JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (the "Agreement") is entered into as of the
12th day of July, 1996, 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 desire 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"), upon the terms and subject the conditions set forth
in this 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. DEFINITIONS. The following definitions shall apply to
this Agreement:
"Additional Note" shall have the meaning given to it in Section
3(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. Within thirty (30) days
following the end of each Contract Year, 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 Per Unit Marketing Expenses" shall be calculated each Contract
Year and shall mean the Approved Marketing Expenses divided by the Expected
Minimum Unit Sales.
"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. Within thirty (30) days following the end of each Contract
Year, the Company shall provide the LLC with a written
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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 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 1, 1996.
"Expected Minimum Unit Sales" shall mean the Minimum Gross Xxxxxxxx
divided by the average selling price of the Product in the prior year.
"Expenses" shall mean (1) Commissions; provided, however, that in any
one month period those Commissions may not exceed twenty percent (20%) of the
Gross Xxxxxxxx; (2) the CGS; (3) Approved Per Unit 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.
"Formation Date" shall have the meaning given to it in Section 3(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
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3(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.
"Minimum Gross Xxxxxxxx" shall have the meaning given to it in Section
7(B)(2) hereof.
"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 other information obtained by the 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 2. PURPOSE OF THE LLC. The LLC will be established for the
purposes of commercializing products 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 3. 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 filing a certificate of
incorporation (the "Charter"). The date of such filing is hereinafter referred
to as the "Formation Date".
B. On the Formation Date:
1. Xxxxxx shall contribute to the LLC (a) initial
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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.
3. Xxxxxx and the Company shall execute a shareholders
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 3(D).
SECTION 4. 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 Board of Directors of the LLC. The Charter
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shall provide for the election of four directors.
B. The directors of the LLC shall be elected annually at annual meetings
of the stockholders of the LLC. It is understood and agreed by the parties
hereto that two of the directors of the LLC shall be individuals nominated by
Xxxxxx and two of the directors 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 directors nominated in accordance
with the foregoing. In the event of the death, incapacity, resignation or
removal of a director 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 director nominated by the party hereto who nominated the director
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 4.
D. The management of the LLC shall be comprised of officers designated
by the Board of Directors of the LLC. Each of the parties hereto hereby
covenants and agrees to cause the directors 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 4(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 4(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 Board of Directors of the LLC shall
meet at least once each calendar quarter at such time and place acceptable to
all directors, and at each annual meeting of the Board of Directors, an annual
operating Budget of the LLC shall be adopted.
G. If the parties are unable to agree at any Board of Directors' 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.
SECTION 5. 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
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and the Company will meet, discuss and formulate a plan for Xxxxxx to fund
pre-clinical animal studies and clinical trials. 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 Company 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; provided that 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) On 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 6. 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 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,
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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 7. 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, 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 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 8. 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 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 30 days in
the case of monthly and quarterly financial statements and 60 days in the case
of annual financial statements) after the end of each period.
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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), 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 9. 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, 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
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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.
C. The provisions of this Section 9 shall survive the termination
or expiration of this Agreement.
SECTION 10. 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 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 Company shall be allowed to draw down upon
the Initial Note on the first of each month an advance of $100,000, and within
seven days thereafter provide a reconciliation of previous months expenditures
and the balance of the account to date. 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 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,
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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 11. 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 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
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Capital Contribution to the LLC.
SECTION 12. 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 12(A) and 12(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 "Indemnified Party")
by the other party (the "Indemnifying Party") under this Section 9:
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 9.
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
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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 9, 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 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 13. 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 musculoskeletal area 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 Company
to manufacture 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
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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 14. MISCELLANEOUS.
A. Should any provision of this agreement be determined by a 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. Notwithstanding 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,
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constitutes the entire agreement between the parties with reference to the
subject matter hereof and supersedes all previous agreements, representations,
memoranda and undertakings whether oral or written, between the parties with
respect to the subject matter hereof and may not be changed without the written
consent of the parties.
F. Except as provided for in Section 4(F), any disputes regarding this
contract 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 requested (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/Xxx X. Brilliant
Xxx X. Brilliant
Assistant General Counsel
TISSUE ENGINEERING, INC.
By: /s/Xxxxxx Xxxx
Xxxxxx Xxxx
CEO & President
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