EXHIBIT 10.26
AGREEMENT
This Agreement is made on December 10, 1996 by American Red
Cross Tissue Services, ("ARC"), a division of Biomedical Services of The
American National Red Cross, a United States corporation chartered by Congress
and Osteotech, Inc. ("Osteotech"), a Delaware corporation having its
headquarters in Eatontown, New Jersey, as follows:
WHEREAS, Osteotech provides high-quality tissue processing
services ("Processing") and other related services to entities engaged in
procuring and distributing bone and related connective soft tissue for
transplantation (collectively, "Tissue"); and
WHEREAS, ARC procures and distributes Tissue from various
sources, and wishes to contract with Osteotech to process such Tissue; and
WHEREAS, ARC wishes to ensure its ability to obtain processing
services as well as distribution, education and marketing and, from time to
time, other services and Osteotech desires to perform such services and to
process Tissue for ARC, provided that ARC agrees to exclusively provide Tissue
to Osteotech for Processing, regardless of where it is recovered, under the
following agreed terms and conditions;
NOW, THEREFORE, the parties agree as follows:
XXXXX Indicates the omission of confidential material pursuant to a request
for confidential treatment made in accordance with Rule 24b-2 under
the Securities Exchange Act of 1934, as amended. The confidential
material is being filed separately with the Secretary to the
Securities Exchange Commission.
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1. PROCESSING
1.1 Bone and Related Tissues Supplied by ARC
1.1.1 General Undertaking. ARC shall supply all Tissue that it
procures exclusively to Osteotech for Processing. Tissue
utilized in ARC research and development activities, if
any, shall be excluded from this requirement. At Osteotech's
request, each month ARC shall use its best efforts to provide
to Osteotech for Processing sufficient cortical bone tissue to
be processed into Grafton(R)products in order to meet
hospital/end user market demand for such products. The Tissue
shall be delivered to Osteotech, at ARC's expense, and shall
conform to all standards, guidelines, rules, regulations and
laws of (i) the United States Food and Drug administration
(FDA); (ii) the American Association of Tissue Banks (AATB);
(iii) other applicable U.S. federal, state and local
government agencies; (iv) any non-U.S. jurisdiction where
Tissue may be procured or distributed by or on behalf of ARC;
(v) ARC's standard operating procedures ("SOPs") as may be
amended from time to time by ARC; and (vi) Osteotech's
processing standards as specified in Osteotech's SOPs as may
be amended from time to time by Osteotech. All of such
standards, guidelines, rules, regulations, laws, procedures
and standards are hereinafter referred to as the "Processing
Standards." If interpretation of the Processing Standards is
required or if there is a disagreement about the
interpretation of the Processing Standards, ARC and Osteotech
will negotiate in good faith a resolution within thirty (30)
days. If there is a conflict between ARC's SOPs and
Osteotech's SOPs, ARC and Osteotech will negotiate in good
faith a resolution within thirty (30) days. If the issues
covered by the preceding two sentences are not resolved within
such thirty (30) day period, the parties will mutually agree
to a third party who will assist the parties in arriving at a
resolution. Recovery Standards shall mean all laws,
standards, rules, regulations, procedures and guidelines
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related to the donation, recovery and suitability
determination of Tissue, including donor referral, informed
consent, tissue recovery, pre-processing storage, packaging
and shipping and all records, activities and standards related
to obtaining, testing, documenting and evaluating serological
test results; obtaining, documenting and evaluating medical
history and lifestyle data; and related organizational,
management and quality assurance activities.
ARC and Osteotech shall provide each other a copy of its SOPs and
copies of any amendments to its SOPs promptly after such amendments are
adopted; provided, however, that doing so will not require such party
to disclose any trade secrets, technical know how or unpublished
scientific data or technical art. Upon reasonable notice and at its own
expense, each of Osteotech and ARC shall have the right to conduct an
annual audit of the other party's facilities and records related to
regulatory compliance. Upon reasonable notice and at its own expense,
each of Osteotech and ARC shall have the right to conduct additional
audits of the other party's facilities and records related to
regulatory compliance in the event there are repeated significant
defects in such other party's SOPs, or in such other party's compliance
with its SOPs or any applicable Processing Standards.
1.1.2 Volume
(a) ARC shall procure, store and distribute all Tissue in a manner
that assures that such Tissue will conform to the Recovery
Standards and the Processing Standards, and shall deliver all
such Tissue to Osteotech.
(b) ARC may increase the volume of donors delivered to Osteotech
above the volume set forth in the applicable forecast prepared
and agreed to in accordance with subsection (c), provided that
it gives Osteotech 90 days
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prior written notice for every planned incremental increase of
50 donors, unless Osteotech agrees in writing to a shorter
notice period for any of these increases.
(c) Subject to subsection (b), during the term of this
Agreement, ARC and Osteotech shall jointly agree upon
written forecasts for the Processing of Tissue for the
succeeding six months, broken out by month. The first
such forecast shall be provided 30 days after the
effective date of this Agreement; each such forecast
shall be a rolling six month forecast provided each
January 1, April 1, July 1 and October 1. If the parties
cannot agree upon a forecast for any month, the forecast
for such month shall be the average of the forecasts of
the parties for the immediately preceding three months.
(d) Osteotech will arrange with ARC to hold regular production
meetings to discuss the forecasts and other processing issues.
1.1.3 Donor Records
ARC will obtain and maintain all necessary books, records, and data
base with respect to the Recovery Standards of ARC (including without
limitation donor medical history, donor life style information,
serology and blood culture testing), inventory of procured Tissue
shipped to Osteotech, inventory of processed Tissue received from
Osteotech, and the receipt and processing of all end user orders
received from ARC's customers who utilize the Tissue. ARC shall provide
to Osteotech, within 15 days of the end of each calendar quarter, data
on the Tissue procurement activity of ARC occurring during that
quarter. Osteotech shall have the right to audit ARC Tissue donor data
upon reasonable prior written notice to ARC.
ARC shall also obtain and forward to the requesting governmental
regulatory agency, in English, such records,
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within the requisite time period, as may be necessary to satisfy all of
the Processing Standards, including, but not limited to, donor medical
history, donor life style information and all donor testing
information.
1.2 Processing
1.2.1 General Undertaking
(a) Processing and packaging of Tissue received by Osteotech
pursuant to Section 1.1.2 into currently available finished
units of Tissue shall be conducted by Osteotech pursuant to
the Processing Standards in accordance with Section 1.2.2. For
purposes hereof, Processing shall include all operations
necessary to prepare procured Tissue for transplantation.
(b) Osteotech shall, upon reasonable prior written notice from
ARC, permit ARC to change the production plan for a donor
determined pursuant to Section 1.2.3(a).
1.2.2 Processes and Methods
(a) Processing of Tissue will be performed by Osteotech under
applicable Processing Standards.
(b) In the event the FDA implements new or additional regulations
applicable to Tissue, Osteotech and ARC shall each implement
such changes to its SOPs as are necessary to comply with such
FDA regulations. In the event Osteotech is unable or unwilling
to implement such changes, ARC shall have the remedy set forth
in Section 6.5.
(c) Osteotech will grant designated ARC personnel access to its
facilities to observe all steps of Processing for the purpose
of conducting a standard ARC inspection of the Processing
Standards. As part of this inspection, all Processing
Standards will be made available to the inspectors. If such
personnel require access to Osteotech's cleanrooms, the
personnel must have on file
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with Osteotech appropriate blood serum test results and such
other tests as Osteotech may require prior to such personnel
being granted access to Osteotech's cleanrooms. Osteotech may,
at its sole discretion, refuse any individual access to
Osteotech cleanrooms for cause. Such denial of access will not
be a violation of this Agreement.
1.2.3 Processing Considerations:
(a) ARC will pre-plan, which will include a written primary
and secondary donor plan, the expected production from
each donor prior to the scheduled day of processing. If
Tissue cannot be processed according to either the
primary or secondary donor plan, verbal approval will
first be obtained from the procuring ARC Area for changes
to the primary or secondary donor plan prior to
processing by Osteotech and ARC will confirm by faxed
written approval. Osteotech will use its best efforts to
maximize the planned yield from each donor.
(b) Osteotech may present valid evidence to ARC if Osteotech
determines that FDA, AATB or other applicable government
agency mandated changes in processing techniques or the
quality and condition of ARC donor Tissue prevents the
achievement of the planned yield provided for in
Subsection (a). The parties agree to discuss the
implications of such parameters and to determine a
reasonable yield based on such new requirements.
(c) ARC shall undertake reasonable efforts to present a consistent
flow of donors to Osteotech with the goal of minimizing
end-of-month bunching of donors. Subject to the foregoing
sentence, donors received at Osteotech for Processing will be
processed within a reasonable period of time from the time
(which shall be reviewed at the regular production meetings
provided for in Section
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1.1.2(d)) (i) all related required donor documentation is
received at Osteotech, (ii) such documentation has been
reviewed by Osteotech's Quality Assurance Department and/or
Regulatory Affairs Department and (iii) such documentation has
been found by such department or departments, as the case may
be, to be complete in every respect and to otherwise meet the
requirements of the Processing Standards. Once Processing of
the donor is complete, subject to the provisions of Sections
2.1.1 and 2.1.3(a), all Tissue will be shipped to ARC upon
final inspection and release thereof by Osteotech's Quality
Assurance Department.
(d) If the release of processed Tissue back to ARC is delayed due
to: (i) Tissue histology of unknown etiology or (ii) microbial
contamination of final product, Osteotech will immediately
notify the procuring ARC area of the reason for the hold and
the approximate time period expected for the hold (in weeks).
(e) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
2.1 TITLE, STORAGE, SHIPPING, REGULATORY COMPLIANCE AND LABELING
2.1.1 Title
Tissue delivered to Osteotech for Processing, the finished units
derived from such Tissue and any other materials or by-products derived
from such Tissue shall remain the property of ARC at all times, except
that ARC may grant Osteotech written permission to use excess Tissue
for research purposes. Osteotech shall not sell, trade or otherwise
dispose of ARC Tissue, Allograft units derived from such Tissue or any
other materials or by-products derived from such Tissue without the
prior written approval of ARC.
XXXXX Indicates the omission of confidential material pursuant to a request
for confidential treatment made in accordance with Rule 24b-2 under
the Securities Exchange Act of 1934, as amended. The confidential
material is being filed separately with the Secretary to the
Securities Exchange Commission.
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2.1.2 Storage
(a) Osteotech shall, at ARC's election, store ARC Allograft units
released by Osteotech awaiting shipment. Such storage shall be
in compliance with all applicable portions of the Processing
Standards.
(b) In the event that Tissue which is being processed by
Osteotech or held by Osteotech in "quarantine storage",
"pre-processing storage", or "post-processing storage"
(as such terms are defined or described in the applicable
portions of the Processing Standards) is destroyed or
rendered unusable while in the possession of Osteotech
due to the negligence of Osteotech, Osteotech shall pay
to ARC any costs incurred by ARC in procuring and
transporting such Tissue to Osteotech.
2.1.3 Shipping
(a) Except as otherwise provided in a written document signed
by both Osteotech and ARC, Osteotech shall ship all
finished units of Tissue, other than demineralized bone
and items being reworked, derived from a donor received
for Processing from a Red Cross Area back to that Area in
one shipment by a carrier designated by ARC. Osteotech
shall ship finished units of demineralized bone to either
the Red Cross Area from which the donor was received or
as directed by ARC. All items being reworked will be
shipped back to the Red Cross Area from which the donor
was received as soon as it is completed and released by
Osteotech's Quality Assurance Department. ARC shall be
responsible for payment of all shipping costs.
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(b) Osteotech shall ship all finished units of Tissue in shipping
containers which meet the requirements specified in the
Processing Standards. All packaging and shipping containers
must be validated and the validation studies shall be
available for review by ARC's Quality Assurance and Regulatory
Affairs Departments.
(c) Osteotech shall clearly label each shipping container as
containing transplantable tissue and with the addresses of
both the shipping and receiving facility. Such labeling shall
meet the specifications included in the Processing Standards.
(d) Each shipment from Osteotech shall include a packaging slip
listing the contents and corresponding donor lot and batch
numbers, if applicable. All tissue containers in each shipment
shall be packed with sufficient materials between containers
so that breakage will be minimized.
(e) ARC will promptly notify Osteotech of any damage to the
finished units of Tissue during shipment thereof.
Osteotech will file a claim against the shipping carrier
for the amount of damage up to ARC's property insurance
deductible, currently $25,000. ARC will notify Osteotech
of any changes to this property insurance deductible
amount during the term of this agreement. Osteotech will
be responsible to request that coverage of this amount be
provided by the shipping carrier at ARC's cost. The
amount recovered from the shipping carrier for claims
will be passed on to ARC within 10 days of receipt by
Osteotech. Osteotech shall have no liability for any
damage to finished Tissue incurred during shipping,
except to the extent Osteotech fails to ensure that the
shipping carrier has the aforementioned insurance.
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(f) Osteotech shall pay for shipping, and related costs arising
from the return of finished units of Tissue to Osteotech due
to complaints except for Tissue damaged during shipment as
specified in (e) above.
2.1.4 Regulatory Compliance and Labeling
(a) Osteotech and ARC shall each be responsible for
regulatory compliance, including without limitation where
applicable, for marketing clearance, for determining the
regulatory status of all Tissue and Tissue products and
obtaining any facility or establishment regulatory
registration. Osteotech and ARC shall each be responsible for
regulatory compliance related to Processing and labeling, to
include without limitation, product inserts, label content,
sales sheets, advertising and product brochure wording. If
interpretation of the Processing Standards is required or if
there is a disagreement about the interpretation of the
Processing Standards, ARC and Osteotech will negotiate a
consensus agreement within thirty (30) days.
(b) Containers of finished units of Tissue must bear a standard
ARC bone product Tissue Services label, approved by Osteotech
and ARC, that contains the product name and identity code,
donor number and expiration date.
(c) Osteotech shall bear the costs of producing labels in
conformance with Section 2.1.4(a). If the labels and/or
package inserts are changed by request of ARC, ARC will bear
the costs of these changes, including label inventory
replacements. Osteotech shall maintain no more than six (6)
months of label and package insert inventory by tissue type.
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(d) All labeling will be in accordance with Sections
2.1.3(b), 2.1.3(c) and 2.1.4(a), and the Processing
Standards.
(e) Specifications for all Tissue products to be processed
from ARC donors will be developed and approved according
to ARC and Osteotech SOPs. Requests to Osteotech about
its ability to accomplish special specifications will be
made in writing by ARC and will receive a written
response from Osteotech within a reasonable period of
time. Requests by ARC for labeling changes, including
package inserts, will be responded to by Osteotech in
writing within 10 working days indicating its ability to
accomplish the changes.
2.2 Liability
(a) Osteotech agrees to defend, hold harmless, and indemnify
ARC against any liability in respect of bodily injury,
death, and property damage arising from the negligence or
willful misconduct of Osteotech or its directors,
officers, employees and agents in the performance of
Osteotech's obligations under this Agreement. Such
indemnification shall include but not be limited to
damages, losses, liabilities, claims, actions, or causes
of action sustained or suffered by ARC arising from a
breach of Osteotech's obligations hereunder or a defect
in any finished unit of Tissue processed by Osteotech
under this agreement, to the extent such defect results
from an error or omission, or from a failure of
workmanship, by Osteotech.
(b) ARC agrees to defend, hold harmless, and indemnify Osteotech
against any liability in respect of bodily injury, death, and
property damage arising from the negligence or willful
misconduct of ARC or its directors,
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officers, employees and agents in the performance of ARC's
obligations under this Agreement. Such indemnification shall
include but not be limited to damages, losses, liabilities,
claims, actions, or causes of action sustained or suffered by
Osteotech arising from a breach of ARC's obligations
hereunder.
(c) For purposes of subsection (a) above, Osteotech shall be
the "indemnifying party" and ARC shall be the
"indemnified party" and for the purposes of subsection
(b) above, ARC shall be the "indemnifying party" and
Osteotech shall be the "indemnified party". The
obligations and liabilities of the indemnifying party
hereunder with respect to claims resulting from the
assertion of liability by third parties shall be subject
to the following terms and conditions:
(i) The indemnified party shall give written notice to
the indemnifying party of any assertion of
liability by a third party which might give rise to
a claim by the indemnified party against the
indemnifying party based on the indemnity contained
in Section 2.2(a) hereof, or Section 2.2(b) hereof,
as the case may be, stating the nature and basis of
said assertion and the amount thereof, to the
extent known, immediately upon hearing of the claim
or receiving notice thereof.
(ii) In the event any action, suit or proceeding is
brought against the indemnified party, with respect
to which the indemnifying party may have liability
under the indemnity agreement contained in subsection
(a) hereof, the action, suit or proceeding shall,
upon the written agreement of the indemnifying party
that it is obligated to
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indemnify under the indemnity agreement contained
in subsection (a) or (b) hereof, as the case may
be, be defended (including all proceedings on
appeal or for review which counsel for the defendant
shall deem appropriate) by the indemnifying party.
The indemnified party shall have the right to be
represented by advisory counsel and accountants, at
its own expense, and shall be kept fully informed of
such action, suit or proceeding at all stages
thereof, whether or not it is so represented. The
indemnifying party shall make available to the
indemnified party and its attorneys and accountants
all books and records of the indemnifying party
relating to such proceedings or litigation. The
parties will render to each other such assistance as
they may reasonably require in order to ensure the
proper and adequate defense of any such action, suit
or proceeding.
(iii) The indemnifying party shall not make any
settlement of any claims without the written
consent of the indemnified party, which consent
shall not be unreasonably withheld or delayed.
(iv) The indemnified party shall not make any settlement
of any claims without the written consent of the
indemnifying party.
(d) The provisions of Section 2.2 shall survive termination
of this Agreement.
2.3 Records and Reports
(a) Osteotech shall maintain on a daily basis, accurate records
concerning Tissue received, Tissue processed and in storage at
Osteotech and finished units of Tissue
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stored and shipped. Such records shall be available to ARC
during normal business hours upon reasonable advance notice at
ARC's expense. Osteotech shall not be required to produce any
data other than data which it is required to obtain and
maintain by the Processing Standards.
(b) In addition to the information provided in (a), Osteotech
shall provide timely reports on each donor showing Tissue
processed and shipped. Reports at the time of shipping should
include total disposition of all Tissue, including cortical
storage, pending reworks and discards.
(c) Osteotech shall ensure that all information pertaining to ARC
will be disclosed only to those Osteotech personnel with a
need-to-know who have signed Osteotech's standard
confidentiality agreement.
(d) Osteotech shall notify ARC prior to the release of any ARC
donor identifying information, such as donor identifying
number, whether pursuant to request of a regulatory or
governmental agency or court or administrative order or
subpoena. The provisions of this subsection shall survive
termination of this Agreement.
(e) Osteotech shall provide ARC monthly written reports to
include:
Rework status, cause, projected release date and trend
analysis;
Complete donor status report for all donors at Osteotech
including those in processing;
Yield per donor and trend analysis;
Value per donor and trend analysis;
Sales for all products distributed from Osteotech for
ARC;
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Complaints (including packaging complaints), and trend
analysis; Turnaround times on donors and reworks and trend
analysis; Microbiologic contamination rates and trend
analysis; Reject reports including amounts, explanations and
trend analysis.
2.4 New Product Development
It is the understanding of ARC and Osteotech that each of them
may independently develop new products and/or processes or
improve upon existing products and/or processes. Therefore,
(a) Subject to subsection (c), Osteotech shall own all rights,
title and interest in and to all information, technology,
data, inventions, products, and processes, conceived, made or
developed by employees of Osteotech as well as the
intellectual property rights based thereon, including but not
limited to copyrights and patent rights.
(b) Subject to subsection (c), ARC shall own all rights, title and
interest in and to all information, technology, data,
inventions, products, and processes, conceived, made or
developed by employees of ARC as well as the intellectual
property rights based thereon, including but not limited to
copyrights and patent rights.
(c) Any joint development of information, technology, data,
inventions, products, and processes, shall be conducted
pursuant to a formal written development agreement signed by
Osteotech and ARC and a development budget for the project
agreed to in writing by Osteotech and ARC.
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(d) The provisions of this Section 2.4 shall survive
termination of this Agreement.
2.5 Non-Proprietary New Products
It is understood and agreed that Osteotech may develop new information,
technology, data, inventions, products, and processes (collectively,
"new products") jointly with its other customers and that certain of
such new products may not be subject to patent or copyright protection
("non-proprietary new products"). ARC agrees that it shall not have
access to, or utilize, such non-proprietary new products and shall not
be able to cause Osteotech to utilize such non-proprietary new products
on ARC's behalf unless and until ARC shall reimburse Osteotech and such
other client for one-third (in the aggregate) of the development costs
(including without limitation internal direct costs, but excluding
internal overhead costs) for such non-proprietary new product as
reasonably determined by Osteotech and such client. The methods and
bases for determining such development costs shall be disclosed to ARC
on a confidential basis. Osteotech shall include a provision identical
in substance to the foregoing provision in its agreements with its
other significant customers to cover any non-proprietary new products
which may be developed jointly hereunder by Osteotech and ARC.
2.6 Shipment of Finished Units and Marketing and Education
Services
(a) At the request of ARC, Osteotech will ship finished units
of Tissue to end user customers of ARC in accordance with
procedures and protocols established between ARC and
Osteotech. Fees for such services will be established at the
time such services are requested and are separate from the
fees listed in Exhibits 3.1 and 3.2. Fees for these services
may be changed from time to time to
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reflect changes in services being performed or in the
cost of performing these services.
(b) Osteotech shall provide marketing and education services
in accordance with protocols and procedures established
between ARC and Osteotech and outlined in Exhibit 2.6.
It is anticipated that the level of such services shall
be at least equal to those provided by Osteotech during
the year ended December 31, 1996. It is anticipated that
Osteotech will not charge ARC a fee for such services,
provided that Osteotech reserves the right to charge a
fee, to be agreed upon by Osteotech and ARC, if the scope
or level of such marketing and education services are
materially changed or if Osteotech otherwise determines
that it cannot provide such services on a cost effective
basis. If fees are charged for such services such fees
will be separate from the fees listed in Exhibits 3.1 and
3.2.
(c) Osteotech may provide such other services as are
requested by ARC in accordance with protocols and
procedures established between ARC and Osteotech. Fees
for such services will be established at the time such
services are requested and will be separate from the fees
listed in Exhibits 3.1 and 3.2. Fees for these services
may be changed from time to time to reflect changes in
services being performed or in the cost of performing
these services.
2.7 Publication and Public Disclosure
(a) ARC shall have the right to publish or otherwise publicly
disclose scientific information or data developed by ARC at
its own expense which utilizes or relates to Osteotech's
Processing technology, provided, however, that notwithstanding
any other provision in this
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Agreement to the contrary, no such publication or disclosure
shall be made by ARC if such publication or disclosure would
result in the disclosure of information defined as
confidential in Section 4 or would otherwise violate or
jeopardize any proprietary rights Osteotech may have with
respect to such technology. Publication of jointly developed
information will be covered in a separate agreement.
(b) At least ninety (90) days prior to publication or other
public disclosure of any information or data, ARC shall
submit to Osteotech for review a draft of the publication
or, if oral disclosure, a written copy of the remarks.
Osteotech shall then have 60 days to notify ARC of (i)
any reasonable changes to the publication or disclosure
it deems appropriate, which changes ARC will make so long
as they do not change materially the meaning of the
information or data being disclosed or published; (ii)
any error in the information or data being disclosed,
which ARC shall correct upon verification of the error;
or (iii) the necessity to delay publication or disclosure
to enable the filing of any patent application or
regulatory filing if applicable, in which event ARC will
delay such publication or disclosure as reasonably
requested by Osteotech.
(c) If there has been no mutual agreement to publish or
disclose within ninety (90) days after Osteotech has
received the notice and draft of the publication or oral
disclosure from ARC, ARC shall again notify, in writing,
Osteotech of its intention to publish or disclose and may
proceed to do so fifteen (15) days after Osteotech's
receipt of such second notice, subject to the provisions
of subsection (a).
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(d) Authorship of any publication shall be determined in
accordance with normal scientific practice.
(e) The provisions of this Section 2.6 shall survive
termination of this Agreement.
3. FINANCIAL TERMS
3.1
(a) ARC will pay Osteotech Processing fees as set forth in
Exhibits 3.1 and 3.2. Subject to the terms set forth in
Exhibits 3.1 and 3.2, such fees may be adjusted from time
to time, but no more frequently than annually, as set
forth in Exhibits 3.1 and 3.2. Osteotech shall provide
ARC with suggested list prices for Osteotech's
proprietary products. The initial suggested list prices
are set forth in Exhibit 3.2.
(b) In the event ARC has requested Osteotech to ship finished
units of Tissue to end user customers of ARC in
accordance with Section 2.6(a) or to perform additional
services in accordance with Section 2.6 (c), ARC will pay
Osteotech fees for such services which are to be
negotiated prior to institution of such services and
which are separate and apart from any fees established in
Exhibits 3.1 and 3.2 for Processing services. In the
event fees become payable to Osteotech for its
performance of marketing and education services in
accordance with Section 2.6(b), ARC will pay Osteotech
fees for such services which are agreed to by Osteotech
and ARC and which are separate and apart from any fees
established in Exhibits 3.1 and 3.2 for Processing
services. Fees for services performed by Osteotech
pursuant to Section 2.6 may be adjusted from time to time
to adjust for changes in Osteotech's costs associated
with providing such services, or to make adjustment for
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the addition, deletion or change in services being
provided.
(c) Unless otherwise agreed to in writing by Osteotech, in
the event ARC does not deliver all Tissue recovered from
a donor to Osteotech, then ARC shall be invoiced by
Osteotech for each such donor or part thereof not
delivered at the average charge per donor invoiced by
Osteotech to ARC during the immediately preceding
calendar quarter. Tissue utilized in ARC research and
development activities, if any, shall be excluded from
this requirement.
3.2 Invoicing and Payment
(a) Osteotech shall submit invoices in U.S. dollars to ARC
for all Processing services rendered in accordance with
the then existing fee schedule. The invoice date shall
be the date that Osteotech's Quality Assurance Department
releases the finished units of Tissue for shipment to ARC
or the date that other services being performed for ARC
(such as serology testing, shipment of Grafton or
shipment of other products to end users on behalf of ARC,
etc.), if any, are completed. ARC shall be separately
invoiced for services performed in accordance with
Section 2.6.
(b) ARC will pay all invoices within forty-five (45) days of
the invoice date. All such payments shall be in U.S.
dollars.
(c) Any balance of any invoice which is not paid within the time
specified above, at the option of Osteotech, shall accrue
interest at the rate of one percent (1%) per month.
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4. CONFIDENTIALITY
(a) For purposes of this Agreement, "Confidential
Information" means all general and specific knowledge,
experience and information that is confidential and of
value to ARC or to Osteotech, including without
limitation, formulations, designs, products, processes,
supplies, methods of manufacture or processing, SOPs,
cost data, master files, the nature of research and/or
development projects, as well as data relating to them,
marketing or business plans, donor data and financial
data. It shall also mean any information disclosed to
either party by any third party which either ARC or
Osteotech is obligated to treat as confidential or
proprietary.
(b) Both parties agree that neither party will, at any time,
without the express agreement of the other party, or
except as expressly permitted by this Agreement, disclose
to any other person or use any Confidential Information
of the other party, except for the purposes of performing
this Agreement or any successor Agreement or as may be
required by law, governmental regulation or court order.
Information shall not be considered to be Confidential
Information of a party if it can be established that (i)
such information was in the possession of the other party
prior to disclosure to such other party by the party
claiming that it is Confidential Information (the
"claiming party") and such information is not otherwise
subject to a confidentiality agreement, (ii) such
information is then part of the public domain and became
so without the breach of this or any other
confidentiality agreement by such other party or any of
its affiliates, (iii) or such information is developed
independently by such other party or becomes known to or
acquired by such other party by means other than as a
E-22
result of a breach of a confidentiality agreement or any
fiduciary obligation.
(c) ARC and Osteotech each agree to require employees, consultants
or others granted access to such Confidential Information to
execute appropriate Confidentiality Agreements; provided that
each organization's agreements are approved by such
organization's counsel.
(d) ARC and Osteotech recognize that violation in any
material respect of any provision of subsection (b) may
cause irreparable injuries to Osteotech or ARC and agree
that ARC or Osteotech shall be entitled to preliminary
and final injunctive relief against such violation. Such
injunctive relief shall be in addition to, and in no way
in limitation of, any and all remedies or rights which
ARC or Osteotech shall have at law or in equity for the
enforcement of the provisions of this Section. In
addition, ARC and Osteotech agree that the party
responsible for the breach of confidentiality shall be
responsible for all legal fees and other costs and
expenses incurred in the successful enforcement of the
non-breaching party's rights and remedies under this
Section.
(e) The provision of this Section 4 shall survive the
termination of this Agreement.
5. TERM OF AGREEMENT
This Agreement shall become effective on January 1, 1997 and shall
terminate December 31, 2006. This Agreement shall automatically renew for an
additional ten year period unless ARC or Osteotech shall, at least six months
prior to the termination date of this Agreement, communicate in writing to the
other party, as the case may be, its intention not to renew the Agreement. A
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Contract Administration Group ("CAG") shall be formed within 30 days after the
effective date of this Agreement. The CAG shall consist of a minimum of four
members, two of whom shall be appointed by each of ARC and Osteotech. The CAG
shall meet as necessary, but no less than quarterly, to discuss any technical or
administrative matters related to this Agreement. The CAG shall conduct a formal
review of this Agreement at the end of every three years and the parties will
negotiate in good faith modifications of any portion of this Agreement,
including financial terms, deemed by either party to be outdated or
inappropriate. Such negotiations will be completed within thirty (30) days after
the end of each three year period. Modification of the Agreement will be made
only by the mutual written agreement of both parties.
6. TERMINATION
6.1 Either party may terminate this Agreement at any time upon:
(a) The material breach by the other party of any of its
obligations under this Agreement if such breach shall not be
cured within ninety (90) days after written notice thereof is
given by the non-breaching party to the breaching party; or
(b) An adjudication of the other party as bankrupt or
insolvent; or the admission in writing by such other
party of its inability to pay its debts as they mature;
or an assignment by such other party for the benefit of
its creditors; or such other party applying for or
consenting to the appointment of a receiver, trustee or
similar officer for its assets; or the appointment of a
receiver, trustee or similar officer for such other
party's assets without the application or consent of such
other party, if such appointment shall continue
undischarged for a period of ninety (90) days; or such
other party instituting (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency
E-24
arrangement or similar proceeding relating to it under the
laws of any jurisdiction; or the institution of any
bankruptcy, insolvency arrangement or similar proceeding
relating to such other party, if such proceeding shall remain
undismissed for a period of ninety (90) days; or the issuance
or levy of any judgment, writ, warrant of attachment or
execution or similar process against a substantial part of the
property or assets of such other party, if such judgment,
writ, warrant of attachment or execution or similar process
shall not be released, vacated or fully bonded within ninety
(90) days after its issue or levy.
6.2 ARC may terminate this Agreement at any time upon ninety (90) days'
prior written notice to Osteotech if ARC makes a determination to end
its program of procuring and distributing Tissue; provided that if ARC
resumes such program at any time during the initial ten year term of
this Agreement it shall provide prompt written notice of such
resumption to Osteotech and this Agreement shall become effective again
in accordance with its terms as soon as is practicable, but in no event
later than ninety (90) days after such notice is received by Osteotech.
6.3 ARC may terminate this Agreement in whole or in part if and to the
extent a third party develops a commercially feasible technology for
processing that yields a product with greater safety and efficacy than
the product produced by exclusive use of Osteotech's Processing
technology and methods as demonstrated and agreed to by a panel of six
mutually agreed upon experts using data collected in two
well-controlled, scientifically-accepted in-vivo models and Osteotech
is unable or unwilling to achieve comparable safety and/or efficacy of
that technology within a reasonable time period, not to exceed six
months, unless otherwise agreed to by the parties in
E-25
writing; provided that if six such experts are not available, the
parties will use their best efforts to cause such panel to have as many
experts (up to six) as are reasonably available. This paragraph may
apply to all or a portion of the Tissue products processed by Osteotech
for ARC.
6.4 In the event ARC enters into an agreement or arrangement whereby
finished units of Tissue processed by Osteotech for ARC are used as
part of such third party's technology or product, ARC shall promptly
inform Osteotech of its intent to enter into such agreement or
arrangement and Osteotech shall have the right to (i) terminate this
Agreement at any time upon 90 days prior written notice to ARC without
any further obligation to ARC or (ii) renegotiate the terms of this
Agreement.
6.5 ARC may terminate this Agreement at any time upon 30 days' prior
written notice to Osteotech if Osteotech is unwilling or unable to
comply with the provisions of Section 1.2.2(b).
7. INSURANCE
(a) Osteotech agrees to secure and maintain in force
reasonable and adequate insurance coverage for
Osteotech's Tissue Processing activities, provided such
coverage is available at reasonable prices and on
reasonable terms, if at all. If such coverage is not
available to Osteotech, Osteotech shall inform ARC of the
reasons why such coverage is unavailable and shall
operate on a self-insured basis to the extent such
coverage is not available until such time as such
coverage does become available to Osteotech. Subject to
the foregoing, Osteotech will use its best efforts to
obtain insurance which will include: (a) a commercial
general liability policy in an amount not less than
$10,000,000 combined single limit for each occurrence
E-26
including professional liability insurance in an amount not
less than $10,000,000, each claim specifically insuring claims
arising from processing of products or services as described
in this Agreement; (b) products liability coverage as
applicable to the processing or manufacture of any product or
solution of Osteotech under this contact in an amount not less
than $10,000,000; (c) an auto liability policy including
owned, non-owned, uninsured and under-insured motorists with
at least $1,000,000 in coverage; (d) workers' compensation
coverage with statutory limits for each jurisdiction where the
work required under this contract and an employers' liability
policy with at least the following limits, $250,000 per
accident, $500,000 per disease in the aggregate, and $250,000
per disease (each employee); (e) property insurance at full
replacement value protecting Tissue of ARC in process and
storage from the perils of fire, lightning, extended coverage,
vandalism, flood, earthquake, theft, and all other perils
commonly included in the term "All Risk" form, and in
addition, coverage of not less than the insurable value of the
property insured by such policy for consequential loss covered
by failure of power, either off premises or on, that creates
an interruption in service to heating, refrigeration, air
conditioning or other electrical equipment and business
interruption coverage in the amount of $8 million. Such
coverage will include Force Majeure perils.
(b) Osteotech shall, at its sole expense, keep in force policies
of insurance as required (i) by the provisions of Section 7(a)
(subject to the conditions set forth in Section 7(a)) and (ii)
by statute which will be written as primary policy coverage
and not contributing with, or in excess of any coverage which
ARC shall carry.
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Osteotech shall provide ARC with a certificate of insurance or
other documentation as proof of insurance required herein
prior to commencement of services and renewal certificates
within 10 days of expiration or non-renewal of the policies
required herein, as long as this Agreement is in effect.
Osteotech shall use its best efforts to cause ARC, its
directors, officers, employees and agents to be listed as
additional insureds with respect to Osteotech's commercial
general liability, products liability, auto liability, and
property insurance as described herein.
(c) Osteotech shall require each subcontractor or assignee
(if any are permitted by ARC) to procure and maintain
insurance of the types and amounts required of Osteotech.
In addition, once approved by ARC, the subcontractor or
assignees shall sign the hold harmless agreement as it
appears in Section 2.2(a) in favor of ARC. If there is
any assignment to a majority-owned subsidiary of
Osteotech as provided in Section 9 of this agreement,
that subsidiary shall meet each requirement of this
Section 7.
(d) ARC shall secure and maintain in force reasonable and adequate
insurance coverage for ARC's Tissue procurement and
distribution activities. ARC shall deliver to Osteotech
certificates of insurance within fifteen (15) days after
execution of this Agreement.
(e) Osteotech shall be liable at all times for damages to or
destruction of Osteotech's equipment and material, including
the loss of use thereof, regardless of how such damage or
destruction occurs, except to the extent otherwise provided in
Section 2.2(b). Except to the extent otherwise provided in
Section 2.2(b), ARC shall be
E-28
under no liability to reimburse Osteotech for any such loss or
damage thereto, and Osteotech waives any right of subrogation
against ARC.
8. FORCE MAJEURE
Neither party shall be responsible to the other for nonperformance or
delayed performance of the terms and conditions hereof due to acts of God, acts
of government, wars, riots, accidents and transportation, fuel or material
shortages, or other causes (except strikes), in the nature of force majeure
which is beyond its control. To the extent Osteotech is unable to perform
Processing of ARC's Tissue due to such events, Osteotech shall arrange to have
ARC's Tissue processed under Osteotech's oversight within 30 days of the
occurrence of such event. Notwithstanding the above, in the event of total or
partial destruction of any processing facility of Osteotech utilized in the
Processing of ARC Tissues, Osteotech shall agree to rebuild such plant or part
thereof within a reasonable period of time and agrees to arrange for the
Processing, under Osteotech oversight, of ARC Tissue during such period.
9. ASSIGNMENT
Except as otherwise expressly herein provided, this Agreement may not
be assigned in whole or in part without the prior written consent of the other
party, provided that Osteotech may assign its rights under the Agreement to any
majority-owned subsidiary of Osteotech without the consent of ARC.
10. NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK
(a) Without the prior written consent of ARC, Osteotech shall
have no right to use the trademark or emblem of ARC in
connection with its Processing activities or to use the name
of ARC for commercial purposes. However, Osteotech may
disclose ARC's name as may be required by law or government
regulation.
E-29
(b) Except as required by law or government regulations, ARC shall
not have the right to use any trademark or emblem of
Osteotech, including the name Osteotech, without the prior
written consent of Osteotech.
(c) (i) Nothing in this Agreement shall be interpreted to convey
to ARC any trademark, patent or proprietary technology owned
by Osteotech; (ii) Nothing in this Agreement shall be
interpreted to convey to Osteotech any trademark, patent, or
proprietary technology owned by ARC.
(d) ARC recognizes that Osteotech performs processing services for
other clients in addition to ARC, and therefore, agrees that
unless specifically developed or customized for ARC or as
otherwise provided herein, all packaging and technology used
by Osteotech to perform processing services will also be used
to perform such services for Osteotech's other clients.
(e) ARC recognizes that Osteotech processes proprietary forms of
tissue and agrees that if it were to distribute these tissues
it will do so only under the trademark, packaging, labels and
emblems developed and provided by Osteotech.
(f) ARC shall not advertise or otherwise promote Osteotech
proprietary products or processes (including without
limitation, Grafton) without Osteotech's prior review and
written approval of all such programs and related material.
11. NOTICES
All notices and other communications provided for hereunder shall be in
writing and shall be mailed by certified mail, return
E-30
receipt requested, telecopied, with a copy sent promptly thereafter
by U.S. mail, or delivered by hand or overnight delivery, as
follows.
If to ARC: Chief Operating Officer
ARCTS
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
If to Osteotech: Chief Executive Officer
Osteotech, Inc.
00 Xxxxx Xxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
or such other person or address as either party may designate by written notice
to the other party complying as to delivery with the terms of this Section 11.
All such notices and other communications shall be effective (i) if mailed by
certified or registered mail, when received as indicated by the return receipt,
(ii) if telecopied, when transmitted, as indicated by the facsimile transmission
report, provided same is on a business day in the U.S. (excludes weekends and
federal holidays) and, if not, on the next business day, or (iii) if delivered,
upon delivery, provided same is on a business day and, if not, on the next
business day.
12. ENTIRE AGREEMENT
This Agreement sets forth the entire Agreement between the parties. Any
prior agreements, promises, negotiations, or representations, either oral or
written, relating to the subject
E-31
matter of this Agreement not expressly set forth in this Agreement
are of no force or effect.
13. MODIFICATION
This Agreement, or any part of section of it, may not be amended or
modified except by the written consent of both parties of the Agreement.
14. APPLICABLE LAW
This Agreement shall be construed in accordance with the laws of the
State of New Jersey.
15. WAIVER
Waiver or breach of any provision of this Agreement shall not be deemed
a waiver of any other breach of the same or a different provision of this
Agreement.
16. INDEPENDENT CONTRACTOR
Osteotech is providing its services hereunder as an independent
contractor. Nothing herein shall create any affiliation, partnership or joint
venture between the parties hereto, or any employer/employee relationship.
17. SEVERABILITY
The provisions of this Agreement shall be severable, and if a court of
competent jurisdiction holds any provisions of this
E-32
Agreement to be in violation of any applicable law, the remaining provisions
shall nevertheless remain in full force and effect.
18. SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
AMERICAN RED CROSS
Dated: December 18, 1996 BY:/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Director
Contracting Office
OSTEOTECH, INC.
Dated: December 18, 1996 BY:/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, President
and Chief Executive Officer
E-33
EXHIBIT 2.6
MARKETING AND EDUCATION SERVICES ARRANGEMENT
Osteotech shall provide American Red Cross marketing and education services as
shall be mutually agreed to between the parties from time to time. Such services
shall be aimed at expanding the demand for Osteotech processed allograft tissue
distributed by American Red Cross. However, Osteotech will not provide such
services in a manner that adversely impacts customer relationships of other
Osteotech clients.
Services provided by Osteotech may include, but are not limited to:
o Providing support by Osteotech's direct field organization to market
and provide medical education for Grafton, other proprietary products
and base tissue products.
o Provide support by Osteotech's agency network to market and provide
medical education for Grafton and other proprietary products.
o Provide training support for American Red Cross field sales
and area personnel.
o Support in development of sales and marketing materials.
o Telemarketing support.
o Participate in sales and marketing planning meetings.
All mutually agreed to marketing and education services of the nature described
above shall be provided to American Red Cross by Osteotech without charge. Such
services shall be determined, in part, based upon annual business plans provided
to Osteotech at least three (3) months prior to the commencement of each
American Red Cross fiscal year. To measure the effectiveness of Osteotech
provided marketing and education services, American Red Cross shall provide to
Osteotech such accurate data as Osteotech may require in such intervals as
Osteotech may require.
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American Red Cross
Schedule of Processing Fees
(Subject to Conditions Below)
Effective January 1, 1997
-------------------------------------------------------------------------------------------------------------------
BASE ALLOGRAFT PROCESSING FEES
FEE
Base Donor Charge (6 or less tissues) $ XXXXX
Base Donor Charge (7 or greater tissues) XXXXX
Exception Donor Charge XXXXX
Soft Tissue Charge (per set-up) XXXXX
Irradiation Charge (per donor) XXXXX
Demineralized Bone Charge (per set-up) XXXXX
Mandible Charge XXXXX
Finishing & Packaging Charge (per unit):
Freeze-Dried XXXXX
Fresh-Frozen XXXXX
Soft Tissue XXXXX
Demin Shape/Chip/Powder greater than 5cc XXXXX
Demin Dental Powder XXXXX
Surgical & Cadaveric Bone (per unit):
Irradiated XXXXX
Non-Irradiated XXXXX
Age Restrictive Donors:
Finishing & Packaging Charge (per unit) XXXXX
Irradiation Charge (per donor) XXXXX
1. Base processing fees itemized on Exhibit 3.1 shall remain in
place from January 1, 1997 through December 31, 1999, provided
the number of ARC donors processed by Osteotech in each year,
commencing January 1 and ending December 31 of each year, is
equal to or greater than the ARC donors processed by Osteotech
in the preceding year.
2. Notwithstanding the above, if ARC fails to provide Osteotech
donors for processing equal to or greater than the number of
donors provided in the preceding year, then Osteotech shall
have the right to increase the processing fees itemized above
in an amount not to exceed the Medical Cost Component of the
XXXXX Indicates the omission of confidential material pursuant to a request
for confidential treatment made in accordance with Rule 24b-2 under
the Securities Exchange Act of 1934, as amended. The confidential
material is being filed separately with the Secretary to the
Securities Exchange Commission.
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Consumer Price Index as is published by the U.S. Department of
Labor. The twelve (12) month period to be used to determine
the maximum amount of any such increase in fees shall be
October 1, through September 30 of the year immediately
preceding the year the increase is to be effective.
3. Subject to 1 above, commencing on January 1, 2000, Osteotech
may increase the base processing fees itemized above and on
January 1 every second year thereafter (2002, 2004, 2006) in
an amount not to exceed the Medical Cost component of the
Consumer Price Index as published by the U.S. Department of
Labor. The twelve (12) month period to be used to determine
the maximum amount of any such increase in fees shall be
October 1 through September 30 of the year immediately
preceding the year the increase is to be effective (i.e.,
period ending September 30, 2001, September 30, 2003 and
September 30, 2005).
4. At any time during a year, the base allograft processing fees
itemized above may be changed for deletion of services or
addition of services not previously provided and included in
the fee schedule above.
5. Notwithstanding 1, 2 or 3 above, if Osteotech's cost to
provide base allograft processing services shall increase by
more than 5% in any year ending December 31, during the term
of this Agreement due to event(s) not directly controlled by
Osteotech, such as, but not limited to, changes in federal,
state or local government rules, regulations or law, changes
in industry standards as published by AATB or the
requirements of ARC; Osteotech shall have the right to
increase its base allograft processing fees commencing the
next January 1 immediately following the event(s) in an
amount equal to the total increase in Osteotech's cost to
provide such services plus a reasonable profit margin
thereon; provided that ARC shall have the right in such
event to have a nationally recognized auditing firm,
agreeable to Osteotech, review and verify whether such event
resulted in any increase of more than 5% in Osteotech's
costs.
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Exhibit 3.2
American Red Cross
Schedule of Processing Fees
(Subject to Conditions Below)
Effective January 1, 1997
GRAFTON PROCESSING FEES
SUGGESTED PROCESSING
LIST PRICE FEE
GEL
0.5cc $ XXXXX *
1.0cc XXXXX *
5.0cc XXXXX *
10.0cc XXXXX *
25.0cc XXXXX *
FLEX
10cm x 2.5cm XXXXX *
5cm x 5cm XXXXX *
PUTTY
5.0cc XXXXX *
10.0cc XXXXX *
*See Below
1. Each November 1 during the term of this Agreement, Osteotech shall
establish and provide to ARC a schedule of the Suggested List Price for
all Grafton products and sizes to be effective on January 1.
XXXXX Indicates the omission of confidential material pursuant to a
request for confidential treatment made in accordance with
Rule 24b-2 under the Securities Exchange Act of 1934, as
amended. The confidential material is being filed separately
with the Secretary to the Securities Exchange Commission.
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2. Osteotech's processing fee for each product and product size shall be as
follows:
Jan. 1, 1997 - Mar. 31, 1997: XXXXX of the Suggested List Price
Apr. 1, 1997 - Jun. 30, 1997: XXXXX of the Suggested List Price
Jul. 1, 1997 - Sept. 30, 1997: XXXXX of the Suggested List Price
Commencing Oct. 1, 1997: XXXXX of the Suggested List Price
XXXXX Indicates the omission of confidential material pursuant to a
request for confidential treatment made in accordance with
Rule 24b-2 under the Securities Exchange Act of 1934, as
amended. The confidential material is being filed separately
with the Secretary to the Securities Exchange Commission.
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