AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT (the "Agreement") is
entered into as of the _____ day of August, 1997, by and between XXXXXX MEDICAL
TECHNOLOGY, INC., a Delaware corporation, having offices at 0000 Xxxxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxxx 00000 ("Xxxxxx") and TISSUE ENGINEERING, INC., a Delaware
corporation, having offices at The Fargo Building, 000 X Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (the "Company").
WHEREAS, the Company has developed and owns technology to produce
collagen-based scaffolds which can be used, among other things, for ligament and
tendon reconstruction, for cartilage regeneration, and for use with calcium
phosphate/sulfate as a bone graft substitute (collectively, the "Technology");
and
WHEREAS, Xxxxxx and the Company agreed, pursuant to a Joint Venture
Agreement dated July 12, 1996, (the "Original Agreement") to form a jointly
owned Delaware limited liability company (the "LLC") for the purpose of broadly
commercializing products for use in the treatment of musculoskeletal problems
based on the Technology (the "Products"); and
WHEREAS, the partners are entering into this Agreement to clarify and
correct certain ambiguities in the Original Agreement;
NOW, THEREFORE, in consideration of the premises and actual covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. AMENDMENT. The Original Agreement is hereby amended and restated
in its entirety by this Agreement.
SECTION 2. DEFINITIONS. The following definitions shall apply to this
Agreement:
"Additional Note" shall have the meaning given to it in Section 4(C)
hereof.
"Approved Marketing Expenses" for any period shall mean the total amount of
marketing expenses mutually agreed upon by Xxxxxx and the Company for such
period when Products become available for marketing (i.e., Food and Drug
Administration approval of the first Product). Within thirty (30) days following
the end of each Contract Year,
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Xxxxxx shall provide the LLC with a written reconciliation of actual marketing
expenses and the Approved Marketing Expenses for such year. In the event the
actual marketing expenses do not exceed the Approved Marketing Expenses that had
been returned to Xxxxxx that year, the difference shall be added to Gross
Xxxxxxxx for the month in which the reconciliation is presented. Xxxxxx shall be
solely responsible for any actual marketing expenses that exceed the Approved
Marketing Expenses for any year.
"Approved R&D Expenses" for any period shall mean the total amount of
research and development expenses mutually agreed upon by Xxxxxx and the Company
for such period, either by separate agreement or as included in a Budget as
defined below. Within thirty (30) days following the end of each Contract Year,
the Company shall provide the LLC with a written reconciliation of actual
research and development expenses and the Approved R&D Expenses for such year.
In the event that the actual research and development expenses do not exceed the
Approved R&D Expenses that had been returned to the Company that year, such
difference shall be added to Gross Xxxxxxxx for the month in which the
reconciliation is presented. The Company shall be solely responsible for any
actual research and development expenses that exceed the Approved R&D Expenses
for any year, unless provision is made by the LLC for such research and
development Expenses and for other mutually agreed upon research and development
expenses to be paid by funds raised by the LLC.
"Budget" shall mean the annual budget of the LLC approved by Xxxxxx and the
Company, which shall include, among other things, budgets for sales forecasts,
Approved Marketing Expenses, Approved R&D Expenses, intellectual property
development, patent prosecution and maintenance expenses, pre-clinical and
clinical costs and expenses, administrative and accounting expenses; provided
that the initial budget for the LLC is attached hereto as Exhibit D.
"CGS" shall mean the Company's actual fully absorbed costs to manufacture
each Product sold.
"Commissions" shall mean the actual sales commissions to be paid by Xxxxxx
on the sale of the Products.
"Contract Year" shall mean each twelve month period commencing on January 1
and ending on December 31; provided that the first Contract Year shall commence
upon execution of this Agreement and end on December 31, 1996.
"Expenses" shall mean (1) Commissions; provided, however, that in any one
month period those Commissions may not exceed twenty percent
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(20%) of the Gross Xxxxxxxx; (2) the CGS; (3) Approved Marketing Expenses;
provided, however, that such marketing expenses shall cease to be deducted when
the aggregate Approved Marketing Expenses for a given year have been repaid to
Xxxxxx; (4) Xxxxxx'x shipping costs for Products sold if such costs are able to
be billed by Xxxxxx to the customer and if not otherwise included in CGS; (5)
Approved R&D Expenses, manufacturing scale-up and manufacturing expenses
incurred by the Company; (6) all costs and expenses of Xxxxxx associated with
pre-clinical animal studies and clinical studies; and (7) any other expenses
that Xxxxxx and the Company agree to deduct.
"Field" shall mean the field of musculoskeletal applications, excluding
dental applications.
"Formation Date" shall have the meaning given to it in Section 4(A) hereof.
"Gross Xxxxxxxx" shall mean the sum of (1) the gross sales price charged by
Xxxxxx, (2) excess Approved Marketing Expenses and (3) excess Approved R&D
Expenses.
"Initial Note" shall have the meaning given to it in Section 4(B)(1)
hereof.
"License" shall mean the royalty free, exclusive and perpetual license
granted by the Company for the Technology for use in the musculoskeletal field,
excluding dental applications, to the LLC pursuant to a license agreement
substantially in the form of Exhibit A attached hereto.
"Net Profit" for any period shall mean the aggregate Gross Xxxxxxxx minus
Expenses.
"Proprietary Information" shall mean any information of either party or the
LLC that might reasonably be considered proprietary, secret, sensitive or
private, including but not limited to: (a) technical information, know-how,
data, techniques, discoveries, inventions, ideas, unpublished patent
applications, trade secrets, formulae, analyses, laboratory reports, other
reports, financial information, studies, findings, or other information relating
to the LLC or the Technology or methods or techniques used by the LLC, whether
or not contained in samples, documents, sketches, photographs, drawings, lists
and the like; (b) data and other information employed in connection with the
marketing of the Products, including cost information, business policies and
procedures, revenues and markets, distributors and customers, and similar items
of information whether or not contained in documents or other tangible
materials; or (c) any
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other information obtained by any party to this Agreement during the term
hereof, that is not generally known to, and not readily ascertainable by proper
means by, third parties.
SECTION 3. PURPOSE OF THE LLC. The LLC will be established for the purpose
of commercializing products in the Field based on the Technology. It is expected
that the LLC initially will focus a large share of its efforts toward products
that can be manufactured using the Technology and commercialized in the near
future. It is also expected that an appropriate balance of longer term product
opportunities will be maintained, working to develop commercializable products.
The parties hereto agree to negotiate in good faith to enter into one or more
additional LLC agreements in the event transactions contemplated by this
Agreement result in additional product ideas.
SECTION 4. FORMATION OF LLC; FURTHER CAPITAL CONTRIBUTIONS;
ADDITIONAL AGREEMENTS OF THE PARTIES.
A. As soon as practicable following the execution of this Agreement, the
parties hereto shall cause the LLC to be formed as a limited liability company
pursuant to the laws of the State of Delaware by entering into a Limited
Liability Company Agreement (the "Charter"). The date of such filing is
hereinafter referred to as the "Formation Date". To the extent that there is any
conflict between the terms of the Charter and the terms of this Agreement, the
terms of this Agreement shall control.
B. On the Formation Date:
1. Xxxxxx shall contribute to the LLC (a) initial administrative,
accounting and legal support in order to create the LLC and (b) a promissory
note in the amount of $1,500,000 (the "Initial Note"), which Initial Note shall
be drawn down on demand by the LLC in accordance with the Budget, in exchange
for issuance by the LLC on the Formation Date of 49% of the validly issued,
fully paid and nonassessable shares of capital stock of the LLC issued and
outstanding on the Formation Date.
2. The Company shall contribute to the LLC the License to the Technology in
exchange for issuance by the LLC on the Formation Date of 51% of the validly
issued, fully paid and nonassessable shares of capital stock of the LLC issued
and outstanding on the Formation Date.
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3. Xxxxxx and the Company shall execute an interest holders agreement
substantially in the form of Exhibit B attached hereto.
X. Xxxxxx hereby agrees to make additional funding contributions to the
LLC, in furtherance of the LLC, in the amount of $1,500,000 on each of the first
and second annual anniversary of the Formation Date; provided that each such
obligation shall be satisfied by delivering to the LLC a promissory note in the
amount of $1,500,000 (the "Additional Note"). To the extent that the LLC is able
to raise its own capital, or arrange for its own financing, Xxxxxx shall be able
to charge the LLC reasonable fees reflecting its fully absorbed cost for
providing administrative, accounting, legal, regulatory and clinical support
provided to the LLC and, in addition to the research and development provided
pursuant to the Budget for the first three years, beginning on the four year
anniversary of the execution of this Agreement, the Company shall be able to
charge the LLC for research and development support and support of product
manufacturing at normal commercial rates for such services.
D. The Company hereby agrees to grant to Xxxxxx an irrevocable voting proxy
for that number of shares of capital stock of the LLC equal to 1% of the issued
and outstanding stock of the LLC on the Formation Date, it being the intent of
the parties hereto that the Company and Xxxxxx each have a right to vote 50% of
the issued and outstanding stock of the LLC at all times; provided, however,
that in the event that Xxxxxx is a party to any agreement that prohibits it from
exercising such voting proxy, such proxy shall be granted to an independent
third party mutually acceptable to both Xxxxxx and the Company; and provided,
further, that Xxxxxx shall have the option to purchase such 1% interest for
$1.00 at anytime following the Formation Date. Furthermore, the Company hereby
agrees to take all action necessary to ensure that any such proxy continues in
perpetuity, including without limitation, executing subsequent voting proxy upon
the expiration of any existing proxy under applicable Delaware law or, at the
request of Xxxxxx, entering into a voting trust to effectuate the purposes set
forth in this Section 4(D).
SECTION 5. CORPORATE GOVERNANCE; MANAGEMENT.
A. Except as otherwise required by law or as provided in the Charter,
responsibility for the management, direction and control of the LLC shall be
vested in the managers of the LLC. The Charter shall provide for the election of
four managers.
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B. The managers of the LLC shall be elected annually at annual meetings of
the members of the LLC. It is understood and agreed by the parties hereto that
two of the managers of the LLC shall be individuals nominated by Xxxxxx and two
of the managers of the LLC shall be individuals nominated by the Company. Each
of the parties hereto covenants and agrees to vote its shares of stock of the
LLC to cause the election of the managers nominated in accordance with the
foregoing. In the event of the death, incapacity, resignation or removal of a
manager prior to the end of his or her term, each of the parties hereto agrees
to vote its shares of stock so as to appoint as his or her replacement a manager
nominated by the party hereto who nominated the manager whose death, incapacity,
resignation or removal was the cause of such vacancy.
X. Xxxxxx and the Company shall take all actions necessary or appropriate
to ensure that the Charter accurately reflects the arrangements set forth in
this Section 5.
D. The management of the LLC shall be comprised of officers designated by
the managers of the LLC. Each of the parties hereto hereby covenants and agrees
to cause the managers of the LLC nominated by it to cast their votes so as to
appoint as officers of the LLC individuals who qualify under the foregoing
provisions of this Section 5(D). In the event of death, incapacity, resignation
or other removal of an officer prior to the end of his or her term, each of the
parties hereto agrees to cause the directors of the LLC to cast their votes so
as to appoint his or her replacement a nominee who qualifies under said
foregoing provisions of this Section 5(D).
E. Notwithstanding anything to the contrary contained herein, the parties
hereto hereby agree to use their best efforts to avoid the occurrence of any
deadlock and further agree to use their best efforts to resolve any deadlock as
expeditiously as possible.
F. The parties hereto agree that the managers of the LLC shall meet at
least once each calendar quarter at such time and place acceptable to all
managers, and at each annual meeting of the managers, an annual operating Budget
of the LLC shall be adopted.
G. If the parties are unable to agree at any managers' meeting to act upon
a resolution approving the LLC's annual operating plan and Budget, the parties
hereto agree that a top-level meeting be convened between the parties, attended
by corporate officers of each party with decision-making authority regarding the
dispute, in order to attempt in good faith to resolve the matter. At such
meeting each of the parties hereto will use its best efforts to resolve the
deadlock and such meeting shall continue until a resolution is achieved.
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SECTION 6. RESEARCH AND DEVELOPMENT ACTIVITIES.
X. Xxxxxx will use its best efforts to obtain regulatory approval to sell
and distribute the Products. In connection therewith, Xxxxxx and the Company
will meet, discuss and formulate a plan for Xxxxxx to fund pre-clinical animal
studies and clinical trials to be conducted by the LLC, which funding shall be
reimbursed pursuant to Section 4(c) hereof. Xxxxxx and the Company agree to
establish a clinical trials committee (the "CTC"), comprised equally of members
from Xxxxxx and the Company. The CTC will design and supervise the clinical
trials and shall have the full authority to direct the conduct of such clinical
trials. The CTC will operate by consensus, however, in the event the members of
the CTC cannot unanimously agree upon any given matter (other than matters
related to the funding of the clinical trials), such matter shall be referred to
and resolved by an oversight committee comprised of an equal number of
independent members from the respective scientific advisory boards of Xxxxxx and
the Company.
X. Xxxxxx agrees that it shall use commercially reasonable efforts to
assist and consult with the LLC with respect to financial, accounting,
regulatory, engineering and manufacturing matters relating to the Products.
C. The LLC shall use the Company exclusively for research and development
services. In providing such services, the Company shall retain employees and
consultants and purchase such equipment and supplies in accordance with the
Budget and for its own account. The Company shall be reimbursed for such
expenditures, as well as for overhead and other expenditures set forth in the
Budget, in accordance with the Budget. In the event the Company ceases to
provide such research and development services, the LLC shall be permitted to
find alternatives sources of research and development services.
D. (1) After the fourth anniversary of this Agreement, the Company shall
provide research and development services to the LLC and (2) upon commencement
of production of any Products, the Company shall provide manufacturing services,
each on financial terms to be mutually agreed upon by the Company, the LLC and
Xxxxxx.
SECTION 7. DISTRIBUTION RIGHTS; INTELLECTUAL PROPERTY
RIGHTS.
A. In furtherance of the LLC, the Company hereby agrees to cause the LLC to
grant and convey to Xxxxxx the world-wide exclusive rights to sell, market,
distribute and conduct all incidental and necessary activities thereto with
respect to the Products pursuant to
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a distribution agreement substantially in the form of Exhibit C attached hereto.
B. The Company shall own all patents associated with the Technology;
provided that the Company hereby grants the LLC a royalty-free license to the
Company's intellectual property to the extent necessary to make, use and sell
any Product, including without limitation, any and all patents and registered
trademarks, which license shall be exclusive for musculoskeletal use. Such
license shall automatically transfer to any successors in interest of the LLC.
Xxxxxx shall have the right to develop and own trademarks and tradenames for the
sale of the Product; provided that Xxxxxx shall undertake to acknowledge in any
Product literature that the Company participated in the invention of such
Product. Any intellectual property developed by either party, or by any third
party, pursuant to work commissioned as an Approved R&D Expense shall be owned
by the LLC. Patent prosecution and maintenance costs associated with such
intellectual property shall be paid by the LLC. Research and development
conducted by either party, independent of this Agreement, or not commissioned as
an Approved R&D Expense, and the intellectual property associated therewith,
shall be owned by the party conducting such research and development.
SECTION 8. PROFIT SHARING; SALES; FORECASTS, ETC.
A. Profit Sharing. The LLC shall pay each of Xxxxxx and the Company fifty
percent (50%) of all Net Profits, if any, on the sale of any Products during
each month; provided that, if in any month Expenses exceed Gross Xxxxxxxx, such
excess Expenses shall be carried forward and deducted in the following month on
a pro rata basis consistent with the percentage of Expenses incurred and paid
that month to Xxxxxx and the Company respectively. The Net Profit calculation
shall be conducted by Xxxxxx, and the LLC shall tender any payment to the
Company and Xxxxxx, or in the case of Xxxxxx, reduce the Initial Note or
Additional Notes, within 90 days of the end of each month.
B. Sales. Xxxxxx hereby agrees to use commercially reasonable efforts to
promote the Products in accordance with the Budgets.
C. Forecasts. Xxxxxx shall provide quarterly sales forecasts that will
include its best forecast for sales in the succeeding three (3) months as well
as projected sales for the succeeding twelve (12) months.
D. Orders and Receivables. Xxxxxx shall take all orders for the Products.
Upon notification from Xxxxxx, the Company shall be
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responsible for promptly delivering such Products directly to the customer or
Xxxxxx, as directed by Xxxxxx from time to time. The Company shall provide the
Product packaged and sterile according to Xxxxxx'x packaging instructions.
Xxxxxx shall be responsible for all billing and collections. Freight shall be
shipped F.O.B. the Company and shall be added by Xxxxxx to all xxxxxxxx to
customers, if acceptable to the marketplace.
SECTION 9. ACCOUNTING AND GENERAL REPORTING.
A. The accounting period of the LLC shall commence on January 1 of each
year end on December 31 of the following; provided that the first accounting
period of the LLC shall commence as of the date this Agreement is executed and
end on the next following December 31.
X. Xxxxxx shall be responsible for keeping all books and records of the LLC
in accordance with sound and generally accepted accounting principles applicable
to the LLC and corporate practices consistently applied. Xxxxxx shall make and
keep books, records and accounts that in reasonable detail accurately and fairly
reflect the transactions of the LLC.
X. Xxxxxx shall prepare monthly, quarterly and annual financial statements
of the LLC. Such financial statements shall be prepared in accordance with
generally accepted accounting principles. Xxxxxx shall submit such statements to
the Company as soon as practicable (but not later than 45 days in the case of
monthly and quarterly financial statements and 90 days in the case of annual
financial statements) after the end of each period.
D. Each party shall have the right, upon 10 days notice, to inspect the
financial records of the other party and the LLC only as they relate to the
calculation of Expenses (including without limitation, commissions, Approved
Marketing Expenses and Approved R&D Expenses), Gross Xxxxxxxx and the
calculation of Net Profit. All materials reviewed and all materials prepared by
the other party based upon the audit shall remain confidential and not be used
for any purpose other the operation or enforcement of this Agreement.
SECTION 10. PROPRIETARY INFORMATION.
A. All business, technical, research and development and financial
information and materials containing such business information provided by the
parties to each other, including without limitation, lists of present or
prospective customers or vendors or of persons that have or shall have dealt
with the respective parties hereto, customer requirements, preferences and
methods of operation,
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management information reports and other computer generated reports, pricing
policies and details, details of contracts, operational methods, plans or
strategies, business acquisition plans, new personnel acquisition plans,
product information and samples, technology, know-how, patent applications,
designs and other business, technical, research and development and financial
affairs learned heretofore or hereafter, are and shall be treated as
confidential. Each party agrees for itself and on behalf of its directors,
officers, employees and agents to whom such information and materials are
disclosed, that it and they shall keep such information and materials
confidential and retain them in strictest confidence both during and after the
term of this Agreement. Such information and materials shall not be disclosed by
either party to any person except to its officers and employees requiring such
information or materials to perform services pursuant to this Agreement and
except to other persons under a confidentiality agreement with either party
protecting such information from disclosure. Each party acknowledges and agrees
that it shall be liable to the other for damages caused by any breach of this
provision or by any unauthorized disclosure or use of such confidential
information and materials by its officers and employees or third parties to whom
unauthorized disclosure was made. In addition to any other rights or remedies
that may be available to each party, each party shall be entitled to appropriate
injunctive relief or specific performance against the other or its officers and
employees to prevent unauthorized disclosure of such confidential information
and materials or other breach of this provision. Each party acknowledges and
agrees that such unauthorized disclosure or other breach of this provision will
cause irreparable injury to the other party and that money damages will not
provide an adequate remedy. Each party shall be entitled to recover from the
other its costs, expenses and attorneys' fees incurred in enforcing its rights
under this Section 9. Each party shall return to the other all such information
and materials covered under this Section 9 and received pursuant to this
Agreement and all copies thereof immediately upon the termination of this
Agreement.
B. This obligation of confidentiality shall not apply to any information
that (1) was known to the receiving party at the time of receipt as evidenced by
tangible records; (2) was in the public domain at the time of receipt; (3)
becomes publicly available through no fault of the party obligated to keep it
confidential; (4) such party legitimately learns from third parties who are
under no obligation of confidentiality with respect to the information; or (5)
is required by applicable law or court order or other mandatory legal process to
be disclosed.
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C. The provisions of this Section 10 shall survive the termination or
expiration of this Agreement.
SECTION 11. OPERATION OF THE LLC.
A. The Company shall provide the LLC with product research and development
services, engineering support, patent services, as well as manufacture the
Products for sale by the LLC, all pursuant to the Budget of Approved R&D
Expenses. As set forth in the Budget, the Company hereby agrees to provide
continuing research and development support necessary to meet customer demand,
technological advances and as may reasonably be requested by the LLC or Xxxxxx,
and employees of the Company shall be regularly available to consult and work
with the LLC and Xxxxxx on such research and development. In addition, the
Company shall manufacture and supply all Products necessary for the conduct of
the LLC's business; provided that the LLC may use an alternative manufacturer or
supplier that it determines is more cost effective than the Company. In order to
receive the necessary funding for the conduct of all Approved R&D Expenses and
all other Expenses set forth in the Budget, the LLC shall be allowed to draw
down upon the Initial Note on the first of each month an advance of $100,000, to
be used to fund Approved R&D Expenses of the LLC. Within seven days following
the end of each calendar month, the Company shall provide a reconciliation of
the previous month's Approved R&D Expenses. This advance shall be transferred by
wire directly to a segregated non-commingle operating account of the Company by
the 1st of the month. If during any month the reconciliation reflects a credit
balance in excess of $10,000, or if a large purchase is anticipated exceeding
$10,000, this monthly advance amount may be adjusted accordingly by mutual
agreement between Xxxxxx and the Company.
X. Xxxxxx shall provide the LLC with administrative services, accounting
services and marketing service, all pursuant to the Budget of Approved Marketing
Expenses. In addition, Xxxxxx shall be fully responsible for any and all
regulatory approvals necessary for the public sale and marketing of the Product
and all labeling and warnings associated with the Product. The Company promptly
shall provide Xxxxxx notice of any and all claims from third parties regarding
any of the Products, including events that may be reportable as an under any
current or future Food and Drug Administration MDR (medical device reporting)
regulations. Upon request, Xxxxxx shall consult with the Company regarding,
and/or provide the Company with proof of any regulatory approvals. In order for
Xxxxxx and the Company to be reimbursed for expenses detailed in Section 3(C)
hereof, and for those Approved Marketing Expenses and all other Expenses set
forth in the Budget, Xxxxxx and the Company shall provide the LLC with monthly
invoices, which invoices shall set forth in reasonable detail the
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services provided and which shall be paid within 15 days of receipt by the LLC.
X. Xxxxxx shall be the exclusive distributor of all Products, and shall be
entitled to distribute the Products in a manner consistent with the
distribution of its own products.
D. The LLC shall be managed in accordance with its Budget and detailed
business plans. In accordance with the initial Budget, the LLC shall be
permitted to draw down the Initial Note upon demand in amounts equal to
approximately $800,000 for direct expenses and approximately $700,000 for
indirect expenses. In addition, the LLC shall be permitted to draw down upon
each Additional Note in amounts necessary to fund operations.
SECTION 12. COVENANTS OF THE PARTIES.
A. Except as otherwise expressly provided herein, all costs and expenses
incurred in connection with the preparation and execution of this Agreement and
the transactions contemplated hereby, including without limitation, attorneys'
fees and advisors' fees, if any, will be paid by the party incurring such costs
and expenses.
B. Each of the parties hereby agree to use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws, rules and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including without limitation, any state or federal regulatory filings. In the
event that at any time after the execution of this Agreement, further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers or directors of each of the parties shall take such necessary action.
C. Upon execution of this Agreement, and continuing during its term, the
Company shall provide the LLC access to, or copies of, all documents and things
in the Company's control which relate to the Products and are necessary for the
LLC to conduct its business, including without limitation, obtaining regulatory
approval for any Product.
D. The Company hereby agrees to use its reasonable efforts during the term
of this Agreement to actively seek to develop the Products and to make prudent
and efficient use of the Initial Note and Additional Note, as well as its own
research and development expenditures. As used in this Agreement, the term
"best efforts" shall mean the commercially reasonable efforts that a prudent
person desiring to
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achieve a particular result would use in order to ensure that such result is
achieved as expeditiously as possible.
E. Each of the parties hereto hereby agrees to at all times conduct its
efforts hereunder in strict compliance with all applicable federal, state and
local laws and regulations and with the highest government standards.
F. Each of the parties hereto hereby agrees to use its best efforts to
arrange for independent financing for the LLC; provided, that in the event that
the LLC obtains such independent financing, the parties hereto hereby agree to
cause the LLC to distribute the first $1,000,000 of any such proceeds to Xxxxxx
as a return of its Initial Note.
SECTION 13. LIABILITY.
A. The Company shall indemnify and hold harmless Xxxxxx from all liability,
damages, costs and expenses (including reasonable attorneys' fees) incurred as a
result of any claims, actions, judgments and demands for injuries to persons or
property arising from any and all design or manufacturing defects in the
Products (collectively, a "Claim"), and for any conduct of the Company, but not
for claims, actions, judgments, and demands arising from Xxxxxx'x negligence,
gross negligence, or willful misconduct with respect to the sale and
distribution of Products.
X. Xxxxxx shall indemnify and hold harmless the Company from any Claim
arising from Xxxxxx'x negligence, gross negligence, or willful misconduct with
respect to the sale and distribution of Products.
C. The provisions of paragraphs 13(A) and 13(B) hereof shall survive the
expiration and any termination of this Agreement.
D. Upon commercialization of Products, the LLC shall carry liability
insurance regarding the Products in an amount consistent with industry practice,
and each of the Company and Xxxxxx shall carry commercially reasonable amounts
of insurance commensurate with their respective obligations under this Agreement
(including without limitation, its indemnification obligations) and support of
the LLC's operations.
E. With respect to any actual or potential Claim or demand or commencement
of any action, or the occurrence of any other event, relating to any Claim
against which a party hereto is indemnified (the
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"Indemnified Party") by the other party (the "Indemnifying Party") under this
Section 13:
1. Promptly after the Indemnified Party first receives written documents
pertaining to the Claim, or if such Claim does not involve a third party Claim
(a "Third Party Claim"), promptly after the Indemnified Party first has actual
knowledge of such Claim, the Indemnified Party shall give notice to the
Indemnifying Party of such Claim in reasonable detail, stating the amount
involved, if known, together with copies of any such written documentation.
2. The Indemnifying Party shall have no obligation to indemnify the
Indemnified Party with respect to any Claim if the Indemnified Party fails to
give the notice with respect thereto in accordance with this Section 13.
3. If the Claim involves a Third Party Claim, then the Indemnifying Party
shall have the right, at its sole cost, expense and ultimate liability
regardless of the outcome, and through counsel of its choice (which counsel
shall be reasonably satisfactory to the Indemnified Party), to litigate, defend,
settle or otherwise attempt to resolve such Third Party Claim; provided,
however, that if in the Indemnified Party's reasonable judgment a conflict of
interest may exist between the Indemnified Party and the Indemnifying Party with
respect to such Third Party Claim, then the Indemnified Party shall be entitled
to select counsel of its own choosing, reasonably satisfactory to the
Indemnifying Party, in which event the Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such counsel. Notwithstanding the
preceding sentence, the Indemnified Party may elect, at any time and at the
Indemnified Party's sole cost, expense and ultimate liability, regardless of the
outcome, and through counsel of its choice, to litigate, defend, settle or
otherwise attempt to resolve such Third Party Claim. If the Indemnified Party so
elects (for reasons other than the Indemnifying Party's failure or refusal to
provide a defense to such Third Party Claim), then the Indemnifying Party shall
have no obligation to indemnify the Indemnified Party with respect to such
Third Party Claim, but such disposition will be without prejudice to any other
right the Indemnified Party may have to indemnification under this Section 13,
regardless of the outcome of such Third Party Claim. If the Indemnifying Party
fails or refuses to provide a defense to any Third Party Claim, then the
Indemnified Party shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim, through counsel of its choice, on behalf
of and for the account and at the risk of the Indemnifying Party, and the
Indemnifying Party shall be obligated to pay the costs, expenses and reasonable
attorneys' fees incurred by the Indemnified Party in connection with such Third
Party Claim. In any
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event, Xxxxxx and the Company shall fully cooperate with each other and their
respective counsel in connection with any such litigation, defense, settlement
or other attempted resolution.
SECTION 14. TERM AND TERMINATION.
A. The term of the Agreement shall commence as of the date of execution of
this Agreement and unless this agreement is terminated earlier pursuant to the
provisions hereof or otherwise, shall expire upon dissolution of the LLC. During
the term that this Agreement remains in effect, the Company and Xxxxxx agree not
to sell or distribute any other product line similar to the Products for use in
the Field without the consent of the other party; provided, however, that this
restriction shall not apply to any product line incidentally acquired by either
company through the purchase of another entity and subsequently contributed to
the LLC, Xxxxxx'x ownership interest in OsteoBiologics, Inc. or the sale or
distribution by Xxxxxx of products developed by OsteoBiologics, Inc.
B. In addition to other events of termination set forth in this Agreement,
this Agreement shall terminate in the following events:
1. If either party breaches a material term or provision of this Agreement
and the breaching party fails to cure the breach within 180 days after notice
thereof, the non-breaching party may terminate this Agreement, with such
termination effective upon expiration of the 180 day period.
2. If any governmental authority limits the ability of the LLC or the
Company to manufacture or the LLC or Xxxxxx to sell the Products in any material
respect, either party may terminate this Agreement by giving written notice of
termination for such reason to the other party, such termination to be effective
upon the giving of such notice.
C. Upon the expiration or termination of this Agreement, Xxxxxx shall have
no right to order or purchase Products from the Company or the LLC, but may
dispose of its inventory of the Products through normal channels. Upon the
termination of this Agreement, all intellectual property owned by either party,
but licensed to the LLC, shall, subject to the terms of any applicable license
agreement, remain property of the respective party.
SECTION 15. MISCELLANEOUS.
A. Should any provision of this Agreement be determined by a
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court having jurisdiction over the parties and the subject matter to be illegal
or unenforceable in such jurisdiction, the parties agree that such determination
shall not affect or impair the validity or enforceability of such provision in
any other jurisdiction or the validity or enforceability of any other provision.
The determination by a court having jurisdiction over the parties and the
subject matter that any provision of this Agreement is illegal or unenforceable
in such jurisdiction shall also not affect the validity or enforceability of the
other provisions of the Agreement in that jurisdiction.
B. If a claim for indemnification arises under this Agreement, the
Indemnified Party shall give the Indemnifying Party prompt written notice of any
event which might give rise to a claim for indemnification, specifying the
nature of the possible claim and the amount believed to be involved. If the
claim for indemnification arises from a claim or dispute with any third person,
the Indemnifying Party shall have the right, at its own expense, to defend
and/or settle such claim or dispute, and the Indemnified Party shall generally
cooperate fully in any such defense, but at no out-of-pocket cost to the
Indemnified Party.
C. In the event that either party is unable to carry out its obligations
under this Agreement due to force majeure (including, without limitation, acts
of God; war; riot; fire; flood; explosion; labor disputes; embargoes; or
unavailability or shortages of raw materials, bulk, equipment or transport), the
failure so to perform shall be excused and not constitute a default hereunder
during the continuation of the intervention of such force majeure. The party
affected by such force majeure shall resume performance as promptly as
practicable after such force majeure has been eliminated. Notwith standing the
foregoing, in the event either party is unable to carry out its obligations
hereunder by reason of such force majeure for a period of 180 days or more, than
either party may at any time thereafter during the continuation of such force
majeure terminate this Agreement upon notice to the other party setting forth
the circumstances of such force majeure.
D. This Agreement is binding upon and inures to the benefit of the parties
hereto and their respective permitted successors and assigns.
E. This Agreement, including the Exhibits annexed hereto, constitutes the
entire agreement between the parties with reference to the subject matter hereof
and supersedes all previous agreements, representations, memoranda and
undertakings whether verbal or written, between the parties with respect to the
subject matter hereof and may not be changed without the written consent of the
parties.
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F. Except as provided for in Section 5(G), any disputes regarding this
Agreement between the parties shall be settled by binding arbitration under the
rules of the American Arbitration Association. Each party shall pick a single
temporary arbitrator which two arbitrators will then choose the single
arbitrator before whom the dispute shall be heard. The dispute shall be heard
before that single arbitrator in Memphis, Tennessee, if initiated by the
Company and in Boston, Massachusetts, if initiated by Xxxxxx.
G. All notices and reports required or permitted to be given under this
Agreement shall be deemed validly given and made if in writing and delivered
personally (as of such delivery) or sent by registered or certified mail,
postage prepaid, return receipt re quested (as of ten (10) days after deposit in
the mail) or sent by facsimile or overnight courier service, charges prepaid (as
of the date of confirmed receipt) to the party to be notified in care of its
General Counsel at its address (or facsimile number if sent by facsimile) first
set forth above. Either party may, by notice to the other, change its address
and facsimile number for receiving such notices or reports.
H. This Agreement shall be construed in accordance with and governed by the
laws of Tennessee without regard to its principles of conflicts of laws.
I. Nothing contained in this Agreement shall be deemed to constitute either
party as the agent for the other, or to establish a fiduciary relationship of
any kind between the parties.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
XXXXXX MEDICAL TECHNOLOGY, INC.
By: /s/Xxxxx X. Xxxxxxxx, III
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
TISSUE ENGINEERING, INC.
By: /s/Xxxxxx Xxxx
Name: Xxxxxx Xxxx
Title: CEO & President
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