Exhibit 10.60
SETTLEMENT AGREEMENT
This Agreement, having an effective date of May 15, 2002, is between (a)
Medtronic, Inc., a Minnesota Corporation having its principal place of business
at 000 Xxxxxxxxx Xxxxxxx, X.X., Xxxxxxxxxxx, Xxxxxxxxx 00000, on behalf of
itself and as owner, directly or indirectly, of Medtronic Sofamor Xxxxx, Inc.
(formerly known as Sofamor Xxxxx Group, Inc.), Sofamor Xxxxx Holdings, Inc.,
Medtronic Sofamor Xxxxx USA, Inc., SDGI Holdings, Inc., and Sofamor Xxxxx X.X.
(hereinafter referred to collectively as "Medtronic"); and (b) Osteotech, Inc.,
a Delaware corporation having its principal place of business at 00 Xxxxx Xxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 (hereinafter referred to as "Osteotech").
WHEREAS United States Patent No. 5,741,253 ("the '253 patent") issued to
Xx. Xxxx Xxxxxx Xxxxxxxxx with claims covering certain methods for performing
spinal surgery; United States Patent No. 5,484,437 ("the '437 patent") issued to
Xx. Xxxxxxxxx with claims covering certain methods for performing spinal
surgery; and United States Patent No. 6,096,038 ("the '038 patent") issued to
Xx. Xxxxxxxxx with claims covering certain instruments for performing spinal
surgery;
WHEREAS the '253, '437, and '038 patents are assigned to Medtronic;
WHEREAS the '253, '437, and '038 patents are the subject of an action
entitled Medtronic Sofamor Xxxxx, Inc., Sofamor Xxxxx Holdings, Inc., Medtronic
Sofamor Xxxxx USA, Inc., SDGI Holdings, Inc., and Sofamor Xxxxx X.X. v.
Osteotech, Inc., Civ. No. 99-2656 GV (W.D. Tennessee), in which Medtronic has
asserted that Osteotech infringes certain claims of the '253, '437, and '038
patents and Osteotech has counterclaimed for a declaration that the '253, '437,
and '038 patents are invalid, unenforceable and not infringed (hereinafter
referred to as "the Tennessee Action");
WHEREAS United States Patent Nos. 5,814,084, 4,950,296, and 6,096,081
("the '084, '296, and '081 patents," collectively) are the subject of an action
entitled University of Florida Tissue Bank, Inc., Regeneration Technologies,
Inc., Sofamor Xxxxx Group, Inc., and Sofamor Xxxxx X.X. v. Osteotech, Inc.,
Civil Action No. 99CV33 MMP, pending in the United States District Court for the
Northern District of Florida, in which Medtronic has asserted that Osteotech
infringes certain claims of the '084, '296, and '081 patents (hereinafter
referred to as "the Florida Action"); and
WHEREAS the parties hereto, to avoid further expenditure of financial,
managerial and other resources, wish to resolve their disputes with finality;
and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and undertakings set forth herein, the parties to this Settlement Agreement
agree as follows:
I. DEFINITIONS
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A. "Patents-in-Suit in Tennessee" means the '253, '437, and '038
patents, which are at issue in the Tennessee Action, and all United
States and foreign counterpart patents (including divisions,
continuations, continuations-in-part, reissues, reexaminations and
all other variations) and all other patents issuing anywhere in the
world that claim the benefit of priority to either of the '253,
'437, and '038 patents.
B. "Patents-in-Suit in Florida" means the '084, '296, and '081 patents,
which are at issue in the Florida Action, and all United States and
foreign counterpart patents (including divisions, continuations,
continuations-in-part, reissues, reexaminations and all other
variations) and all other patents issuing anywhere in the world that
claim the benefit of priority to either of the '084, '296, and '081
patents.
C. "Off the Market" means that Osteotech is not, after the designated
date, taking or filling orders, selling or otherwise receiving
revenue for (other than revenue for product delivered prior to
February 1, 2003 on standard payment terms per account as of the
date of this agreement, with all new accounts established after
April 24, 2002, not to exceed thirty (30) days net terms, provided
that nothing herein shall affect Osteotech's right to later collect
on any account), loaning, consigning, promoting, advertising,
marketing, distributing or processing the product or the related
instruments and methods.
D. "The Litigation" means the Tennessee and Florida Actions
collectively.
II. JUDGMENT
A. Simultaneously with the execution of this Settlement Agreement, the
parties to this Settlement Agreement shall enter into a Consent
Judgment with respect to the Tennessee Action, in the form of
Exhibit A annexed hereto (which may be modified only if necessary to
accord with local practice or requirements of the Court), by which
Osteotech stipulates to an injunction against infringement,
including direct infringement, active inducement of infringement and
contributory infringement of any of the claims of the '253, '437, or
'038 patents for the duration of the term of each such patent, with
each party to the Settlement Agreement to pay its own costs and
attorney fees.
B. Simultaneously with the execution of this Settlement Agreement, the
parties to this Settlement Agreement shall enter into a Consent
Judgment with respect to the Florida Action, in the form of Exhibit
B annexed hereto (which may be modified only if necessary to accord
with local practice or requirements of the Court), with each party
to this Settlement Agreement to pay its own costs and attorney fees.
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III. PAYMENT
A. Osteotech will pay Medtronic $1,900,000 in 24 equal monthly payments
of $79,166.67 each, commencing May 15, 2002, and payable on the 15th
day of each month, or if not a business day then on the next
business day thereafter, without interest except as hereinafter
provided (each a "Monthly Payment"). Osteotech shall have the right
to prepay the amounts owing hereunder to Medtronic in whole or in
part from time to time without premium or penalty.
B. In the event Osteotech fails to make a Monthly Payment when due and
such failure continues for 10 days after Medtronic has given
Osteotech written notice of such failure, interest shall be due on
the then outstanding balance, accruing from May 15, 2002, including
each overdue payment, calculated at a rate equal to 5% per annum,
based on the number of days elapsed in a 365-day year.
C. In the event Osteotech fails to make a Monthly Payment when due and
such failure continues for 10 days after Medtronic has given
Osteotech written notice of such failure, Medtronic shall have the
right, without further notice, to declare the entire aggregate
amount of all remaining Monthly Payments, and all interest due
thereon, immediately due and payable, and to present a drawing on
the Letter of Credit described below in paragraph D in the aggregate
accelerated amount.
D. Osteotech's obligation to make the Monthly Payments (whether on the
stated due date or if the maturity has been declared due and
accelerated), and any interest due thereon, will be backed by an
irrevocable letter of credit issued by Fleet National Bank ("the
Issuer") for the account of Osteotech and for the benefit of
Medtronic Inc. in the form of Exhibit C annexed hereto (the "Letter
of Credit").
E. If Medtronic presents an affidavit to Osteotech and Fleet National
Bank testifying that the Letter of Credit has been lost, stolen, or
destroyed and that Medtronic has exercised due diligence searching
for the Letter of Credit, and Medtronic indemnifies or provides
objectively satisfactory security to Osteotech and the Issuer,
Osteotech will request that the Issuer issue a replacement Letter of
Credit (marked as a Replacement Letter of Credit) to Medtronic. If
Medtronic presents an affidavit to Osteotech and Fleet National Bank
testifying that the Letter of Credit has been mutilated, accompanied
by the mutilated Letter of Credit, Osteotech will request that the
Issuer issue a replacement Letter of Credit (marked as a Replacement
Letter of Credit) to Medtronic.
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F. If, for any reason, the Letter of Credit or Replacement Letter of
Credit is found void by any court, or fails to fully compensate
Medtronic as intended by this settlement, Osteotech may, within 10
days of written notice of such event, pay in full any remaining
unpaid amounts under this Agreement. If Osteotech fails to pay in
full any remaining unpaid amounts under this Agreement within 10
days of written notice of such event, Medtronic may, at its sole
option, void this settlement and any covenant not to xxx, release or
other obligation on its part under this settlement.
G. In the event Osteotech prepays the amount due Medtronic under this
Section III, Medtronic shall cause the original Letter of Credit,
together with any amendments, to be delivered promptly to Osteotech,
together with a written statement that Osteotech has fully satisfied
the payment terms of the Settlement Agreement and that the Letter of
Credit may be terminated.
IV. RELEASES, COVENANTS, AND OBLIGATIONS
In consideration for the Consent Judgments and payments set forth above,
the parties to this Agreement agree to the following releases, covenants, and
obligations:
A. Medtronic does hereby release, acquit and discharge Osteotech, its
affiliates, predecessors, successors, assigns, directors, officers,
employees, and agents from any claims, demands, actions or causes of
action that Medtronic made or may have made under the
Patents-in-Suit in Tennessee and Florida relating to any Osteotech
product, instrument, or method accused of infringement in the
Litigation through April 24, 2002.
B. Medtronic hereby grants Osteotech a conditional covenant not to xxx
Osteotech for infringement under any patent relating to spinal
interbody implants until January 31, 2003, provided that Osteotech
complies with all other terms and conditions of this Settlement
Agreement. If Osteotech fails to comply with all terms and
conditions herein, the covenant is null and void from the outset.
C. If Osteotech complies with all the terms and conditions of this
Settlement Agreement that Osteotech is obliged to comply with or
fulfill on or before February 15, 2003, Medtronic will deliver to
Osteotech by February 28, 2003, a release through January 31, 2003
for all claims of patent infringement by the products, instruments
and methods accused of infringement in the Tennessee and/or Florida
Actions under any patent owned by or licensed to Medtronic. The
release to be delivered by Medtronic shall be in the form of Exhibit
D annexed hereto.
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D. Medtronic will not voluntarily join with any other person or entity
pursuing an action against Osteotech that is covenanted against or
released by the terms of this Settlement Agreement. An action is
covenanted against hereunder if the covenant is in full force and
effect and has not become void as provided herein. An action is
released hereunder if such release has been delivered to Osteotech
and has not become void as provided herein.
E. Osteotech acknowledges that Medtronic cannot control the action of
any other person or entity (except those persons and entities
controlled or directly or indirectly owned by Medtronic) nor can it
preclude the possibility that it may be involuntarily joined into
such action, which would not be contrary to the terms of this
Settlement Agreement. Enforcement of this Settlement Agreement,
whether undertaken by Medtronic alone or in conjunction with any
other person or entity, would not be contrary to this Settlement
Agreement.
F. Medtronic agrees: (a) to discontinue its participation in the
Florida Action; (b) neither to fund nor to voluntarily assist
Regeneration Technologies Inc. ("RTI") or any other party to
continue to pursue the Florida Action against Osteotech (provided
that any purchase or sale by Medtronic of securities of RTI or other
commercial transactions between Medtronic and RTI shall not
constitute funding or assistance); and (c) to contact RTI, inform it
of the terms of this settlement and give it Medtronic's
recommendation to accept these terms in complete resolution of the
Florida Action. Osteotech acknowledges that Medtronic has already
completed Step (c).
G. Osteotech acknowledges that Medtronic has no control over what
actions RTI or any other person (except those persons and entities
controlled or directly or indirectly owned by Medtronic) may take,
nor can Medtronic preclude the possibility that it may be required
to provide involuntary assistance to RTI or another person by court
order or subpoena.
H. Osteotech further acknowledges that the continuance by Medtronic's
counsel of any representation of RTI or any other party in pursuing
the Florida Action, without funding or voluntary assistance by
Medtronic, would not be contrary to the terms of this Settlement
Agreement.
I. Osteotech does hereby release, acquit and discharge Medtronic, its
affiliates, predecessors, successors, assigns, directors, officers,
employees and agents from any claims, demands, actions, or causes of
action that Osteotech made or may have made related to the
Patents-in-suit in the Tennessee or Florida Actions or relating to
the products, instruments and methods accused of infringement in the
Tennessee or Florida Actions through April 24, 2002.
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J. Osteotech reserves all claims and defenses it may have in the
Florida Action against any person or entity other than Medtronic.
K. Osteotech shall take the bio-d(R)Threaded Cortical Bone Dowel
("bio-d(R)") product line Off the Market no later than January 31,
2003. After January 31, 2003, any products and related instruments
and method-directed material related to the bio-d(R)product line
which have previously been delivered to an end-user customer
(physician or hospital) such that the end-user customer has taken
legal title, on standard payment terms as described above, may
remain in place; any other products and related instruments and
method-directed material shall be recalled and withdrawn from the
market completely, including without limitation any such items in
the possession, custody or control of Osteotech or its employees,
sales representatives, distributors, or stocking facilities, and
including any such items which such persons or entities have loaned
or consigned to another.
L. Osteotech agrees that it will not replace the bio-d(R) product line
or its related surgical instruments with any products which infringe
any of the `253, `437, `038, `081, `084, and `296 Patents, nor will
it promote the practice of any methods covered by any of those
patents after the withdrawal of the bio-d(R) product line from the
market by January 31, 2003 or such earlier date as it completes such
withdrawal.
M. Osteotech, Inc. and each of its officers, agents, employees,
successors and assigns, as well as any person who, acting in concert
or participating with the defendant, has actual notice of the
Consent Judgment, consent to being permanently enjoined from
infringement, active inducement of infringement, or contributory
infringement of any claim of United States Patent Nos. 5,471,253,
5,484,437, and 6,096,038 (collectively "the '253, '437, and '038
patents.") for the remainders of their prospective terms, except
that Osteotech shall be permitted to continue sales of products in
the existing bio-d(R)product line as it existed on April 24, 2002
(including related instruments and methods) only until such products
are fully withdrawn from the market not later than January 31, 2003,
as provided herein.
V. TRANSFER OF THIS AGREEMENT
A. This Agreement and the rights and obligations set forth herein shall
be transferable only to a purchaser who acquires substantially all
of the rights and assets of a party, or of the business unit of a
party that includes the spinal interbody implant business. The
rights and obligations of the transferee shall be the same as the
transferor's rights and obligations immediately preceding the
transfer, and the transferee shall not acquire any rights or incur
any obligations apart from or severable from the transferred
business. Nothing in this
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provision shall prevent any party from transferring this Agreement
or the rights or obligations set forth herein to an affiliate,
provided that doing so does not relieve that party of its
obligations hereunder.
VI. MISCELLANEOUS
A. This Agreement may not be modified except in writing signed by
authorized representatives of the parties.
B. The parties to this Agreement represent and warrant that they have
the authority to enter into this Agreement, including the releases
and covenants contained herein, and that they and their counsel have
the authority to execute and file the Consent Judgment. Medtronic,
Inc. represents and warrants that it has the right to bind the
entities included within the definition of "Medtronic" in this
Settlement Agreement to the terms and conditions of this Settlement
Agreement and to cause such entities to comply with their
obligations under this Settlement Agreement.
C. Any party to this Agreement who believes that another party has
breached this Agreement shall give written notice to the other
party. If the party asserted to have breached determines that it has
breached this Agreement, it may cure the breach within 10 days of
receiving notification of the breach without incurring any penalty,
except as provided in Paragraphs III B and C supra.
D. This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive and procedural laws of the State of
Tennessee.
E. The United States District Court for the Western District of
Tennessee shall retain jurisdiction over the implementation of or
disputes arising out of the settlement of this litigation. The
parties retain their rights to petition the United States District
Court for the Western District of Tennessee regarding any breach or
violation of this Agreement, to seek enforcement of this Agreement
and seek equitable relief and damages.
F. All disputes, controversies or differences that may arise between
the parties out of, or in relation to, or in connection with this
Agreement, or for the breach thereof, shall be submitted to the
United States District Court for the Western District of Tennessee
for resolution, or if, and only if, such court shall not have
jurisdiction over such dispute, then in State Court in Shelby
County, Tennessee.
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G. Enforcement of the terms of this settlement, whether undertaken by
Medtronic alone or in conjunction with any other person or entity,
is not contrary to the terms of this settlement.
H. This settlement between Medtronic and Osteotech is complete and
final as to both the Tennessee and Florida actions, and is not
contingent on any action RTI, the University of Florida Tissue Bank
("UFTB"), or any other person may take.
I. No right or license is granted herein by implication or otherwise
under any patent, patent application or patent claim.
J. All notices to, demands, consents or other communications which any
party to this Agreement may desire or may be required to give to any
other party must be in writing, shall be sent by overnight courier
or registered United States Mail, or by facsimile transmission with
electronically confirmed transmission, and shall be effective as of
the date of confirmed receipt at the address of the party set forth
below:
for Medtronic: for Osteotech:
General Counsel Chief Executive Officer
Medtronic, Inc. Osteotech, Inc.
000 Xxxxxxxxx Xxxxxxx, X.X. 00 Xxxxx Xxx
Xxxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
With a copy to: With a copy to:
Chief Counsel Xxxxx X. Xxxxxxx, Esq.
Medtronic Sofamor Xxxxx, Inc. Xxxxxx & Whitney L.L.P.
0000 Xxxxxxx Xxxxx 00 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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In witness whereof, the parties have caused this Agreement to be executed
by their respective duly authorized representatives on the dates and places
indicated below.
MEDTRONIC, INC.,
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
ATTEST:
Title: Senior Vice President General
Counsel and Secretary
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By: /s/ Xxxxxxxx X. Xxxxxxxxx Dated: June 21, 2002
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ATTEST: OSTEOTECH, INC.,
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------- ---------------------------------
Title: Executive Vice President, CFO
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Dated: June 28, 2002
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