
GMP/QSR
Regulations and ISO 13485:1996, EN 46001 requirements and that GBI
has all
approvals and consents required to mark the Products with the CE
mark.
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4.5. Remedial Actions. Each party will notify the other
immediately, and
promptly confirm such notice in writing, if it obtains
information
indicating that any of the Products may be subject to any recall,
field
corrective action or other regulatory action (other than a
corrective and
preventive action ("CAPA") under the Act) with respect to a Product
taken
either by virtue of applicable federal, state, foreign or other law
or
regulation or good business judgment (a "Remedial Action"). The
Parties
will
assist each other in gathering and evaluating such information as
is
necessary to determine the necessity of conducting Remedial
Action;
provided that ATS shall have sole responsibility for collecting
information
from
its customers, including customer complaints. ATS will
determine
whether to commence any Remedial Action with respect to the
Product. Each
Party will maintain
adequate records to permit the Parties to trace the
manufacture of the Product and the distribution and use of the
Product. In
the
event ATS determines that any Remedial Action with respect to
the
Product should be commenced or Remedial Action is required by
any
governmental authority having jurisdiction over the matter, ATS
will
control and coordinate all efforts necessary to conduct such
Remedial
Action. If ATS conducts any Remedial Action related to the Product
and GBI
is
determined to be (either by mutual agreement or by arbitration
pursuant
to
the terms of this Agreement) responsible for the problem requiring
the
Remedial Action (i.e., a problem arises from faulty manufacture),
GBI, at
ATS' option, will
either issue a credit to ATS or reimburse ATS for the
sales price of all ATS devices recalled in such Remedial Action and
the
other reasonable costs of conducting such Remedial Action. GBI
shall have
sole
responsibility for handling any CAPA's. ATS shall cooperate with
GBI
to
the extent reasonably requested by GBI in handling any CAPA.
4.6. Complaints and Medical Device Reporting. Each party will
comply with
applicable provisions of the Medical Device Reporting systems,
including
the
requirements of 21 CFR Part 803, and each party will cooperate with
the
other for the efficient compliance therewith. ATS and GBI agree to
notify
the
other within two (2) business days of receipt from any customer of
any
complaint or Medical Device Report ("MDR") filable complaint
relating to
the
Product. ATS will investigate such complaint or MDRs/Vigilance
Reports
and
forward to GBI all information relating to any defects in the
performance, design, or quality of the Products. GBI shall
investigate all
instances of product failure or inadequacy documented by ATS and
forwarded
by
ATS for investigation. GBI shall provide a written summary of
the
findings from such investigation to ATS within seven days following
the
date
that GBI is informed of such complaint or MDR. ATS shall have
sole
responsibility for filing the MDR with the appropriate regulatory
agency.
4.7. Vigilance Reporting. ATS will notify GBI in writing if a
Vigilance Report
is
required to be filed with respect to the Product. ATS, at its sole
cost
and
expense, will be responsible for complying with Vigilance
Reporting
requirements for the Product in cooperation with GBI as the
manufacturer of
the
Product. GBI will remain responsible for any and all Product
investigation as provided in Section 4.6.
4.8. ATS Audits. GBI will give ATS reasonable access to its records
to allow ATS
to
conduct full compliance audits relating to the Product, at ATS'
expense,
as
reasonably deemed necessary by ATS, but no more frequently than
once in
any
twelve (12) month
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4.9. period. The audit may include, without limitation, records
relating to
manufacturing
compliance with the Specifications, compliance with quality
control and inspection reports procedures, compliance with
GMP/QSR
Regulations, CE mark certification records and procedures,
regulatory
compliance, and after the following certifications have been
obtained
compliance with ISO 13485:1996 and EN 46001 requirements. Such
audits will
be
conducted during GBI's normal business hours, after two (2) weeks
prior
written notice to GBI by ATS, and at times mutually agreeable to
the
parties. GBI will make its regulatory compliance and quality
assurance
personnel reasonably available to ATS in connection with such
audits. If
ATS
recommends any corrective actions to GBI in connection with
such
audits, GBI will take any corrective action recommended by ATS
within
thirty (30) days of receipt of any corrective action
recommendations, if
possible, or will inform ATS in writing of the reasons why GBI
believes
such
corrective action is not required or cannot be completed within
such
30-day period. ATS will be given access to audit any corrective
action.
4.10. Regulatory Inspections. GBI will promptly notify ATS of any
inspection of
its
facilities manufacturing the Product or any component part of a
Product
by
the FDA, ISO, CE mark certification organization or other
federal,
state, or local regulatory agency which relates to the
manufacture,
assembly, or packaging of the Product and provide ATS with
information
about the progress and
outcome of such inspection, including, without
limitation, copies of any notice of observations or warnings,
requests for
Remedial Action, CAPA's or other adverse findings.
ARTICLE 5
RESEARCH AND DEVELOPMENTS COSTS
5.1. Research and Development Costs. Except as otherwise provided
in Section
5.2,
GBI shall fund the development of the Products at its sole cost
and
expense as more particularly set forth in the Development Plan
attached as
Exhibit A. Upon commercialization of the Products, GBI shall
provide, at
its
own cost and expense, on-going research and development and
training
support of the Products, as more specifically provided in Sections
12.2 and
12.3
of this Agreement.
5.2. Payments by ATS. ATS will pay GBI ***** Dollars ($*****) upon
execution of
this
Agreement as payments for GBI's research and development efforts.
ATS
will
pay GBI an additional ***** Dollars ($*****) upon obtaining
clearance
of
the 501(k) Premarket Notification filings from the FDA for the
first two
(2)
of the four (4) Products identified in Section 1.22(i)-(iv).
ARTICLE 6
INTELLECTUAL PROPERTY
The Parties contemplate that inventions may be developed or
conceived by either
Party alone or by the Parties jointly in furtherance of the
development set
forth in this Agreement and agree with respect to such inventions
as follows:
***** Denotes confidential information that has been omitted from
the exhibit
and
filed separately, accompanied by a confidential treatment request,
with
the
Securities and Exchange Commission pursuant to Rule 24b-2 of
the
Securities Exchange Act of 1934.
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6.1. Ownership Generally. Except as otherwise specifically set
forth in this
Article 6 and subject to the licenses granted in this Agreement,
GBI shall
own
all right, title and interest in and to GBI Confidential
Information
and
GBI Inventions and ATS shall own all right, title and interest in
and
to
ATS Confidential Information and ATS Inventions. The ownership of
Joint
Inventions shall be as set forth in Section 6.2.
6.2. Patenting Joint Inventions.
(a)
Except as otherwise
set forth in this Agreement, if the Parties
develop, invent or conceive a Joint Invention during the term of
this
Agreement, the Joint Invention(s) shall have joint ownership.
Each
Party shall promptly provide notice to the other and shall
disclose
any Joint Invention to the other in sufficient technical detail
to
allow the other Party to evaluate such Joint Invention. In
addition,
GBI shall provide ATS with sufficient information to file a
patent
application on the Joint Invention, if desired. ATS shall have
the
exclusive right (except as set forth below) to prosecute (or
not
prosecute and maintain as trade secret information) and maintain
all
patent applications related to Joint Inventions, provided the
Parties
are identified as co-owners of such Joint Invention, and any
patents
issuing therefrom and to enforce and defend such patents and/or
any
and all intellectual property rights arising from such Joint
Inventions. Each Party represents and warrants to the other that
all
employees and consultants of such Party have agreements with
such
Party assigning rights in all inventions to ATS or GBI, as
applicable.
(b)
All patent maintenance
fees related to Joint Inventions shall be paid
by ATS no later than thirty (30) days before the due date. ATS
will
notify GBI regarding each maintenance fee payment that has been
made
by ATS no later than fifteen (15) days before the due date. If
ATS
does not pay the maintenance fee for any patent as required hereby,
or
if ATS does not notify GBI of such payment, GBI shall have the
right
to pay the fee and be reimbursed by ATS for such fee and any
expenses
incurred (including reasonable attorneys' fees) in arranging
for
proper filing and payment of such fee and in seeking
reimbursement
from ATS.
(c)
If ATS fails to take
reasonable actions to defend patents and/or
intellectual property rights arising from Joint Inventions
within
sixty (60) days following a written demand made by GBI (or sooner
if
any statute of limitation or other enforceability right will
expire),
then GBI may commence action to defend and protect such rights.
ATS
shall reimburse GBI for any expenses (including reasonable
attorneys'
fees) incurred in such action.
(d)
Any amount recovered
in any action to defend or enforce patents or
intellectual property rights arising from Joint Inventions shall
first
be applied to the expenses of pursuing such action. Any excess
recovery shall be split equally between the Parties.
6.3. Marketing Joint Inventions. Joint Inventions which constitute
Products
shall be manufactured and distributed pursuant to the terms of
this
Agreement. With respect to
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each
Joint Invention which is not a Product (a "Non-Product Joint
Invention") either Party may notify the other of its desire to
further
develop and commercialize such Non-Product Joint Invention. For a
period of
ninety (90) days after the date of delivery of such notice, the
Parties
shall negotiate in good faith with respect to the terms of the
further
development and commercialization of such Non-Product Joint
Invention.
During such 90-day period, neither party will enter into an
agreement with
any
third party for the development, distribution, supply or other
commercialization of such Non-Product Joint Invention and none of
ATS, GBI
or
any officer, director, employee or representative of ATS or GBI
shall
solicit or conduct any discussions or negotiations with, or
provide
information to, any third party with respect to the Non-Product
Joint
Invention. Each Party will promptly communicate to the other the
terms of
any
proposal or inquiry it receives from any third party or attempts
to
initiate such discussions or negotiations by any third party with
respect
to
such a transaction. If during such 90-day period, ATS and GBI are
unable
to
agree upon mutually acceptable terms and conditions for the
development
of
such Non-Product Joint Invention, and such time period has not
been
extended by mutual agreement, then each Party shall have the right
to
pursue development and commercialization of the Non-Product Joint
Invention
pursuant to the profit sharing rights set forth in Section 6.4.
6.4. Profit Sharing from Non-Product Joint Inventions. Except as
otherwise
agreed in writing, any net profits made by either Party from the
sale,
transfer or other commercialization of a Non-Product Joint
Invention shall
be
split evenly between the Parties. Within thirty (30) days after
each
calendar quarter, in which a Party has gross receipts from
commercializing
a
Non-Product Joint Invention, such Party shall submit a report to
the
other Party identifying gross receipts from Non-Product Joint
Inventions
and
a net profit calculation with a reasonably detailed explanation of
the
amounts deducted from gross receipts accompanied by payment of
fifty
percent (50%) of the net profit amount, if any.
ARTICLE 7
AUDIT RIGHTS
7.1. Each Party and its respective Affiliates, subdistributors,
agents and
sublicensees shall maintain accurate books and records in
accordance with
generally accepted accounting principals and showing sales of the
Products
and
Non-Product Joint Inventions by such Party and its Affiliates,
subdistributors, agents and sublicensees in sufficient detail to
enable Net
Sales and/or net profits pursuant to Section 6.4 payable hereunder
to be
determined and to otherwise enable each Party to monitor compliance
by the
other with the terms of this Agreement. Each Party (or its
accountants)
shall have the right to inspect such books and records at
reasonable
intervals (but no more frequently than once in any twelve (12)
month
period) and upon reasonable prior written notice. Such inspections
shall
occur during normal business hours at the offices of the Party
being
inspected and at the expense of the inspecting Party; provided,
however,
that
if such inspection shall reveal an underpayment by a Party of
amounts
actually due of more than five percent (5%), then the Party being
inspected
shall bear the expense of such inspection. Any deficiencies in
payment
shall be immediately due and payable together with interest at the
rate of
eighteen percent (18%) per annum from the date or dates such
amounts should
have
been paid.
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ARTICLE 8
APPOINTMENT AS EXCLUSIVE DISTRIBUTOR
8.1. Scope. Subject to the terms and conditions of this Agreement,
GBI grants to
ATS
and its Affiliates the exclusive right to market, sell and
distribute
the
Products in the Territory.
8.2. Exclusivity. ATS' distribution rights under this Agreement
shall be
exclusive in the Territory for the Products. GBI represents and
warrants to
ATS
that GBI has not entered into any other agreements, written or
oral,
with
any third party permitting the sale or distribution of Products in
the
Territory, and covenants and agrees that during the term of this
Agreement,
GBI
will not enter into any such agreement or itself sell or distribute
any
Products in the Territory.
8.3. Subdistributors and Subagents. ATS may appoint subdistributors
or subagents
for
distribution of the Products in the Territory, and will provide to
GBI
a
list of such subdistributors from time to time. Notwithstanding
such
appointment of subdistributors, ATS shall remain fully responsible
for the
performance of all of its covenants and obligations hereunder, and
any
sales by GBI to such subdistributor shall be billed by GBI to ATS
directly.
8.4. Additional Products. ATS' right to distribute Products under
this Agreement
includes the right to distribute Additional Products. If GBI,
individually
or
jointly with ATS, develops Additional Products during the term of
this
Agreement, GBI shall notify ATS in writing promptly after GBI
estimates the
date
that such Additional Product will be available for commercial sale
in
the
Territory, and this Agreement shall automatically be amended to
include
any
such Additional Products.
8.5. New Products.
(a)
If GBI or ATS develops
a New Product (excluding a Joint Invention)
during the term of this Agreement, GBI or ATS, as applicable,
shall
notify the other Party in writing (a "New Product Development
Notice")
promptly after GBI or ATS, as applicable, estimates the date that
such
New Product will be available for commercial sale in the
Territory,
and (i) if GBI develops a New Product, ATS will have the right for
a
period of ninety (90) days after the date ATS receives the New
Product
Development Notice to negotiate distribution rights, transfer
pricing,
and other terms and conditions applicable to such New Product on
terms
that are substantially consistent with this
