EXHIBIT 10.3

 

SUPPLY AGREEMENT

 

This SUPPLY AGREEMENT (this “Agreement”) dated as of March 25, 2009, (“Effective
Date”) is by and between OSIRIS THERAPEUTICS, INC., a Delaware corporation
(“Osiris”), and ALLOSOURCE, an Illinois not-for-profit corporation
(“AlloSource”) (any of which may be individually referred to herein as a “Party”
and collectively as the “Parties”).

 

RECITALS:

 

A.                                   Osiris is engaged in the business of
processing and manufacture of an osteobiologic allograft material containing
cancellous bone commonly known as Osteocel® and Osteocel Plus® (collectively,
the “Product”) (the development, manufacturing, marketing and sale of the
Product shall be referred to herein as the “Business”).

 

B.                                     Pursuant to this Agreement, Osiris and
AlloSource intend that Osiris supply to AlloSource and that AlloSource will
purchase certain of Osiris’s inventory, all on the terms and conditions
contained in, and as more fully set forth in, this Agreement.

 

Section 1                                             Purchase; No Liabilities.

 

(a)                                  Subject to the terms and conditions set
forth herein and simultaneously with the satisfaction of the conditions set
forth in clauses (i), below (the “Purchase Date”), AlloSource agrees to
purchase, and Osiris agrees to supply, free and clear of all liens, all right,
title and interest of Osiris in, to and under all Osiris’s Product inventory
which has been manufactured by Osiris in accordance with the specifications,
excluding any Product that has, as of the Manufacturing Closing (defined below),
failed any testing requirement or any quality test and excluding any Product
that should have been discarded based on information available to Osiris prior
to the Manufacturing Closing (the “Inventory”).  Notwithstanding the foregoing,
the Inventory is considered donated human tissue under quarantine for which
donor eligibility and product availability for distribution determinations are
not completed, prohibiting the product being transplanted until eligibility and
availability for distribution determinations are completed as defined in Title
21 Code of Federal Regulations part 1271. The purchase of Inventory is subject
to the following:

 

(i)                                     Osiris and NuVasive, Inc. shall complete
both the “Technology Closing” and the “Manufacturing Closing” (as defined in the
Asset Purchase Agreement effective May 8, 2008 by and between Osiris and
NuVasive, as amended (collectively the “APA”)), within fifteen (15) days of the
execution of this Agreement;

 

(b)                                 AlloSource and **** acknowledge that the
Amended and Restated Tissue Procurement and Processing and Supply Agreement and
dated as of February 1, 2008 by and

 

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**** Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.

 

(continued...)

 

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between Osiris and AlloSource shall be: (a) assigned by Osiris to NuVasive in
connection with the Manufacturing Closing; and (b) amended, modified,
supplemented or terminated upon terms and conditions mutually satisfactory to
each of NuVasive and AlloSource.”

 

(c)                                  AlloSource shall not assume by virtue of
this Agreement or the transactions contemplated hereby, and shall have no
liability for, any liabilities of Osiris.

 

(d)                                 Except as expressly specified herein, Osiris
shall cease processing of any new donor tissue and shall use best efforts to
complete all processing of Inventory within five (5) days of the Effective Date.

 

Section 2                                             Purchase Price.  The
“Purchase Price” shall be calculated by multiplying $**** times the number of
cubic centimeters of Inventory purchased hereunder;  Three business days prior
to the Purchase Date, Osiris shall provide AlloSource with an estimated listing
and itemization of the work in progress inventory, which is subject to
inspection and verification by AlloSource, such inspection and verification to
occur upon reasonable written notice by AlloSource to Osiris.  AlloSource shall
pay one third of the Purchase Price on each of: 45, 75, and 90 days from the
Manufacturing Closing.  AlloSource and Osiris shall have the independent and
bilateral right to withhold and set-off against any amount otherwise due to be
paid (but not yet paid) to each other any amounts due from the other Party,
including with respect to the indemnity provided in Section 9.

 

Section 3                                             Osiris Representations and
Warranties.

 

(a)                                  The Inventory shall (a) conform with the
applicable specifications therefore and with all promises, warranties or
affirmations of fact set forth in regulatory documents or made on the container
or label for the Inventory; (b) have been procured, processed, labeled, handled,
packaged and shipped in accordance with industry standards, the specifications,
all necessary quality control procedures and all applicable laws and
regulations; and (c) not infringe or misappropriate any patent or other
intellectual property right of any third party. There is no design or
manufacturing defect with respect to the Inventory other than defects found by
AlloSource during its review and Release of the Inventory.

 

(b)                                 All documentation supplied to AlloSource in
connection with the Inventory shall, to the knowledge of the Osiris, be accurate
and complete.

 

(c)                                  All permits listed on Schedule 2.11 of the
APA are in full force and effect.

 

(d)                                 Osiris is in compliance in all material
respects with all applicable laws, statutes, regulations, rules, ordinances,
standards, guidelines and judicial or administrative orders issued

 

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(...continued)

 

**** Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.

 

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by the FDA or any other governmental agency or the American Association of
Tissue Banks, relating to the Inventory. To the extent appropriate for
Inventory, all Inventory has been processed, manufactured, packaged, labeled,
stored, handled, and distributed by Osiris in compliance with Osiris quality
control standards and all applicable laws including Good Tissue Practices and
the United States National Organ Transplant Act. None of the Inventory has been
recalled or subject to a field safety notification, and Osiris has not received
written notice (whether completed or pending) of any proceeding seeking recall,
suspension or seizure of the Inventory.

 

Section 4                                             Cooperation. Until all of
the Inventory is Released, Osiris will cooperate and assist AlloSource with the
Release thereof. Specifically, following the Manufacturing Closing, AlloSource
will be fully responsible for final Release of all Inventory. Osiris will
cooperate with AlloSource on the Release of  Inventory; for clarity Osiris will
be closing operations and will terminate most of its employees but hereby agrees
to keep a minimum of 4 employees for 6 weeks to cooperate with AlloSource.
Osiris’ cooperation shall include obtaining any missing or required donor
information from recovery agencies, completing and correcting all processing
records, completing all quality control testing transferred to AlloSource and
cooperating with AlloSource on the planning and scheduling of the transfer of
Inventory to fulfill the obligations specified in Section 5. In the event that
AlloSource requests in writing, specific services beyond the initial six week
period, Osiris will agree to extend the employment period for such person(s) to
a mutually agreed to period of time and AlloSource will agree to reimburse
Osiris, at its cost, for the extension. Osiris’s failure to comply with this
covenant will result in the AlloSource’s withholding the final installment
payment of the Purchase Price until such time as Osiris provides the necessary
cooperation to effect a Release.  For purposes of this Agreement, “Release(d)”
means that AlloSource has received all information and documentation and other
cooperation described above from Osiris necessary for  AlloSource to determine
that each item of Inventory is acceptable or not acceptable for distribution to
a third party for human transplantation. In the event that AlloSource determines
that Osiris is not meeting the cooperation as defined in Section 4, AlloSource
will notify Lou Barnes (or other employees designated by Osiris) within three
days of determination of non-cooperation.

 

Section 5                                             Shipping;
Transportation.   Within thirty (30) days of the Purchase Date, the Inventory
remaining in Osiris’ Columbia facility will be transferred to AlloSource to
shipping location(s) specified by AlloSource,  AlloSource shall be responsible,
at AlloSource’s cost, for the management, insurance, transportation costs,
permits and selection of carriers to transport the Transferred Assets.  Osiris
will cooperate with AlloSource on the planning and scheduling of the
transfer(s).

 

Section 6                                             Records. Osiris shall
maintain accurate and complete records of its procurement, processing, supply,
and shipment of Inventory hereunder for the period of time required by
applicable laws or regulations.  Upon reasonable prior written request of
AlloSource, or whenever requested to comply with laws or regulations, Osiris
shall provide AlloSource with such information, including documentation,
requested by AlloSource regarding the Inventory,

 

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including, without limitation, quality control and quality assurance of
Inventory supplied hereunder.

 

Section 7                                             Complaints; Adverse
Claims.  Osiris shall provide written notification of any complaint or adverse
claim related to the Inventory as soon as reasonably practical after Osiris’s
receipt of such complaint or claim.  Each Party agrees to provide reasonable
assistance and cooperation to the other Party in the investigation and
resolution of any such complaint or claim related to the Inventory, including
any recall, field correction, market withdrawal, stock recovery or other similar
action; provided that AlloSource shall have final authority and responsibility
for all decisions concerning the Inventory and responsibility for all
communication with any non-governmental third party related to Inventory.

 

Section 8                                             Insurance.  Osiris shall
carry and maintain insurance which shall be primary in nature and cover all
risks and liability, including without limitation general and products
liability, associated with the Inventory other than the acts and omission of
AlloSource in releasing the Inventory and with limits of liability equal to at
least **** in the aggregate per year.  Such insurance shall be claims made based
and shall include tail coverage under the same terms for a period of at least
ten (10) years following the Purchase Date.

 

Section 9                                             Indemnification.  Osiris
hereby agrees to indemnify, defend and save harmless AlloSource and its
directors, officers, employees, affiliates, agents, advisors, representatives,
members and assigns (collectively, the “AlloSource Indemnified Parties”) from,
against and in respect of any and all any loss, claim, tax, demand, loss,
deficiency, damage, liability, judgment, fine, penalty, fee, cost or expense
(including, without limitation, reasonable attorneys’, consultants’ and experts’
fees and expenses) incurred, paid, accrued or sustained by the AlloSource
Indemnified Parties, including, without limitation, any costs of defending any
action, suit, claim, charge, cause of action or suit (whether in contract or
tort or otherwise), litigation (whether at law or in equity, whether civil or
criminal), controversy, assessment, arbitration, investigation, hearing,
complaint, demand or other proceeding to, from, by or before any arbitrator,
court, tribunal or other governmental entity or enforcing the AlloSource
Indemnified Party’s rights under this Agreement, incurred or suffered by any
AlloSource Indemnified Party arising out of, or related to, the following (each,
a “AlloSource Claim”):

 

(a)                                  any misrepresentation or breach of warranty
made by Osiris in this Agreement or in any document, certificate or other
instrument required to be delivered by Osiris under this Agreement;

 

(b)                                 any breach or non fulfillment by Osiris when
required to be performed of any covenant or agreement made or to be performed by
Osiris in this Agreement or in any agreement or instrument entered in connection
with this Agreement;

 

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**** Portions of this page have been omitted pursuant to a request for
Confidential Treatment filed separately with the Commission.

 

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(c)                                  any fraud or intentional misrepresentation
with respect to, or intentional breach of, this Agreement by Osiris; and

 

(d)                                 any liabilities related to the Business, the
Product, the Inventory or Osiris, whether arising before, on or after the
Manufacturing Closing, including any defect in the Inventory or any personal
injury caused by the Inventory, but excluding any act or omission by  AlloSource
in releasing the Inventory. Furthermore, AlloSource affirms that Inventory as
defined in Section 1(a) will be Released by AlloSource and any deficiency in the
Release process will void Osiris’ Inventory indemnification.

 

Section 10                                      Miscellaneous.

 

(a)                                  Merger Clause.  This Agreement contain the
final, complete and exclusive statement of the agreement between the parties
with respect to the transactions contemplated herein.

 

(b)                                 Amendments.  No amendment to, or any waiver
with respect to any provision of, this Agreement shall be effective unless in
writing and executed by both parties.

 

(c)                                  Notices.  All notices, requests and demands
and other communications hereunder must be in writing and shall be deemed to
have been duly given (i) if given by facsimile, when such facsimile is
transmitted to the number specified in this Agreement, if written confirmation
of receipt thereof is obtained, (ii) on the date of delivery shown on the return
receipt (or, if none shown, three days after deposit in the mail) if placed in
the United States mails and forwarded by registered or certified mail, return
receipt requested, postage prepaid, or (iii) one business day after deposit in
the mail, if delivered, prepaid, to an overnight courier.  All such
communications shall be addressed as follows:

 

 

(i)

if to Osiris:

 

 

 

 

 

Osiris Therapeutics, Inc.

 

 

7015 Albert Einstein Avenue

 

 

Columbia, Maryland 21046

 

 

Attention:  Chief Financial Officer

 

 

Facsimile: (443) 283-4259

 

 

 

 

 

with a required copy (which shall not constitute notice) to:

 

 

 

 

 

McKenna Long & Aldridge LLP

 

 

303 Peachtree St., NE, Suite 5300

 

 

Atlanta, Georgia 30308

 

 

Attention:  Michael Cochran, Esq.

 

 

Facsimile: (404) 527-4198

 

 

 

 

(ii)

if to AlloSource:

 

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AlloSource

 

 

6278 South Troy Circle

 

 

Centennial, Colorado 80111

 

 

Attention: Kevin J. Cmunt

 

 

Facsimile: (720) 873-0212

 

 

 

 

 

with a required copy (which shall not constitute notice) to:

 

 

 

 

 

Shipman & Goodwin LLP

 

 

One Constitution Plaza

 

 

Hartford, Connecticut 06103

 

 

David M. Mack, Esq.

 

 

Facsimile: (860) 251-5211

 

Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other parties in accordance with this
Section.

 

(d)                                 Captions.  The captions are for convenience
of reference only and shall not be construed as a part of this Agreement.

 

(e)                                  Governing Law.  This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware without regard to its conflicts of law principles.

 

(f)                                    Counterparts.  This Agreement may be
executed in any number of counterparts (including those delivered by facsimile
or other electronic means), each of which shall constitute an original but all
of which taken together shall constitute one and the same instrument.  The
parties need not sign the same counterpart.

 

(g)                                 Benefits and Binding Effect.  No party may
assign or transfer any of their respective rights, benefits or obligations under
this Agreement without the consent in writing of the other party hereto.

 

(h)                                 Simultaneously Executed Contracts: This
Agreement shall be effective when all of: this Agreement, the 3rd Amendment to
the NuVasive-Osiris Manufacturing Agreement, the AlloSource-NuVasive Processing
and Supply Agreement and the 2nd Amendment to the NuVasive-Osiris Asset Purchase
Agreement are fully executed.

 

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties have each caused this Supply Agreement to be
executed by their respective duly authorized officers, all as of the date first
above written.

 

 

 

OSIRIS THERAPEUTICS, INC.

 

 

 

 

 

By:

/s/ Richard W. Hunt

 

Name:

Richard W. Hunt

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

ALLOSOURCE

 

 

 

 

 

 

 

By:

/s/ Thomas A. Cycyota

 

Name:

Thomas A. Cycyota

 

Title:

President and CEO

 

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