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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(continued...)


 

















 


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


 






(...continued)


 


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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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(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