ROYALTY AGREEMENT
This Royalty Agreement (the "Agreement"), is made and entered
into as of December 26, 2000 (the "Effective Date"), by and between Cytomedix,
Inc., a Delaware corporation ("Cytomedix"), and Curative Health Services, Inc.,
a Minnesota corporation ("Curative").
RECITALS
WHEREAS, Cytomedix and Curative are parties to that certain
Amended and Restated Asset Purchase Agreement effective as of October 12, 2000
(the "Asset Purchase Agreement"), pursuant to which Cytomedix has agreed to
purchase certain assets of Curative and its Affiliates as set forth therein; and
WHEREAS, pursuant to Section 2.7(a)(viii) of the Asset
Purchase Agreement, it is a condition to the closing of the transactions
described in the Asset Purchase Agreement that the parties hereto enter into
this Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and legal sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms and
variations thereof have the meanings specified or referred to in this Article I:
"Affiliates" - any person or entity which directly or
indirectly controls, is controlled by, or is under common control with a party
hereto. For purposes of this Agreement, "control" means the legal, beneficial or
equitable ownership directly or indirectly of more than 50% of the aggregate of
all voting equity interests rights in such entity.
"Best Efforts" - the efforts that a prudent person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that a person
required to use Best Efforts under this Agreement will not be required to
dispose of or make any change to its business, or expend any material funds or
incur any other material burden.
"FDA" - the United States Food & Drug Administration, or any
successor agency.
"Future Products" - any products developed and sold by
Cytomedix which embody any of the Patents or are covered by any claim of the
Patents.
"Inter-Creditor Agreement" - that certain Inter-Creditor
Agreement of even date herewith by and among TSENVI, LLC, BEL-CAP Delaware
Investments, LLC, Bristol Investment Fund, Ltd., and Curative.
"Net Sales Amount" - the invoiced amount of sales of Procuren
or the Future Products by Cytomedix or any of its affiliates or sublicensees to
third parties, less the following items: (a) customary trade, quantity and cash
discounts, sales rebates allowed and taken; (b) credits actually given for
rejected or returned products; (c) value-added, sales, use or turnover taxes,
excise taxes and customs duties included in the invoice amount; and (d) bad debt
expense applied in a manner that specifically relates to the Net Sales of the
applicable product and in accordance with GAAP.
"Patents" - the domestic and foreign patents being transferred
from Curative to Cytomedix pursuant to the Asset Purchase Agreement as set forth
on Schedule A, including any continuations-in-part, continuations, divisions,
substitutes, reissues, reexaminations or extensions thereof.
"Procuren" - Procuren(R), a thrombin-induced platelet
releasate.
ARTICLE II.
ROYALTY OBLIGATIONS
Section 2.1 Amount of Payment. Cytomedix shall pay royalties
to Curative during the Term as set forth below:
(a) Cytomedix shall pay Curative three percent (3%)
of the aggregate Net Sales Amount of Procuren (such amount,
the "Procuren Royalty"), on a country by country basis, in
each of the countries listed on Schedule 2.1 (the "Applicable
Countries") for such time as any of the Patents with respect
to such Applicable Country remain valid, enforceable, and in
effect. Cytomedix shall have no further obligation to pay the
Procuren Royalty in any Applicable Country at such time when
no Patent with respect to such Applicable Country remains
valid, enforceable and in effect.
(b) Cytomedix shall pay Curative six percent (6%)
(the "Future Products Royalty Percentage") of the aggregate
Net Sales Amount of the Future Products (the "Future Products
Royalty," and together with the Procuren Royalty, the
"Royalty"), on a country by country basis, in each Applicable
Country for such time as any of the Patents with respect to
such Applicable Country remain valid, enforceable, and in
effect; provided, however, that at such time that the
aggregate worldwide Net Sales Amount of the Future Products
with respect to which the Future Products Royalty has been
paid since the Effective Date exceeds Three Hundred Million
Dollars ($300,000,000), the Future Products Royalty Percentage
shall thereafter be reduced to five percent (5%). Cytomedix
shall have no further obligation to pay the Future Products
Royalty in any Applicable Country at such time that no Patent
with respect to such Applicable Country remains valid,
enforceable and in effect.
Notwithstanding the foregoing, Cytomedix shall have no
obligation to pay any Royalties to Curative in connection with any sales of
Procuren made to Curative or any of its Affiliates pursuant to the terms of that
certain Supply Agreement of even date herewith, by and between Cytomedix and
Curative (the "Supply Agreement") until such time, if any, that Cytomedix
receives FDA approval of Procuren.
Section 2.2 Payment of Royalty. Cytomedix shall pay the
Royalty quarterly. Within forty-five (45) days after the end of each calendar
quarter, Cytomedix shall (a) pay Curative the amount of the Royalty owed by
Cytomedix for such calendar quarter, and (b) provide Curative with a written
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report setting forth the Net Sales Amount with respect to Procuren and the
Future Products for the applicable quarter, and the computation of the Procuren
Royalty and the Future Products Royalty with respect thereto for the applicable
quarter. The Royalty shall be payable in currency of the United States of
America regardless of the country where earned and shall be paid or deposited as
designated in writing by Curative. The exchange rate used to calculate the
Royalty shall be the same rate specified under Financial Accounting Standards
Board Statement 52, or its successor, used to translate the financial results of
Cytomedix or its Affiliates for public reporting. If the Royalty for the
previous calendar quarter remains unpaid within forty-five (45) days after the
end of such calendar quarter, interest shall accrue on such unpaid amount at the
lower of (a) fifteen percent (15%) per annum, or (b) the highest rate permitted
by law, until paid.
Section 2.3 No Other Compensation. Except as expressly
provided herein, Curative is not entitled to any other compensation from
Cytomedix or any other third party in connection with the sale of Procuren and
the Future Products and shall receive no royalty on sales of any other product
of Cytomedix.
Section 2.4 Records and Reports; Audits. Cytomedix shall keep
true and accurate records and books of account containing information necessary
for the determination of the Royalty payable hereunder. These records and books
of account shall upon reasonable notice be available during business hours for
inspection by Curative. Curative shall be entitled to conduct an audit, upon
thirty (30) days' prior written notice to Cytomedix, of such books and records.
Curative may engage an independent third party auditor to conduct such audits.
Cytomedix shall be entitled to receive a copy of any audit reports produced by
or on behalf of Curative hereunder. In the event any such audit reveals a
greater than five percent (5%) discrepancy between the correct amount of the
Royalty which should have been paid by Cytomedix pursuant to the terms herein
during the period covered by such audit and the actual amount of the Royalty
paid by Cytomedix during such period, Cytomedix shall reimburse Curative for the
costs of such audit.
Section 2.5 Milestones. Cytomedix covenants that it shall:
(a) submit a request to the FDA for a pre-IND
(Investigational New Drug) application meeting for Procuren
within three (3) months of the Closing Date;
(b) initiate a clinical trial for Procuren within 180
days of the release of any Institutional Review Board, or
State or Federal agency clinical holds subsequent to filing
the IND;
(c) submit a Biologics License Application (BLA) for
Procuren to FDA within twelve (12) months of completing a
successful Phase III clinical trial;
(d) make reasonable efforts to commercialize Procuren
in the United States within four (4) months of receiving final
FDA approval of the BLA; and
(e) upon termination of that certain
Commercialization Agreement dated as of January 19, 1998 (the
"BTG Agreement"), by and between Curative and BTG USA Inc., a
Delaware corporation, and successful completion of the
transfer of all data gathered under the BTG Agreement to
Cytomedix, Cytomedix will use reasonable efforts to initiate
pre-clinical animal studies to determine the feasibility of
using platelet factor 4 derived peptides to promote wound
healing.
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Section 2.6 Offset. Notwithstanding any other provision in
this Agreement or the Asset Purchase Agreement, upon notice to Curative,
Cytomedix may set off any amounts owed by Cytomedix to the University of
Minnesota or any successor in interest pursuant to that certain Second Curatech
- University of Minnesota Research Agreement dated as of September 30, 1988
against any amounts otherwise payable to Curative under this Agreement;
provided, however, that the amount of such set-off shall not reduce (a) the
Procuren Royalty Percentage (after taking into account such set-off) below one
and one-half percent (1.5%) for any payment period, and (b) the Future Products
Royalty Percentage (after taking into account such set-off) below four and
one-half percent (4.5%) for any payment period, or, in the event the Future
Products Royalty Percentage has been reduced to five percent (5%) as set forth
in Section 2.1(b) above, below three and one-half percent (3.5%) for any payment
period. The exercise of such right of set-off by Cytomedix in good faith,
whether or not ultimately determined to be justified, will not constitute an
event of default under this Agreement.
ARTICLE III.
TERM; TERMINATION
Section 3.1 Term. This Agreement commences upon the Effective
Date and terminates at such time when Cytomedix has no further obligation to pay
any Royalties pursuant to Section 2.1 (the "Term").
Section 3.2 Termination. Upon thirty (30) days' prior written
notice to Curative, Cytomedix may terminate this Agreement if Curative breaches
any of its material obligations hereunder pursuant to Section 5.2 and fails to
cure such breach by the end of such thirty (30) day period, or, if the parties
agree that the breach is not capable of being cured or remedied within thirty
(30) days, then within a timeframe mutually agreed upon by the parties.
Section 3.3 Remedies upon Termination. Termination of this
Agreement shall not limit either party from pursuing any other remedies
otherwise available to it, including, without limitation, injunctive relief.
Section 3.4 Effect of Termination. In the event of notice of
termination, each party shall continue to perform its obligations hereunder up
to the date of termination. Upon termination, except as otherwise provided
herein, the obligations of the parties hereunder shall cease and Cytomedix shall
pay Curative any amounts then owing hereunder; provided however, that in the
event of termination due to a breach by Curative of Section 5.2, Cytomedix shall
have no right to offset any payment due to Curative under Section 2.1.
ARTICLE IV.
CONFIDENTIALITY
Each party acknowledges that any information concerning the
other party received in connection with this Agreement shall be deemed
"Confidential and Proprietary Information" (provided that information contained
within the Assets (as defined in the Asset Purchase Agreement) transferred to
Cytomedix shall not be deemed Confidential and Proprietary Information of
Curative). Each party agrees that it shall not permit the duplication, use or
disclosure of any such Confidential and Proprietary Information to any person or
entity (other than its own employees or agents who must have such information
for any proper purpose), unless (a) authorized in writing and signed by the
other party, or (b) legally required to disclose such information, provided that
the party availing itself of this exception has promptly notified the other
party of such required disclosure and has used commercially reasonable efforts
to lawfully avoid or limit such disclosure. Confidential and Proprietary
Information does not
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include any information which, at the time of disclosure, is generally known by
the public through no breach of the disclosing party. The provisions of this
Article IV shall survive the expiration or termination of this Agreement.
ARTICLE V.
INTELLECTUAL PROPERTY
Section 5.1 Right to Defend. At the election and expense of
Cytomedix, Cytomedix shall have the sole right (but not the obligation, except
as otherwise set forth in Section 5.3 below) to protect all intellectual
property rights related to Procuren and the Future Products, by obtaining and
maintaining appropriate patent, trademark, trade secret or other rights.
Curative agrees to cooperate, at the expense of Cytomedix, in the filing and
prosecution of patent applications in the United States and in foreign countries
in connection with all such intellectual property rights, and to promptly notify
Cytomedix of any conflicting uses of, or any applications or registrations to
use, any xxxx, name, symbol, device or word that becomes known to Curative that
Curative believes may constitute an act of infringement with respect to the
intellectual property rights related to Procuren and the Future Products.
Section 5.2 Ownership of Intellectual Property. Curative
acknowledges that, subject to Article VI, neither this Agreement nor the
performance of its obligations hereunder shall affect the ownership by Cytomedix
of any of the goodwill or intellectual property rights related to Procuren or
the Future Products, and such goodwill or other rights shall be and remain in
the name of Cytomedix. Curative warrants that, subject to Article VI, it shall
not at any time (a) do or cause to be done any act or thing contesting or in any
way impairing or tending to impair any part of such ownership and/or rights, or
(b) represent that it has any ownership in Procuren or the Future Products or
any intellectual property rights in connection therewith.
Section 5.3 Enforceability of Patents. Cytomedix shall use its
Best Efforts to ensure that the Patents remain valid and enforceable.
ARTICLE VI.
SECURITY INTEREST
Section 6.1 Security Interest. Subject to the applicable terms
and conditions of this Agreement, Cytomedix hereby assigns and grants to
Curative a security interest (the "Security Interest") in and a lien on the
Patents (the "Collateral") to secure the payment and the performance of the
following obligations (collectively, the "Obligations"):
(a) the payment of the Royalty; and
(b) all reasonable costs incurred by Curative to
obtain, preserve, perfect and enforce the provisions of this
Article VI and the Security Interest created hereby, collect
the Royalty and maintain and preserve the Collateral,
including but not limited to taxes, assessments, insurance
premiums, repairs, reasonable attorney's fees and legal
expenses, and expenses of sale.
Section 6.2 Ownership of Collateral. Subject to the liens and
security interests set forth in the Security Agreement, the Securities Purchase
Agreement and the Inter-Creditor Agreement, Cytomedix shall defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein adverse to Curative which arises out of or relates to any
occurrence or event
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happening after the Closing (as defined in the Asset Purchase Agreement) and
Cytomedix shall keep the Collateral free from all liens and security interests.
Section 6.3 Costs of Curative. Cytomedix shall pay all
reasonable costs necessary to obtain, preserve, perfect, defend and enforce the
Security Interest, collect the Obligations, and preserve, defend, enforce and
collect the Collateral, including but not limited to taxes, assessments,
insurance premiums, repairs, reasonable attorney's fees and legal expenses, and
expenses of sale. Without waiving Cytomedix's default for failure to make any
payment owed hereunder, Curative may, at its option, pay any such costs and
expenses and discharge encumbrances on the Collateral, and such payment shall be
part of the Obligations; provided, that Curative shall not take any such action
unless it has requested Cytomedix to take such action in writing and Cytomedix
has not taken such action within thirty (30) days after its receipt of such
request. Cytomedix shall reimburse Curative on demand for any costs so incurred.
Section 6.4 Event of Default. The happening of any one or more
of the following listed events constituted an event of default (an "Event of
Default") by Cytomedix:
(a) Cytomedix fails to pay the Royalty owed hereunder
when due and does not cure such non-payment within ninety (90)
days of written notice thereof by Curative; or
(b) Cytomedix fails to meet the Milestones as set
forth in Section 2.5.
Section 6.5 Remedies of Curative Upon Default. Upon the
occurrence of an Event of Default, Curative may, upon giving fifteen (15) days
written notice thereof to Cytomedix, and Cytomedix, Inc., and after such parties
have not cured such Events of Default within the fifteen (15) day period,
declare the Obligations in whole or part immediately due and may enforce payment
of the same and exercise any rights under the Uniform Commercial Code as enacted
in the State of New York, rights and remedies under this Agreement, or
otherwise. For purposes of this Section 6.5, to the extent the Event of Default
is triggered by any failure to meet a time deadline, such time deadline is to be
treated as extended until the end of such fifteen (15) day period for purposes
of any cure. If Curative chooses to exercise its rights to take possession and
dispose of the Collateral in a commercially reasonable manner, Cytomedix is
still liable for any unpaid Obligations and is entitled to any surplus in excess
of the Obligations. If Curative chooses to exercise its rights to take
possession and retain the Collateral in full satisfaction of the Obligations,
Cytomedix is not liable for any unpaid Obligations and is entitled to any
surplus in excess of the Obligations, such surplus as mutually determined by the
parties in good faith.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 No Joint Venture. Nothing herein shall create any
association, partnership, joint venture or agency relationship between the
parties hereto or any third party.
Section 7.2 Further Assurances. The parties shall cooperate
reasonably with each other in connection with any steps required to be taken as
part of their respective obligations under this Agreement, and the parties agree
(a) to furnish upon request to each other such further information, (b) to
execute and deliver to each other such other documents, and (c) to do such other
acts and things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement.
Section 7.3 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and are deemed to have
been duly given when (a) delivered by hand
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with written confirmation of receipt, (b) sent by facsimile with confirmation of
transmission by the transmitting equipment, (c) five (5) days after delivery, if
sent by certified mail, return receipt requested, or (d) one (1) day after
delivery, if sent by a nationally recognized overnight delivery service, return
receipt requested, in each case to the appropriate addresses, or facsimile
numbers set forth below (or to such other addresses, facsimile numbers or as a
party may designate by notice to the other parties):
Cytomedix: Cytomedix, Inc.
Xxxxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Vice President of Strategy and Business Development
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
Curative: Curative Health Services, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Xx. Vice President of Business Development
Fax: (000) 000-0000
with a copy to: Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Section 7.4 Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right under this Agreement operates as a
waiver of such right, and no single or partial exercise of any such right
precludes any other or further exercise of such right or the exercise of any
other right. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party is
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party is deemed to be a waiver of any obligation of
such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
Section 7.5 Entire Agreement and Modification. This Agreement,
the Asset Purchase Agreement and the Supply Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
between the parties with respect to the subject matter of this Agreement. This
Agreement may not be amended except by a written agreement signed on behalf of
each of the parties hereto.
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Section 7.6 Assignment. Except as set forth above, no party to
this Agreement may assign, transfer, or otherwise dispose of any of its rights,
duties, or obligations hereunder without the prior written consent of the other
party hereto; provided, however that upon prior written notice to the other
party, (a) either party may assign, transfer, or otherwise dispose of any of its
rights, duties or obligations hereunder to any of its Affiliates without the
consent of the other party (in which case the assigning party shall continue to
be liable for its obligations hereunder), and (b) Curative may assign its right
to receive the Royalty to any third party without the consent of Cytomedix,
provided that no such assignment or delegation pursuant to clauses (a) or (b)
shall relieve either party from any of its obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their permitted successors and assigns.
Section 7.7 Severability. If any provision of this Agreement
is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement remain in full force and effect. The parties
further agree that if any provision contained herein is, to any extent, held
invalid or unenforceable in any respect under the laws governing this Agreement,
they shall take any actions necessary to render the remaining provisions of this
Agreement valid and enforceable to the fullest extent permitted by law and, to
the extent necessary, shall amend or otherwise modify this Agreement to replace
any provision contained herein that is held invalid or unenforceable with a
valid and enforceable provision giving effect to the intent of the parties.
Section 7.8 No Third Party Beneficiary. No provision of this
Agreement shall create, or be deemed to create, any legal or equitable right in
any person not a party to this Agreement or give any such person any claim
against any party to this Agreement that such party would not have but for this
Agreement.
Section 7.9 Section Headings; Construction. The headings of
Articles and Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All words used in this
Agreement will be construed to be of such gender or number as the context
requires. The language used in the Agreement shall be construed, in all cases,
according to its fair meaning, and not for or against any party hereto. The
parties acknowledge that each party has reviewed this Agreement and that rules
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be available in the interpretation of this
Agreement.
Section 7.10 Governing Law; Jurisdiction. This Agreement is to
be governed by and construed under the laws of the State of New York without
regard to conflicts of laws principles that would require the application of any
other law. The parties agree that the state and federal courts located in New
York County, New York shall be the sole venue and shall have sole jurisdiction
for the resolution of all disputes arising hereunder.
Section 7.11 Execution of Agreement, Counterparts. This
Agreement may be executed in one or more counterparts, each of which is deemed
to be an original copy of this Agreement and all of which, when taken together,
are deemed to constitute one and the same agreement. The exchange of copies of
this Agreement and of signature pages by facsimile transmission shall constitute
effective execution and delivery of this Agreement as to the parties and may be
used in lieu of the original Agreement for all purposes. Signatures of the
parties transmitted by facsimile are deemed to be their original signatures for
any purpose whatsoever.
[remainder of page intentionally left blank]
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[signature page to Royalty Agreement]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CYTOMEDIX:
CYTOMEDIX, INC.
By: /s/ Xxxxx Xxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxx Xxxxxx
--------------------------------------------
Its: Vice President of Science and Technology
--------------------------------------------
CURATIVE:
CURATIVE HEALTH SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------------------
Its: Senior Vice President, Business Development
--------------------------------------------
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SCHEDULE A
PATENTS
[omitted]
This schedule has been omitted from this report in accordance with Item 601 of
Regulation S-K. The Registrant hereby agrees to furnish supplementally to the
Securities and Exchange Commission a copy of this schedule upon request.
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SCHEDULE 2.1
APPLICABLE COUNTRIES
Argentina
Australia
Austria
Belgium
Brazil
Canada
Denmark
Finland
France
Germany
Germany
Hungry
Ireland
Israel
Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Republic of Korea
Russian Federation
South Africa
Spain
Sweden
Switzerland
United Kingdom
United States
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