exv10w9



 





[***]
indicates that text has been omitted which is the subject of a
confidential treatment request. This text has been filed separately
with the SEC.






Exhibit 10.9




SUPPLY AGREEMENT



This Agreement made as of the 8th day of May, 2001 among:





	 	 	 	WESTAIM BIOMEDICAL CORP., a corporation incorporated under the laws
of Alberta
	 
	 	 	 	(hereinafter referred to as “Westaim”)





- and -





	 	 	 	SMITH & NEPHEW INC., a corporation incorporated under the laws of
Canada, SMITH & NEPHEW, INC., a corporation incorporated under the
laws of the State of Delaware in the United States of America, and
T.J. SMITH & NEPHEW LIMITED, a corporation formed and organized under the laws of England and
Wales
	 
	 	 	 	(hereinafter collectively referred to as “S&N”)




WHEREAS Westaim, Westaim Biomedical Inc. and S&N have agreed to a license and development
arrangement concerning the development and promotion in a specified field of use of certain
existing and future products based on Westaim’s nanocrystalline silver antimicrobial coating
technology, all as set out in the License and Development Agreement (as defined herein) and will,
inter alia, enter into an asset purchase agreement and a transitional services agreement;



AND WHEREAS Westaim and S&N have agreed that Westaim will manufacture and supply exclusively
within the Field (as defined herein) to S&N and S&N will exclusively purchase from Westaim such
products, all upon the terms and subject to the conditions set forth in this Agreement;



NOW, THEREFORE, in consideration of the premises and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby agreed to by the parties,
and intending to be legally bound hereby, the parties hereto agree as follows:




ARTICLE 1

DEFINITIONS




Section 1.1 Definitions



In this Agreement, unless otherwise provided, the following terms shall have the following
meanings:





	 	1.1.1	 	“Acticoat Absorbent Dressing Product” means the Acticoat absorbent
dressing product (referred to in FDA 510 K number K002896) which has the features












 



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	 	 	 	set out in the Specifications set out in Schedule A and which was marketed and sold by
Westaim under the tradename “Acticoat Absorbent Dressing” immediately prior to the
Effective Date, together with all Improvements thereto which Westaim and S&N agree in
writing to implement;
	 
	 	1.1.2	 	“Acticoat Moisture Control Dressing Product” means the Acticoat moisture control dressing
product (referred to in FDA 510 K number K010447) which has the features set out in the
Specifications set out in Schedule B and which was marketed and sold by Westaim under the
tradename “Acticoat Moisture Control Dressing” immediately prior to the Effective Date,
together with all Improvements thereto which Westaim and S&N agree in writing to implement;
	 
	 	1.1.3	 	“Acticoat Product” means the Acticoat product (referred to in FDA 510 K numbers K955453)
which has the features set out in the Specifications set out in Schedule C and which was
marketed and sold by Westaim under the tradename “Acticoat” or “Acticoat Burn Dressing”
immediately prior to the Effective Date, together with all Improvements thereto which Westaim
and S&N agree in writing to implement;
	 
	 	1.1.4	 	“Acticoat 7 Product” means the Acticoat product (referred to in FDA 510 K number K001519)
which has the features set out in the Specifications set out in Schedule D and which was
marketed and sold by Westaim under the tradename “Acticoat 7” immediately prior to the
Effective Date, together with all Improvements thereto which Westaim and S&N agree in writing
to implement;
	 
	 	1.1.5	 	“Affiliates” means any Person that directly or indirectly controls, is controlled by, or is
under common control with another Person. A Person shall be deemed to “control” another
business entity if it owns, directly or indirectly, more than fifty percent (50%) of the
outstanding voting securities, capital stock, partnership interest or other comparable equity
or ownership interest of such Person. If the laws of the jurisdiction in which such Person
operates prohibit ownership of more than fifty percent (50%), control shall be deemed to exist
at the maximum level of ownership allowed by such jurisdiction;
	 
	 	1.1.6	 	“Agreement” means this supply agreement, together with all schedules hereto and any
amendments to or restatements of this supply agreement;
	 
	 	1.1.7	 	“Asset Purchase Agreement” means the asset purchase agreement of even date herewith between
Westaim and Smith & Nephew, Inc., together with all Schedules thereto and any amendments to or
restatements of such asset purchase agreement;
	 
	 	1.1.8	 	“Business Day” means any day except a day that is a Saturday, a Sunday or a statutory
holiday in Alberta;
	 
	 	1.1.9	 	“Claim” has the meaning attributed to that term in Section 9.4;










 



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	 	1.1.10	 	“Confidential Information” has the meaning attributed to that term in Section
8.1;
	 
	 	1.1.11	 	“Distribution Royalties” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.12	 	“Effective Date” means 11:59 pm Calgary time on the 8th day of May, 2001, or such other time
and date as the parties to this Agreement may agree upon in writing;
	 
	 	1.1.13	 	“Equipment” means the equipment listed in Schedule E and any New Equipment which
subsequently becomes Equipment as provided in Section 11.11;
	 
	 	1.1.14	 	“Escrow Agreement” means the manufacturing, technology, escrow agreement of even date
herewith among S&N, Westaim, Westaim Biomedical Inc., and Montreal Trust Company of Canada,
together with all schedules thereto and any amendments to or restatements of such
manufacturing technology escrow agreement;
	 
	 	1.1.15	 	“Event Milestone Payments” means payments under Section 6.4 of the License and Development
Agreement;
	 
	 	1.1.16	 	“FDA” means the United States Food and Drug Administration, or any successor organization;
	 
	 	1.1.17	 	“Field” has the meaning attributed to that term in the License and Development Agreement;
	 
	 	1.1.18	 	“First Refusal Free Transfer Period” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.19	 	“First Refusal Transfer Closing Date” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.20	 	“First Refusal Transfer Notice” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.21	 	“First Refusal Transfer Period” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.22	 	“Fixed Cost Portion of Fully Allocated Cost of Goods” means the portion of Fully Allocated
Cost of Goods (without regard for the proviso in such definition concerning the limitation on
the increase of the Fixed Cost Portion of Fully Allocated Cost of Goods) that does not relate
in any way to: variable costs, including, without limitation, costs relating to raw materials
and any other costs which increase or decrease depending upon the volume of Product produced;
costs not within the control of Westaim or its Affiliates, including










 



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	 	 	 	without limitation the costs of supplies or services provided by third parties; costs
incurred as a result of complying with an order or request of a governmental authority
or regulatory body that relates to manufacturing or the manufacturing facilities; costs
incurred at the request of S&N; and any costs resulting from increases in the amount of
compensation to employees of Westaim or its Affiliates if such increase was a part of a
general increase in the amount of compensation to employees in similar positions within
Westaim;






	 	1.1.23	 	“Force Majeure Event” means the events described in Section 12.1;
	 
	 	1.1.24	 	“Free Transfer Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.25	 	“Fully Allocated Cost of Goods” means with respect to the manufacture and supply of a
particular Product, the aggregate of






	 	1.1.25.1	 	direct material, direct labour and subcontracted costs incurred by Westaim in
connection with the procurement of raw materials or production, manufacture,
processing, labeling, testing, transportation and packaging of such Product, and
	 
	 	1.1.25.2	 	S&N’s proportionate share of indirect costs incurred by Westaim relating to
the manufacturing and manufacturing facilities (“Manufacturing Costs”)
related to such Product including administration and labour (in either
case relating to the manufacturing), depreciation on equipment owned by Westaim, rent,
insurance, utilities, taxes (excluding taxes on income), repairs, maintenance,
cleaning, training, quality control and the like, with such calculation to be made in
accordance with Canadian GAAP. S&N’s proportionate share of such indirect costs
shall be based on the percentage of the aggregate Manufacturing Costs in the
reporting period for which S&N is responsible under this Agreement, being, for
Equipment (other than New Equipment) [***] (or [***] if Westaim has relinquished its [***] reservation of capacity) less
the proportion of Production Capacity (in excess of any such reserve capacity, if
applicable) actually used by Westaim in the reporting period for purposes authorized
by this Agreement, and for New Equipment, the actual usage of such New Equipment by
Westaim in the reporting period for purposes authorized by this Agreement as a
percentage of actual use by Westaim for other purposes.






	 	 	 	provided, however, that for purposes of this Agreement, the Fixed Cost Portion of
Fully Allocated Cost of Goods shall not rise from one calendar year to the next by a
percentage amount that exceeds the greater of [***] and the percentage
increase in the Consumer Price Index, as published by Statistics Canada, from such
calendar year to the next;
	 
	 	1.1.26	 	“Governmental Permits” has the meaning attributed to that term in Section 2.4;











 



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	 	1.1.27	 	“Improvements” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.28	 	“Knowledge” means, in the case of S&N the actual knowledge of Stephen Lang, Simon Dawkins,
Jim Irvin, Janine Lepage and Martin Allen after reasonable inquiry, and, in the case of
Westaim, means the actual knowledge of Barry Heck, Scott Gillis and Dominic Vatelero, after
reasonable inquiry;
	 
	 	1.1.29	 	“License and Development Agreement” means the license and development agreement of even date
herewith among Westaim, Westaim Biomedical Inc., T.J. Smith & Nephew Limited and Smith &
Nephew, Inc., together with all schedules thereto and any amendments to or restatements of
such agreement;
	 
	 	1.1.30	 	“Lien” means, with respect to any property, any assignment, mortgage, charge, pledge, lien,
hypothec, conditional sale or title retention agreement, lease, levy, execution, seizure,
attachment, garnishment or other similar encumbrance or security interest in respect of such
property, howsoever arising (including, without limitation, pursuant to applicable law),
whether absolute or contingent, fixed or floating, legal or equitable, perfected or otherwise;
	 
	 	1.1.31	 	“Manufacturing Assets” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.32	 	“Manufacturing License” has the meaning attributed to that term in Section 4.1.1.1;
	 
	 	1.1.33	 	“Negotiation Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.34	 	“Net Sales” has the meaning attributed to that term in the License and Development
Agreement;
	 
	 	1.1.35	 	“New Equipment” has the meaning attributed to that term in Section 11.11;
	 
	 	1.1.36	 	“New Product” means any new product that the parties agree in writing to add to the scope of
this Agreement, with mutually agreed upon Specifications to be evidenced in writing by the
appending of an additional Schedule to this Agreement;
	 
	 	1.1.37	 	“Offered Purchase Price” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.38	 	“Offered Purchase Terms” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.39	 	“Party” means Westaim or S&N, as the case may be, and “Parties” means Westaim and S&N;
	 
	 	1.1.40	 	“Percentage Manufacturing Profit” means [***] of










 



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	 	 	 	Net Sales for all Products until the earlier of: (i) May 8, 2004, and (ii) the
first day of the calendar quarter immediately following four consecutive calendar
quarters during which Net Sales equaled at least [***], in the aggregate, whereupon “Percentage Manufacturing Profit” means
[***] of Net Sales for all Products;






	 	1.1.41	 	“Person” means an individual, corporation, company, cooperative, partnership, trust,
unincorporated association, entity with juridical personality or a governmental
authority or body, and pronouns which refer to a Person have a similarly extended meaning;
	 
	 	1.1.42	 	“Production Capacity” means the manufacturing capacity of the Equipment, reduced to take
into account all down times including scheduled and unscheduled maintenance;
	 
	 	1.1.43	 	“Products” means the Acticoat Product, the Acticoat 7 Product, the Acticoat Absorbent
Dressing Product, the Acticoat Moisture Control Dressing Product, and includes any inventory
of such Products existing as at the Effective Date, and any New Product and “Product” means
any one of the Products;
	 
	 	1.1.44	 	“Purchase Option” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.45	 	“Qualifying Offer” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.46	 	“Regulatory Authority” means, with respect to a particular Product, those government
agencies or authorities responsible for the approval of such Product in the United States,
Canada and the European Union (taken as a whole, not individual member countries);
	 
	 	1.1.47	 	“Rejection Date” has the meaning attributed to that term in Section 2.2.3;
	 
	 	1.1.48	 	“Rejection Notice” has the meaning attributed to that term in Section 2.2.3;
	 
	 	1.1.49	 	“S&N Indemnities” has the meaning attributed to that term in Section 9.1;
	 
	 	1.1.50	 	“S&N Offer” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.51	 	“S&N Production Capacity” has the meaning attributed to that term in Section 11.3;
	 
	 	1.1.52	 	“S&N Purchase Price” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.53	 	“S&N Purchase Terms” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.54	 	“Sales Milestone Payments” means payments made to Westaim under Section 6.5 of the License
and Development Agreement;
	 
	 	1.1.55	 	“Sales Report” has the meaning attributed to that term in Section 3.2;











 



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	 	1.1.56	 	“Specifications” means, with respect to a particular Product, the
specifications in relation to such Product set forth in the applicable Schedule
for that Product to this Agreement or, with respect to a New Product, as agreed
upon in writing by Westaim and S&N, as such specifications may be amended from
time to time by the written agreement of Westaim and S&N;
	 
	 	1.1.57	 	“Survival Period” has the meaning attributed to that term in Section 12.9;
	 
	 	1.1.58	 	“Term” means the term of this Agreement as specified in Section 10.1;
	 
	 	1.1.59	 	“Territory” means, subject to Sections 1.1.16.13 and 1.1.16.14 of the License and
Development Agreement, all countries of the world;
	 
	 	1.1.60	 	“Transfer Closing Date” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.61	 	“Transfer Notice” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.62	 	“Transfer Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.63	 	“Transition Services Agreement” means the transition services agreement of even date
herewith among Westaim and Smith & Nephew Inc. and Smith & Nephew, Inc., together with
all schedules thereto and any amendments to or restatements of such transition services
agreement;
	 
	 	1.1.64	 	“Westaim Manufacturing Technology” means, with respect to a particular Product in the
Field, the proprietary technology relating to the manufacture of such Product owned by
Westaim or licensed in by Westaim with the right to sublicense in the manner
contemplated by this Agreement and which is necessary in connection with the manufacture
of such Product;
	 
	 	1.1.65	 	“Westaim Know-How” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.66	 	“Westaim Indemnities” has the meaning attributed to that term in Section 9.2;
	 
	 	1.1.67	 	“Westaim Patent Rights” has the meaning attributed to that term in the License and
Development Agreement; and
	 
	 	1.1.68	 	“Westaim Production Capacity” has the meaning attributed to that term in Section
11.3.





Section 1.2 Number and Gender



Words importing the singular number only in this Agreement shall include the plural number and vice
versa and words importing one gender only in this Agreement shall include all genders and words
importing Persons in this Agreement shall include individuals, partnerships, corporations and any
other entities, legal or otherwise.










 



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Section 1.3 Sections and Headings



The division of this Agreement into Articles, Sections and Subsections and the insertion of
headings are for convenience of reference only and shall not affect the interpretation of this
Agreement. The terms “this Agreement”, “hereof, “hereunder” and similar expressions refer to this
Agreement and not to any particular Article, Section, Subsection, Schedule or other portion
hereof. Unless otherwise indicated, any reference in this Agreement to an Article, Section,
Subsection or Schedule refers to the specified Article, Section, Subsection or Schedule to this
Agreement.




Section 1.4 Schedules





The following schedules attached to this Agreement shall form part of this Agreement:




Schedule A — Acticoat Absorbent Dressing Product Specifications




Schedule B — Acticoat Moisture Control Dressing Product Specifications




Schedule C — Acticoat Product Specifications




Schedule D — Acticoat 7 Product Specifications




Schedule E — Equipment



Section 1.5 Effective Date



This Agreement shall commence as of the Effective Date.




Section 1.6 Calendar Quarter



Wherever calendar quarter is used in this Agreement in connection with a matter that pertains to
S&N’s financial reporting, S&N shall be entitled to interpret the provision to refer to the period
used in its quarterly reporting practice.




Section 1.7 Legislation



Any reference in this Agreement to legislation or a statute includes, unless otherwise indicated,
rules and regulations passed or in force as at the date of this Agreement and any amendments to
such rules or regulations from time to time, and any legislation or regulations substantially
replacing the same.




Section 1.8 Time of Essence



In this Agreement, time is of the essence.










 



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ARTICLE 2

MANUFACTURING AND SUPPLY OBLIGATIONS




Section 2.1 Supply of Product



Subject to the terms and conditions of this Agreement, S&N hereby appoints Westaim as S&N’s
exclusive supplier of Products in the Territory and Westaim agrees to supply Products in the
Territory exclusively to S&N, and Westaim undertakes and agrees to sell to S&N, and S&N agrees to
purchase from Westaim, such quantities of Products as are ordered by S&N from time to time. S&N
shall order all of its requirements for Products exclusively from Westaim. Westaim shall not sell
Products to any Person other than S&N or an Affiliate of S&N without the express written consent
of S&N.




Section 2.2 Forecasting; Purchase Orders; QA and QC




Unless otherwise agreed to in writing by Westaim and S&N, the supply by Westaim to S&N of a
particular Product shall be on the following terms and conditions:




	 	2.2.1	 	Westaim agrees to supply to S&N and S&N agrees to purchase exclusively
from Westaim such quantities of such Product as S&N shall request monthly by written
purchase order, all in accordance with the terms of this Agreement. S&N shall, on a
monthly basis during the Term (except during any period in which S&N is exercising its
rights under the Manufacturing License in accordance with Article 4), provide Westaim
with a twelve (12) month non-binding rolling forecast of S&N’s estimated requirements
for the Product. Such twelve (12) month non-binding rolling forecast shall be provided
to Westaim no later than five (5) Business Days preceding the beginning of each
calendar month and shall cover the twelve (12) month period commencing with the
calendar month next following such calendar month (e.g., on or before September 21,
2001, S&N is required to provide Westaim with an updated twelve (12) month rolling
non-binding forecast for the period November 1, 2001 to October 31, 2002). S&N shall
on a monthly basis request a supply of the Product from Westaim by way of written
purchase order. The purchase order for a particular month shall be delivered to
Westaim no later than five (5) Business Days preceding the beginning of the particular
month. The minimum amount of the Product ordered by S&N for any particular month shall
be [***] of the requirements last estimated for such month in the
applicable twelve (12) month non-binding rolling forecast. Each purchase order shall
be binding on S& N and Westaim, and Westaim shall fill each purchase order of S&N
within [***] days from receipt of such purchase order, provided, however,
that, with respect to a particular month, in the event S&N’s purchase order exceeds [***] of the requirements last estimated for such month in
the applicable twelve (12) month non-binding rolling forecast, Westaim shall not be
obligated to fill the amount of such purchase order in excess of [***] but shall only be required to use reasonable commercial efforts to fill
the amount of such purchase order in excess of the requirements last










 



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	 	 	 	estimated for such month in the applicable twelve (12) month non-binding
rolling forecast. Further, notwithstanding the above, but subject to Westaim complying
with Section 11.11, under no circumstances shall Westaim be obligated to supply a
quantity of Products over any period that exceeds the quantity of Products that can be
produced by the Equipment during such period using the S&N Production Capacity;
	 
	 	2.2.2	 	all Products purchased hereunder by S&N from Westaim shall conform to the applicable
Specifications at the time of delivery by Westaim to S&N; and
	 
	 	2.2.3	 	upon receipt of any Product, S&N may inspect and test such Products for conformance to the
applicable Specifications and may, up to and including the date which is thirty (30) days
after the date of receipt by S&N of such Products (the “Rejection Date”), reject the same by
sending to Westaim written notice (the “Rejection Notice”) of such rejection on or before the
Rejection Date (specifying the nature of such non-conformance) if such Product does not
conform to the Specifications. S&N shall be deemed to have accepted a particular delivery of
such Product if S&N has not sent to Westaim a Rejection Notice in connection with such
delivery on or before the Rejection Date related to such delivery; provided, however, that S&N
shall have the right to reject Product by delivery to Westaim of a Rejection Notice after the
Rejection Date, as soon as is practicable following S&N becoming aware of the non- conformance
of the Product, if such Product did not conform to the Specifications at the time it was
delivered to S&N and the non-conformance resulted from a latent defect not capable of being
detected by S&N during a reasonable inspection and testing of the Product at the time of
delivery to S&N. If Westaim disagrees with the alleged non-conformity of such Product with
the Specifications, and after the Parties have endeavoured to settle such disagreement between
themselves, then an independent laboratory, mutually agreed upon in writing by the Parties
(acting reasonably), shall analyze samples of the alleged non-conforming Product to determine
compliance with the Specifications. Westaim and S&N shall be bound by the laboratory
analysis of such alleged non-conformity of such Product with the
Specifications. The cost incurred in connection with retaining the independent laboratory
shall be borne by S&N if the Product in question is found to conform to the Specifications and
by Westaim if the Product in question is found to not conform to the Specifications. To the
extent it is determined that any Product supplied by Westaim to S&N under this Agreement does
not conform to the Specifications, Westaim’s sole obligation and S&N’s sole remedy shall be to
have Westaim replace such non-conforming Product at no additional cost to S&N.
	 
	 	2.2.4	 	S&N and Westaim agree to negotiate in good faith to conclude a “technical agreement”
required by the Regulatory Authorities in respect of a Product within ninety (90) days of the
Effective Date, and to negotiate in good faith to conclude a “technical agreement” required by
the Regulatory Authorities in respect of a New Product prior to the anticipated launch of such
New Product.










 



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Section 2.3 Delivery; Title; Risk of Loss



Westaim shall transfer Products to S&N [***] or such other facilities as Westaim and S&N, by mutual agreement in
writing, may from time to time designate.




Section 2.4 Representations





	 	2.4.1	 	Westaim represents and warrants to S&N that each Product will be produced in
compliance with all applicable laws, the non-compliance with which would have a
material adverse effect on Westaim’s ability to meet its obligations under this
Agreement in relation to such Product. Westaim shall at all times relevant throughout
the Term own, hold or possess all material licenses, franchises, permits, privileges,
immunities, registrations, approvals (including, without limitation, regulatory
approvals), authorizations and qualifications (“Government Permits”) necessary to allow
it to manufacture and produce the Products. All such Government Permits shall in all
material respects be valid, subsisting and in good standing at all relevant times
throughout the Term.
	 
	 	2.4.2	 	Westaim represents and warrants that it is the owner of the Westaim Patent
Rights and that such ownership is unencumbered by any lien or security interest granted
by Westaim and, to the Knowledge of Westaim, it is the owner of the Westaim Know-How
and that all material formal requirements in connection with the maintenance and
continuation of the patents and trade-marks (including the payment of fees and taxes
necessary for the continued use of and/or registration thereof) have been complied with
as at the Effective Date. Westaim has no Knowledge of any reason why any patent
included in the Westaim Patent Rights would be held to be invalid or otherwise
unenforceable, of any reason why any patent application included in the Westaim Patent
Rights would be refused or withdrawn, of any reason why any Person would claim that the
production, use or sale of Products would infringe its intellectual property rights or
that any trade secret of another Person has been appropriated by Westaim in the
production of the Products. Westaim has taken reasonable measures to avoid
misappropriation of trade secrets or infringement of copyright. For purposes
of this Section 2.4.2, it is acknowledged that “ownership” goes to title and not
to right to use or exploit, and that title does not necessarily give the right to use
or otherwise exploit.
	 
	 	2.4.3	 	Except as expressly provided in this Article 2, Westaim makes no representation or warranty, whether express or implied, with respect to the
Products including, without limitation, any representation as to fitness for a
particular purpose or merchantable quality.





Section 2.5 Inspection by S&N



No more frequently than once per calendar year, Westaim shall allow S&N, upon reasonable written
notice to Westaim and in any event within fifteen (15) days of such notice being given,










 



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during normal business hours and with a representative of Westaim present, if Westaim makes a
representative available, to visit Westaim’s manufacturing facility and to review the quality
control procedures and manufacturing records of Westaim, in order to assure satisfaction of the
requirements of this Agreement. Westaim shall respond to all reasonable comments or requests
provided by S&N to Westaim with respect to the foregoing.




Section 2.6 Import/Export Licenses



S&N shall be responsible for obtaining, at its expense, any import/export licenses required by any
governmental authority with respect to Products from and after its delivery to S&N pursuant to
this Agreement.




Section 2.7 Label Content



S&N shall be responsible for ensuring that the label and product insert for any Product sold in
any country in the Territory comply with all legal, governmental and regulatory requirements of
such country, and, to the extent required for Westaim to fully and effectively meet all of its
obligations under this Agreement. S&N shall be responsible for advising Westaim in writing and in
a timely manner of all such country specific requirements in connection with the packaging of
Products including without limitation label, package insert, language and other such requirements,
and Westaim shall be responsible for following all reasonable instructions and advice provided by
S&N to Westaim in this regard.




Section 2.8 Validation



All facilities, processes, equipment and analytical methods used for control of critical process
steps employed by Westaim in the manufacture and production of Products shall be validated in
accordance with the rules, regulations and guidance documents of the Regulatory Authorities and
shall otherwise be in material compliance with all applicable laws, rules and regulations.




Section 2.9 Regulatory Matters



Westaim agrees that it will allow all inspections of its facilities required by any Regulatory
Authority and will appropriately respond, forthwith upon receipt and in consultation with S&N, to
all requests of any Regulatory Authority and shall provide copies of all such responses to S&N
forthwith upon receipt.




Section 2.10 Production Records



The manufacture of Product shall be recorded in batch production record format that is in
compliance with the requirements of the Regulatory Authorities. With respect to a particular
manufacturing run, Westaim will, upon the written request of S&N, provide S&N reasonable access to
Westaim’s batch production records with respect to such manufacturing run during normal business
hours. Product and plant master files shall also be maintained by Westaim in accordance with the
requirements of the Regulatory Authorities and such files shall be available upon reasonable
written notice during normal business hours to the Regulatory Authorities or S&N.










 



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Section 2.11 Maintenance of Records



Westaim will keep or cause to be kept complete and current records relating to all of its
manufacturing supply activities under this Agreement in accordance with applicable law, rules and
regulations and also the requirements of the Regulatory Authorities.




Section 2.12 Subcontracting



Westaim shall not subcontract its obligations under this Agreement without the prior written
consent of S&N, which consent shall not be unreasonably withheld; provided, however, that Westaim
shall be entitled to subcontract all or some of its obligations under this Agreement to one or
more of its Affiliates without the consent of S&N provided Westaim remains responsible to S&N for
the performance of this Agreement by such Affiliate.




ARTICLE 3

CONSIDERATION




Section 3.1 Purchase Price



The purchase price payable by S&N to Westaim for a particular Product shall be equal to the Fully
Allocated Cost of Goods for such Product plus the Percentage Manufacturing Profit.




Section 3.2 Payment



The purchase price specified in Section 3.1 shall be paid by S&N to Westaim in the following
manner. Westaim shall issue an invoice to S&N at the time it delivers Products pursuant to a
purchase order received from S&N with respect to any particular month pursuant to Section 2.2.1.
Such invoice shall state an amount payable by S&N to Westaim as consideration for the Products and
shall include the Fully Allocated Cost of Goods, the Percentage Manufacturing Profit, and all
applicable taxes and other charges. Amounts payable by S&N under such invoices shall be paid within
[***] days of receipt of the invoice by S&N. In determining the Percentage Manufacturing
Profit, the average gross selling price for the particular Product during the previous calendar
quarter shall be used as an estimate of Net Sales. S&N shall advise Westaim in writing of the
average gross selling price for all Products (on a Product by Product basis) for each calendar
quarter and shall provide reasonable supporting documentation with respect thereto within [***]
Business Days of the end of such calendar quarter. Within [***] days of the close of each
calendar quarter, the actual Net Sales for each Product for such calendar quarter shall be
determined by S&N and provided to Westaim in a sales report (the “Sales Report”) specifying, at a
minimum, (a) [***] of each Product made during such calendar quarter, (b) [***] of each
Product made during such calendar quarter and (c) the [***] of each Product sold in
such calendar quarter. Each such Sales Report shall include reasonable supporting documentation. If
the Sales Report indicates that S&N has paid more or less than it should have paid, then such
overpayment or underpayment shall be paid by the appropriate party to the other party within [***] days following receipt of such Sales Report.










 



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Section 3.3 Audit Rights





	 	3.3.1	 	Westaim will keep and maintain proper and complete records and books of
account in such form and detail as is necessary for the determination of the Fully
Allocated Cost of Goods. Westaim shall once in each calendar year during normal
business hours and upon fifteen (15) days prior notice from S&N make those records
available for audit by a nationally recognized accounting firm designated by S&N
(except one to which Westaim shall have objection, acting reasonably) for the sole
purpose of, and Westaim will only be required to disclose information related to,
verifying the Fully Allocated Cost of Goods and the correctness of calculations and
classifications in respect thereof. Westaim shall preserve such records made in any
calendar year for a period of seven (7) years following the close of that calendar
year. In the event that such audit discloses that the actual amount of Fully Allocated
Cost of Goods are less than the amount paid by S&N to Westaim pursuant to this Article
3, then Westaim shall promptly reimburse to S&N such overpayment. In the event that
such audit discloses that the actual amount of Fully Allocated Cost of Goods payable
by S&N to Westaim are greater than the amount paid by S&N to Westaim pursuant to this
Article 3, then S&N shall promptly pay to Westaim such underpayment based on the
results disclosed by such audit. The cost of such audit shall be borne by S&N unless
such audit discloses that Fully Allocated Cost of Goods is less by [***] or
more than the amount paid by S&N to Westaim pursuant to this Article 3 or such audit
discloses that Fully Allocated Cost of Goods is more than the amount paid by S&N to
Westaim pursuant to this Article 3, in which case Westaim shall be responsible for
payment of all reasonable costs of such audit to a maximum of the amount of any
underpayment by S&N to Westaim due to an incorrect calculation of Fully Allocated Cost
of Goods and S&N shall be responsible for payment of all other costs of such audit.
Notwithstanding the foregoing, S&N shall not have the right to conduct more than once,
for the same purpose, an audit of the same information, books and records, whether
under this Agreement or the License and Development Agreement; provided, however, that
if any such audit discloses that the actual Fully Allocated Cost of Goods was
calculated incorrectly such that a reimbursement by Westaim is required pursuant to
this Section 3.3.1, then S&N shall have a further right to audit the same
information, books and records for the same purpose until such time as no further
errors are found.
	 
	 	3.3.2	 	S&N will keep and maintain proper and complete records and books of account
in such form and detail as is necessary for the determination of the Net Sales amounts
payable by S&N to Westaim under this Agreement. S&N shall once in each calendar year
during normal business hours upon fifteen (15) days prior notice from Westaim make
those records available for audit by a nationally recognized accounting firm
designated by Westaim (except one to which S&N shall have objection, acting
reasonably) for the sole purpose of, and S&N will only be required to disclose
information related to, verifying such Net Sales and deductions therefrom and the
correctness of calculations










 



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	 	 	 	and classifications in respect thereof. S&N shall preserve such records made in
any calendar year for a period of seven (7) years following the close of that
calendar year. In the event that such audit discloses that the actual Net Sales
amounts for Products are greater than the Net Sales amounts reported by S&N to
Westaim pursuant to this Article 3 for purposes of calculating the purchase price
payable by S&N to Westaim for Products, then S&N shall pay to Westaim any
additional purchase price for Products based on the results disclosed by such
audit. In the event that such audit discloses that the actual Net Sales amounts
for Products are less than the Net Sales amounts reported by S&N to Westaim
pursuant to this Article 3, then Westaim shall reimburse S&N for any such
overpayment of the purchase price for Products based on the results disclosed by
such audit. The cost of such audit shall be borne by Westaim unless such audit
discloses that the actual Net Sales amounts for Products are greater by [***] or more than the Net Sales amounts reported by S&N to Westaim
pursuant to this Article 3 or such audit discloses that the Net Sales for Products
are less than the Net Sales reported by S&N to Westaim pursuant to this Article 3,
in which cases S&N shall be responsible for payment of all reasonable costs of
such audit to a maximum of the amount of any overpayment by S&N to Westaim due to
an incorrect calculation of Net Sales and Westaim shall be responsible for payment
of all other costs of such audit. Notwithstanding the foregoing, Westaim shall
not have the right to conduct more than once, for the same purpose, an audit of
the same information, books and records, whether under this Agreement or the
License and Development Agreement; provided, however, that if any such audit
discloses that the actual Net Sales was calculated incorrectly such that a payment
by S&N is required pursuant to this Section 3.3.2, then Westaim shall have a
further right to audit the same information, books and records for the same
purpose until such time as no further errors are found.





Section 3.4 Late Payments



Any late payments of any nature made under this Agreement shall bear interest, running from the
date such payment was due until such payment is made in full, at a rate per annum equal to the
average three (3) month US dollar LIBOR rate (as published from time to time by Reuters) plus [***].




Section 3.5 Currency Conversion



The currency in which Net Sales were invoiced shall be converted to United States dollars on the
date of payment of the Percentage Manufacturing Profit using the applicable average rate of
exchange for U.S. dollars for the prior quarter quoted as bcal currency per US $1, published in
The Financial Times (London edition).




Section 3.6 Taxes and Other Withholdings



Each of Westaim and S&N shall be responsible for any and all taxes and other similar levies or
charges properly assessed against payments received by such Party from the other Party under










 



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this Agreement. If applicable laws or regulations require that taxes or other amounts be
withheld on such payments, the withholding Party will in a timely manner notify the other Party
in writing specifying the details thereof and shall:





	 	3.6.1	 	deduct those taxes or other amounts from the amount of such payment due to the
receiving Party,
	 
	 	3.6.2	 	pay the taxes or other amounts to the proper taxing authority in a timely
manner, and
	 
	 	3.6.3	 	send proof of payment to the receiving Party within sixty (60) days following
that payment.




The Parties agree to cooperate to lawfully reduce the amount of any such deductions by obtaining
the benefit of any tax treaty with respect to such deductions. Further, the withholding Party
shall cooperate with the receiving Party in obtaining for the receiving Party a credit or refund
for any such taxes, levies or charges.




Section 3.7 Set-Off



If pursuant to any of the terms of this Agreement, or any other agreement or instrument
contemplated in this Agreement, including, without limitation, the Transition
Services Agreement, the Asset Purchase Agreement or the License and Development Agreement, it is
determined pursuant to the dispute resolution procedure in Section 12.4 or otherwise by an
unappealable decision of a court of law, that a Party owes any amount to the other or to an
Affiliate of the other, then without limiting or waiving, in any respect, any rights or remedies of
the other Party, the other Party shall have the right to set-off the aggregate amount of such
amount owing against, and apply it in full or partial satisfaction of, any amounts payable by the
other Party or an Affiliate of the other Party, pursuant to the terms of this Agreement or any
other agreement or instrument contemplated in this Agreement, including, without limitation, the
Transition Services Agreement, the Asset Purchase Agreement or the License and Development
Agreement.




ARTICLE 4

MANUFACTURING LICENSE




Section 4.1 Manufacturing License





	 	4.1.1	 	License to Make and Have Made in the Territory






	 	4.1.1.1	 	With respect to Products, Westaim hereby grants to T.J. Smith & Nephew
Limited and its Affiliates a royalty-free license (or, where applicable,
sublicense) under the Westaim Manufacturing Technology to make and have made
Products for sale by S&N in the Field in the Territory pursuant to the License
and Development Agreement (the “Manufacturing License”); provided, however,
that S&N may not practice the Manufacturing License until such time, if ever,
as Westaim










 



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	 	 	 	has failed to cure a material supply difficulty or failed to satisfy S&N,
acting reasonably, that it can cure such supply difficulty at least as well as S&N,
all as described in Section 4.1.1.3.
	 
	 	4.1.1.2	 	Notwithstanding the foregoing, Westaim agrees to advise S&N in a timely manner of any
material supply difficulties (which shall include the inability or unwillingness of Westaim to
provide assistance to S&N pursuant to Section 11.11) with respect to a Product or Products
experienced by Westaim (including any caused by a Force Majeure Event) so that the Parties
have an opportunity to discuss such difficulties and possible resolutions thereof at an
early stage with a view to avoiding the application of the Manufacturing License in relation
to the Product or Products.
	 
	 	4.1.1.3	 	If Westaim advises S&N of a supply difficulty pursuant to Section 4.1.1.2 or encounters one
but does not notify S&N thereof and S&N desires to practice the Manufacturing License with
respect to Products (in whole or in part), S&N will notify Westaim in writing of such desire
not earlier than [***] following the commencement of the discussions referred to in
Section 4.1.1.2 or, if no discussions occur because Westaim failed to notify S&N of the supply
difficulty, [***] following the date S&N becomes aware of the supply difficulty. In
that event, Westaim shall have a period of [***] following receipt of the notice
from S&N to either cure the supply difficulty or demonstrate to the satisfaction of S&N,
acting reasonably, that it can cure the supply difficulty at least as well as S&N, having
regard for the time and cost to implement the cure. If, by the end of the [***]
period, and only in such circumstances, Westaim has neither cured the supply difficulty nor
demonstrated to the satisfaction of S&N, acting reasonably, that it can cure such difficulty
at least as well as S&N, then S&N shall become entitled to practice the Manufacturing
License with respect to such Product to the extent requested by S&N in its written notice to
Westaim. Except as expressly provided in Section 9.1 (insofar as it pertains to third
party claims against S&N), the right to practice the Manufacturing License in relation to such
Product will be S&N’s sole remedy for the actions of Westaim giving rise to that right. S&N
shall purchase from Westaim such quantity of such Product and material intermediates as are
then held by or on behalf of Westaim.
	 
	 	4.1.1.4	 	During any period in which S&N is practicing the Manufacturing License with respect to
Products, S&N shall:






	 	4.1.1.4.1	 	be responsible for all aspects of the manufacture and supply of such
Products assumed by S&N and, as a result, Westaim shall, notwithstanding any
provision to the contrary in this Agreement, be relieved from all obligations










 



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	 	 	 	under this Agreement with respect to the manufacture and supply of such
Products during such period, including without limitation any liability
in respect thereof to S&N or any third party, except in relation to
Products manufactured and supplied by Westaim prior to the commencement
of such period or after the conclusion of such period;
	 
	 	4.1.1.4.2	 	only modify the label of such Product to the extent required by the
applicable Regulatory Authority.






	 	4.1.1.5	 	At the time that S&N is entitled to practice the Manufacturing License under this Section
4.1, the lease provided for in Article 11 shall be deemed to have been terminated, and Westaim
shall comply with the provisions in Section 11.8 with respect to expiry of the Term and the
return of the Equipment.
	 
	 	4.1.1.6	 	If within one year after S&N begins to practice the Manufacturing License with respect to
such Products in the Field in the Territory (to the extent requested by S&N in its written
notice to Westaim), Westaim has demonstrated to the satisfaction of S&N, acting reasonably,
the ability to once again manufacture such Products for sale in the Territory in compliance
with the provisions of this Agreement at a Fully Allocated Cost of Goods no more than the
Fully Allocated Cost of Goods incurred by S&N during its period of manufacture, and has paid
to S&N an amount equal to all of the costs directly incurred by S&N in establishing and
terminating such manufacturing operations (including all capital expenditures or commitments
to third parties in relation thereto made by S&N to enable it to manufacture and supply such
Products), S&N shall, subject to then existing third party commitments, permit Westaim to
resume such manufacturing activities of such Products for sale in the Territory. S&N will
use commercially reasonable efforts in structuring any third party arrangements to
minimize the duration and scope of any such commitments so as to facilitate the resumption by
Westaim of manufacturing activities of such Products for sale in the Field in the Territory.
Upon such resumption by Westaim, the lease provided for in Article 11 shall resume and
S&N will no longer be entitled to practice the Manufacturing License with
respect to such Products in the Territory (except to the limited extent required to enable S&N
to comply with then existing third party commitments regarding manufacture of such Products)
until such tune as the conditions described in Section 4.1.1.2 above recur and the procedures
in Section 4.1.1.3 above have once again been complied with and S&N is thereby entitled to
again practice the Manufacturing License.










 



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	 	4.1.2	 	Technology Transfer






	 	4.1.2.1	 	In order to enable S&N to effectively exercise its rights under the
Manufacturing License when applicable, Westaim, S&N and certain other named
parties have concurrently with this Agreement entered into the Escrow Agreement.
Further, in the event that S&N becomes entitled to practice the Manufacturing
License with respect to Products, Westaim will provide S&N with all assistance
reasonably required to ensure a smooth and seamless transition of manufacturing
of Products, including the ability to consult with Westaim personnel involved in
manufacturing Products and, if Westaim has provided its prior written consent,
the ability to make offers of employment to such personnel.
	 
	 	4.1.2.2	 	Any information received by S&N pursuant to Section 4.1.2 shall be subject to
the confidentiality provisions of Article 8 and shall be deemed to be the
Confidential Information of both S&N and Westaim. S&N shall return any such
information to Westaim at such time as its ability to practice the Manufacturing
License with respect to Products terminates (except that S&N may retain one copy
for legal archival purposes).






	 	4.1.3	 	Protection in Bankruptcy. The rights granted to S&N by Westaim
pursuant to this Section 4.1 constitute “intellectual property” (including as such term
is defined under Section 101 (35A) of the United States Bankruptcy Code) for purposes
of applicable bankruptcy law (including Section 365(n) of the United States Bankruptcy
Code).
	 
	 	4.1.4	 	Force Majeure Events




Notwithstanding any provision to the contrary in this Article 4, if S&N, but for the occurrence of
a Force Majeure Event with respect to Westaim, would be entitled to provide to Westaim the written
notice specified in Section 4.1.1.3, Westaim shall be presumed to be the Party that is able to take
the steps to relieve the effect of the occurrence of the Force Majeure Event (and thus rely on the
provisions of Section 12.1), unless S&N can reasonably demonstrate at such time that S&N is
materially better positioned to take the steps to relieve the effect of the occurrence of the Force
Majeure Event (in which case S&N shall become entitled to practice the Manufacturing License, all
as provided for in this Article 4, notwithstanding the occurrence of the Force Majeure Event).




Section 4.2 S&N Cost of Manufacture



S&N shall be responsible for all costs of the manufacture of the Products by or on behalf of S&N
during the time that S&N is manufacturing Products under the Manufacturing Licence.










 



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ARTICLE 5

RECALLS AND COMPLAINTS




Section 5.1 Product Recalls



S&N shall be responsible for implementing all Product recalls:, (a) required by a request,
directive or order of any applicable Regulatory Authority; (b) required by the order of a court of
competent jurisdiction; and (c) required by S&N, acting reasonably and with input from Westaim (if
time permits). To the extent that the Product recalled was sold prior to the date of this
Agreement or to the extent that the adverse event or complaint resulting in the recall was
attributable to Westaim, S&N out-of-pocket expenses incurred in connection with such recall shall
be borne by Westaim. S&N shall handle any such recall in a timely manner and in compliance with
all applicable laws and regulations. S&N shall keep Westaim informed in a timely manner with
respect to any such recall. No communications regarding any such recall shall be initiated by
either S&N or Westaim with the news media, customers, the FDA or any other Regulatory Authority,
except if and to the extent required by applicable law or regulatory requirement, without the
prior written approval of the other of them, which approval shall not be unreasonably withheld or
delayed. If a Party does not respond in writing to the other Party within the time period
requested by the other Party, acting reasonably, and in a timely fashion but in any event within
ten (10) days after receipt of any request for approval, such failure to respond will be deemed to
be a response that the Party does not have any comment in respect of the recall. In the event of a
recall, the defect giving rise to such recall shall be remedied as promptly as possible by the
Party responsible for the defect.




Section 5.2 Complaints and Adverse Events




Each of S&N and Westaim shall notify the other Party no later than the following Business Day,
after becoming aware of any report of any serious adverse event or consumer complaint, and within
ten (10) Business Days after becoming aware of any non-serious adverse events or consumer
complaints, associated with the use of a Product, whether or not determined to be attributable to
Product. Such notification shall be by facsimile or e-mail (with flagged priority). Evaluation,
follow-up and reporting of all adverse events and customer complaints shall be the responsibility
of S&N. Westaim shall provide all assistance reasonably requested by S&N in the foregoing regard.
Each Party shall maintain a record of all reported adverse events.



ARTICLE 6

INSURANCE




Section 6.1 Insurance





	 	6.1.1	 	Subject to adjustment as hereinafter provided, Westaim shall, at its sole
cost and expense, procure and maintain policies of commercial general liability
insurance in amounts of not less than [***] per incident
and [***] annual aggregate and naming S&N as an additional
insured and of business interruption insurance in amounts of not less than two million
dollars ($2,000,000) per incident and ten million dollars ($10,000,000) annual
aggregate and naming S&N as an










 



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	 	 	 	additional insured. Such commercial general liability insurance shall,
among other things, provide (a) product liability coverage and (b) contractual
liability coverage for Westaim’s indemnification under Section 9.1. If Westaim
elects to self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of [***]
annual aggregate), such self-insurance program must be reasonably acceptable to
S&N. The minimum amounts of insurance coverage required under these provisions
shall not be construed to create a limit of Westaim’s liability with respect to
its indemnification obligation under Section 9.1. S&N and Westaim agree to review
on the fifth, tenth, fifteenth, etc., anniversary of the Effective Date the
adequacy of the insurance requirements set forth in this Section 6.1.1 in the then
current circumstances and to revise such requirements where appropriate, acting
reasonably, to conform with the then current industry norms.
	 
	 	6.1.2	 	Subject to adjustment as hereinafter provided, S&N shall, at its sole
cost and expense, procure and maintain policies of commercial general liability
insurance in amounts of not less than [***] per incident and
[***] annual aggregate and naming Westaim as an additional
insured and of business interruption insurance in amounts of not less than two million
dollars ($2,000,000) per incident and ten million dollars ($10,000,000) annual
aggregate and naming Westaim as an additional insured. Such commercial general
liability insurance shall, among other things, provide (a) product liability coverage
and (b) contractual liability coverage for S&N’s indemnification under Section 9.2. If
S&N elects to self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of [***]
annual aggregate), such self-insurance program must be reasonably acceptable to
Westaim. The minimum amounts of insurance coverage required under these provisions
shall not be construed to create a limit of S&N’s liability with respect to its
indemnification obligation under Section 9.2. S&N and Westaim agree to review on the
fifth, tenth, fifteenth, etc., anniversary of the Effective Date the adequacy of the
insurance requirements set forth in this Section 6.1.2 in the then current
circumstances and to revise such requirements where appropriate, acting reasonably, to
conform with the then current industry norms.





Section 6.2 Notice of Insurance



Each Party shall provide the other with written evidence of such insurance upon request. Each
Party shall provide the other with written notice at least forty-five (45) days prior to the
cancellation, non-renewal or material change in such insurance.




Section 6.3 Maintenance of Insurance



Each Party shall maintain such comprehensive general liability insurance beyond the expiration or
termination of this Agreement during (a) the period that any Product manufactured by










 




- 22 -



Westaim is being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by S&N or by a sublicensee, Affiliate or agent of S&N and (b) a period of
not less than fifteen (15) years after the period referred to in (a) above.




ARTICLE 7

IMPROVEMENTS




Section 7.1 Improvements



If S&N requests a change to the Specifications and Westaim, acting reasonably, determines that
such change is feasible with regard to the manufacture of a particular Product, such change shall
be incorporated within the applicable Specifications pursuant to a written amendment of such
Specifications. It is the responsibility of S&N to ensure that the applicable regulatory and
governmental authorities approve the proposed change (if required) to the Specifications or method
of manufacture.




ARTICLE 8
CONFIDENTIALITY



Section 8.1 Confidentiality



The Parties to this Agreement recognize that from time to time one Party may disclose to another
Party(ies) information which is of a confidential nature (“Confidential Information”) and it is
therefore agreed that:





	 	8.1.1	 	Except as otherwise expressly authorized in writing by the discloser or
specifically provided for in this Agreement, all Confidential Information of the
disclosing Party shall be held in strict confidence by the receiving Party and the
receiving Party shall employ or cause to be employed diligent efforts and reasonable
care in order to ensure that such Confidential Information is not made available to
any third Party, excepting only as required under this Agreement including in
connection with the exercise by S&N of its rights in relation to the Manufacturing
License, where applicable or to the directors, officers, employees, agents and
consultants of the receiving Party whose duties require disclosure of the same or as
expressly authorized in writing and then (in any such case) only if the Parties to
whom such Confidential Information is being disclosed have given to the disclosing
Party an enforceable undertaking (in a form of contract used by the disclosing Party
in its normal course of business and that that deals with equivalently sensitive
information) not to disclose such Confidential Information to any other Party.
	 
	 	8.1.2	 	Subject to Section 8.1.3, Confidential Information shall not
include information that is in the public domain at the time of disclosure, that the
recipient can demonstrate based on written records was lawfully already in its
possession, that is approved in writing for release by the discloser or that is
obtained by any Party to this Agreement from a third Party without obligation










 



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	 	 	 	of confidence (provided, however, that no third Party from which the information
is obtained has any obligation of confidence to any Parties to this Agreement)
or that becomes public knowledge otherwise than through the fault of the
recipient or any Person to whom it has disclosed the Confidential Information.
	 
	 	8.1.3	 	Disclosure of Confidential Information shall not be precluded if such
disclosure is in response to a valid order of a court or other governmental body or of
any political subdivision thereof or is otherwise required to be disclosed by law.
Notwithstanding the foregoing, in the event that a Party is required to make a
disclosure of the other Parry’s Confidential Information pursuant to this Section
8.1.3, it will, except where impractical, give reasonable advance notice to the other
Party of such disclosure and use its best efforts to secure confidential treatment of
such information.
	 
	 	8.1.4	 	Confidential Information that is specific shall not be deemed to be within the
public domain merely because it is embraced by general knowledge in the public domain.
Further, any Confidential Information dealing with any combination of features of a
specific matter shall not be deemed to be within the public domain, unless the
combination of features and the principle of operation are in the public domain.
	 
	 	8.1.5	 	Each Party to this Agreement shall, upon the termination of this Agreement,
return all corporeal Confidential Information to the owner of such Confidential
Information with a written undertaking that no copies (electronic or otherwise) have
been retained, except that the receiving Party may retain one (1) copy in its legal
files solely to allow it to monitor its obligations hereunder.
	 
	 	8.1.6	 	Each of the Parties to this Agreement acknowledges that the other Party to
this Agreement would suffer irreparable harm as a result of the breach of any of the
non-disclosure and confidentiality obligations set forth in this Section 8.1 and that
legal remedies are inadequate; therefore, each of the Parties to this Agreement agrees
that, in addition to any damages and other remedies that the other Party to this
Agreement may be entitled to as a result of such a breach, the other Party to this
Agreement shall be entitled to seek an order from a court of competent jurisdiction
restraining such Party from breaching or continuing to breach any of the provisions of
this Section 8.1.
	 
	 	8.1.7	 	The covenants of the Parties under this Section 8.1 shall continue in full
force and effect notwithstanding the termination of this Agreement by effluxion of time
or otherwise.





Section 8.2 No Disclosure



Except as required by law or any applicable regulatory authority or as otherwise provided herein,
the Parties agree that the existence of this Agreement and the contents of this Agreement shall not
be disclosed to any third Party without the prior written consent of the other Parties.










 



- 24 -



Notwithstanding the foregoing, in the event that a Party is required to make a disclosure of the
other Party’s Confidential Information pursuant to this Section 8.2, it will, except where
impractical, give reasonable advance notice to the other Party of such disclosure and use its
best efforts to secure confidential treatment of such information.




ARTICLE 9

INDEMNIFICATION




Section 9.1 Indemnification by Westaim



Westaim shall indemnify and hold S&N (its Affiliates and their respective officers, directors,
shareholders, employees, agents, and their successors and permitted assigns) (collectively the
“S&N Indemnitees”) free and harmless from any claims, demands, liabilities, losses, actions or
causes of actions, and any and all expenses associated therewith (including without limiting the
generality of the foregoing, reasonable defence costs and legal fees), arising out of or in
connection with, or that are the result of, or are otherwise related to: (i) any claim, suit,
proceeding or cause of action against any of the S&N Indemnitees alleging physical injury
(including death) or property damage as a result of the acts or omissions of Westaim or its
officers, directors, shareholders, employees or agents, except to the extent attributable to any
one or more of the S&N Indemnitees; (ii) any failure of Westaim to perform, in whole or in part,
any covenants or obligations under this Agreement except to the extent attributable to any one or
more of the S&N Indemnitees; (iii) Westaim’s non-compliance with any applicable national, federal,
provincial or state laws or regulations, except to the extent attributable to any one or more of
the S&N Indemnitees; (iv) for the period specified in Section 12.9, any breach by Westaim of any
of its representations or warranties under this Agreement.




Section 9.2 Indemnification by S&N



S&N shall indemnify and hold Westaim (its Affiliates and their respective officers, directors,
shareholders, employees, agents, and their successors and permitted assigns) (collectively the
“Westaim Indemnitees”) free and harmless from any claims, demands, liabilities, losses, actions or
causes of actions, and any and all expenses associated therewith (including without limiting the
generality of the foregoing, reasonable defence costs and legal fees), arising out of or in
connection with, or that are the result of, or are otherwise related to: (i) any claim, suit,
proceeding or cause of action against any of the Westaim Indemnitees alleging physical injury
(including death) or property damage as a result of the acts or omissions of S&N or its officers,
directors, shareholders, employees or agents, except to the extent attributable to any one or more
of the Westaim Indemnitees; (ii) any failure of S&N to perform, in whole or in part, any covenants
or obligations under this Agreement except to the extent attributable to any one or more of the
Westaim Indemnitees; (iii) S&N’s non-compliance with any applicable national, federal, provincial
or state laws or regulations, except to the extent attributable to any one or more of the Westaim
Indemnitees; (iv) for the period specified in Section 12.9, any breach by S&N of any of its
representations or warranties under this Agreement. The liability of the parties included in the
definition “S&N” shall be joint and several.










 



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Section 9.3 Infringement Indemnification



In the event of any action or threatened action against S&N in which it is asserted that the
production of the Product infringes a copyright, patent, or other industrial property right, S&N
shall promptly notify Westaim of such action or threatened action. If a court of competent
jurisdiction upholds the infringement action in a judgment that has become incapable of appeal,
or if an injunction has been granted, Westaim shall use reasonable commercial efforts to:





	 	9.3.1	 	procure the right for Westaim to continue using the allegedly infringing
Westaim Manufacturing Technology; or
	 
	 	9.3.2	 	replace or modify the Westaim Manufacturing Technology, as the case may be, so
that it becomes non-infringing but has substantially equivalent capabilities as the
infringing technology.




Without limiting or waiving, in any respect, any rights or remedies of S&N or any Affiliate of S&N
in any other Section of this Agreement, if as a result of an infringement claim in relation to the
Products other than New Products or solely to the Westaim Manufacturing Technology incorporated
into any New Product, then (a) S&N is required to pay any damages it shall be entitled to recover
such damages from Westaim, or (b) S&N is required to pay any royalty to the claimant for ongoing
rights to permit continued production of the Product, S&N shall be entitled to deduct such damages
or royalties from the amount payable to Westaim on account of Section 3.1, this being the sole
remedy for recovery of such damages or royalties unless Westaim has breached any representation
given to S&N in Section 2.4.2 in respect of the said infringement.




Section 9.4 Procedure



The indemnified party shall give prompt written notice to the indemnifying party(ies) of any suits,
claims or demands by third parties (“Chim”) which may give rise to any loss for which
indemnification may be required under this Article 9, provided however that failure to give such
notice shall not impair the obligation of the indemnifying party to provide indemnification
hereunder except if and to the extent that such failure materially impairs the ability of the
indemnifying party to defend the Claim. The indemnifying party shall be entitled to assume the
control, defence and settlement of any Claim or demand of any third party at its own cost and
expense; provided, however, that the other party shall have the right to be represented by its own
counsel at its own cost in such matters. In the event that the indemnifying party shall decline to
assume control of any such Claim, the party entitled to indemnification shall be entitled to assume
such defence of, and settle such Claim, all at the sole cost and expense of the indemnifying party.
Neither the indemnifying party nor the indemnified party shall settle or dispose of any such matter
in any manner which would adversely impact the rights and interests of the other party without the
prior written consent of the indemnified party, which shall not be unreasonably withheld. Each
party shall cooperate with the other party and its counsel in the course of the defence of any such
Claim, such cooperation to include using reasonable efforts to provide or make available documents,
information and witnesses.










 



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ARTICLE 10

TERM AND TERMINATION




Section 10.1 Term and Expiration



This Agreement shall be effective as of the Effective Date and, unless terminated earlier pursuant
to this Article 10, this Agreement shall expire on a Product-by-Product and a country-by-country
basis upon the expiration or termination of the License and Development Agreement with respect to
such Product in such country.




Section 10.2 Early Termination



This Agreement may be terminated by either Party as follows:





	 	10.2.1	 	by mutual written agreement of Westaim and S&N, effective as of the time specified
in such written agreement;
	 
	 	10.2.2	 	subject to Article 4, by one Party where the other Party fails to perform or observe
in any material respect any material covenant, condition or provision of, or fails to
rectify a material breach of, this Agreement, provided, however, that the Party
alleging such failure to perform or observe or breach must first give the other Party
written notice thereof, which notice must identify the failure to perform or observe
or breach in reasonable detail and that the Party giving such notice views such
alleged failure to perform or observe or breach as a basis for terminating this
Agreement under this Section 10.2.2 and the Party receiving such notice must have
failed to cure such alleged breach with in forty-five (45) days after receipt of such
notice;
	 
	 	10.2.3	 	by one Party where the other Party institutes proceedings to be adjudicated a
bankrupt or insolvent or to be wound-up, or consents to the institution of bankruptcy,
insolvency or winding-up proceedings against it, or files a petition, answer or
consent seeking dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, or if any such proceedings are commenced in respect of the Party and
are not being contested in good faith (and with the intended result of such
contestation being to suspend any adverse effect of such proceeding on the rights of
the Party hereunder) within thirty (30) days after the other Party becomes aware
thereof or if the other Party consents to the filing of any such petition or to the
appointment of a receiver over its business and assets generally or makes a general
assignment for the benefit of creditors, or admits in writing its inability to pay its
debts generally as they become due;
	 
	 	10.2.4	 	by one Party where the other Party institutes proceedings under the
Companies’ Creditors Arrangement Act, the Bankruptcy and Insolvency Act or other
similar legislation or the other Party seeks or takes any proceeding relating to a
compromise or arrangement with creditors or claimants generally; or
	 
	 	10.2.5	 	by one Party where the other Party voluntarily suspends for more than thirty










 



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	 	 	 	(30) Business Days all or substantially all of its business operations, other
than suspensions of a temporary nature resulting from a strike or similar event
not within the control of the Party or from a lock-out.





Section 10.3 Survival of Obligations



Such provisions of this Agreement that, by their nature, would be expected to survive termination
of this Agreement, including without limitation Article 8 and Article 9, shall survive any such
termination.




Section 10.4 Continuing Liability



Termination of this Agreement for any reason shall not release any Party from any liability,
obligation or agreement which has already accrued nor affect the survival of any provision hereof
which is expressly stated to survive such termination. Termination of this Agreement for any
reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice or
adversely affect, any rights, remedies or claims, whether for damages or otherwise, which a Party
may have hereunder or which may arise out of or in connection with such termination.




Section 10.5 Return of Confidential Information



Upon termination of this Agreement, each party shall return to the other all Confidential
Information of such other party that remains in its possession, except that each party shall be
entitled to retain one copy of any such information for archival purposes.




ARTICLE 11

LEASE OF EQUIPMENT




Section 11.1 Lease



S&N hereby leases the Equipment to Westaim and Westaim hereby leases the Equipment from S&N for
the duration of the Term, on the terms and subject to the conditions contained in this Agreement.




Section 11.2 S&N Ownership



The Equipment is and shall at all times be and remain the sole property of S&N and Westaim shall
have no right, title or interest therein or thereto except as set forth herein. At S&N’s request,
Westaim shall at its own expense affix and maintain on the Equipment in a manner satisfactory to
S&N, acting reasonably, labels, plates or other marks supplied by S&N to identify the Equipment as
the property of S&N. The Equipment shall at all times be and remain personal property and shall not
in any manner be permanently affixed or attached to any lands or building so that it becomes a
fixture under applicable real estate law.










 



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Section 11.3 Use of Equipment



Except as otherwise expressly set out herein, the Equipment shall be solely used by Westaim for
the purpose of manufacturing and producing Products pursuant to this Agreement. Westaim
acknowledges and agrees that [***] of the Production Capacity for the manufacture of Products shall
be primarily and on a first priority basis for S&N
(“S&N Production Capacity”). During the Term,
Westaim shall be entitled to use the remaining [***] of the Production Capacity (“Westaim Production
Capacity”) and any unused S&N Production Capacity for purposes other than the manufacture of
Products for S&N. In consideration for Westaim’s right to use the Westaim Production Capacity
during the Term, Westaim shall pay to S&N a charge of [***] per year for a period of 7 years
commencing on the 1st of June, 2001. Thereafter, Westaim shall be deemed to have fully
paid for its rights in relation to the Westaim Production Capacity. Westaim may terminate its
entitlement to use the Westaim Production Capacity at any time, with the result that the S&N
Production Capacity shall increase to 100% of Production Capacity. On such termination, Westaim’s
obligation to pay the balance of the unpaid charge for the Westaim Production Capacity shall
forthwith terminate and any prepaid portion of such charge shall be refunded by S&N to Westaim.
Westaim shall also be responsible for any additional variable costs (such as electricity)
associated with its use of the Westaim Production Capacity and for any direct or indirect costs
associated with its own use of the S&N Production Capacity.




Section 11.4 Use of Other Equipment



Westaim may use any other piece or pieces of equipment it determines appropriate to manufacture
the Products, acting reasonably. So long as the Production Capacity used in manufacturing the
Products does not exceed the S&N Production Capacity, any cost in using such other piece or pieces
of equipment, including, without limitation, depreciation, shall not cause an increase in the
amount that would otherwise constitute the Fully Allocated Cost of Goods had only the Equipment be
used. If or when the Production Capacity used in manufacturing the Product exceeds the S&N
Production Capacity, any cost in using such other piece or pieces of equipment, including, without
limitation, depreciation, shall be included in the calculation of the Fully Allocated Cost of
Goods.




Section 11.5 Quiet Possession



Except as otherwise expressly set out herein, Westaim shall have exclusive use and quiet possession
of the Equipment during the Term. S&N shall have the right, on prior reasonable notice, to enter
Westaim’s premises to inspect the Equipment during regular business hours. Westaim shall keep the
Equipment during the Term at its premises in Fort Saskatchewan, Alberta, and shall not, without
S&N’s prior written consent, not to be unreasonably withheld, move the Equipment from that
location. Westaim shall use and operate the Equipment in a careful and prudent manner and not for
any unlawful purpose and shall, at Westaim’s expense, comply with and conform to, all applicable
federal, provincial and other laws, ordinances and regulations.




Section 11.6 Westaim’s Obligations



Westaim shall:










 



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	 	11.6.1	 	keep the Equipment free of all Liens of any kind or nature arising
through Westaim;
	 
	 	11.6.2	 	not transfer, deliver up possession of, encumber or sublet the Equipment;
	 
	 	11.6.3	 	keep all Equipment in good repair, condition and working order and shall furnish all
parts, mechanisms, devices and servicing so required, subject to Section 11.8 below;
	 
	 	11.6.4	 	comply with all laws, regulations and orders relating to the Equipment; and
	 
	 	11.6.5	 	pay all taxes associated with Westaim’s use of the Equipment.





Section 11.7 Insurance, Damage





	 	11.7.1	 	For so long as the Equipment is in Westaim’s possession, Westaim assumes and shall
bear the entire risk of loss, damage to or destruction of the Equipment from any cause
whatsoever. Westaim shall obtain and maintain for the Term, at its own expense,
insurance against loss or damage to the Equipment including without limitation, loss by
fire (including extended coverage), theft, collision and such other risks of loss as
are customarily covered by insurance on such type of Equipment and by prudent operators
of businesses similar to that in which Westaim is engaged, in such amounts, in such
form and with such insurers as shall be satisfactory to S&N, acting reasonably provided
that the amount of such insurance shall not be less than the full replacement value of
the Equipment. The insurance coverage shall be in favour of both S&N and Westaim as
named insureds, shall name S&N as first loss payee, and shall contain a clause
requiring the insurer to give S&N at least fifteen (15) business days prior written
notice of any alteration in the terms of or cancellation of the policy. On request,
Westaim shall furnish to S&N a certificate of insurance or other evidence satisfactory
to S&N that such insurance coverage is in effect. Westaim shall give S&N prompt notice
of any damage to or loss of the Equipment or any part thereof.
	 
	 	11.7.2	 	If there is any damage to or loss of any part of the Equipment, Westaim will at its
expense make all proofs of loss and take all other steps necessary to recover insurance
benefits, unless advised in writing by S&N that S&N desires to do so. Westaim appoints
S&N as its agent and attorney to make any claims and receive any payments pursuant to
the insurance policies. Proceeds of insurance will be disbursed by S&N against
invoices for repair, partial repair or replacement of the Equipment. However, if any
part of the Equipment is lost, stolen, destroyed or damaged beyond repair for any
reason, the Parties shall determine in good faith discussions whether Westaim or S&N
ought to replace the Equipment, such determination to be made in a
manner substantially similar to that set out in Article 4 concerning curation of a
material supply difficulty.














 



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Section 11.8 Expiry of Term




On expiry of the Term or following earlier termination of this Agreement or the lease provided for
in this Article 11 (as provided in Section 4.1.1.5), Westaim shall at S&N’s sole cost and expense
immediately return the Equipment to S&N in good repair, condition and working order and in
substantially the same condition as at the Effective Date, reasonable wear and tear excepted, at
such place as S&N may specify and provide reasonable cooperation and assistance in connection
therewith. If Westaim fails to do so within fourteen (14) business days after expiry or termination
of this Agreement, S&N shall have the right, on reasonable notice to Westaim, to enter upon any
premises where the Equipment or any of it may be, with or without legal process, and remove the
Equipment.



Section 11.9 No Sublease or Assignment




Westaim shall not sublet, assign or part with possession of the Equipment or permit its use by any
other Person other than Westaim, except for sublets or assignments to an Affiliate of Westaim
where Westaim remains responsible to S&N for the performance of all obligations under this
Agreement. Nothing herein contained shall release Westaim from its obligations to perform any
duty, covenant or condition required to be performed under this Agreement.



Section 11.10 Representations, Warranties





	 	11.10.1	 	S&N does not make, and there are no representations or warranties, express
or implied, statutory or otherwise, with respect to the Equipment or
this Agreement or any schedule or amendment hereto or affecting the rights of
the Parties hereby and S&N shall not be deemed to make, now or hereafter at
any time, any representation or warranty, express or implied, as to the quality
of the material or workmanship of the Equipment, or the conformity of
the Equipment to the provisions and specifications of Westaim, or to the
condition, design, merchantable quality, durability, operation or fitness for
use or for any particular purpose of the Equipment or freedom thereof from any
Liens or rights of others or any other representation or warranty whatsoever,
express or implied with respect to the Equipment.
	 
	 	11.10.2	 	Westaim does not make, and there are no representations or warranties,
express or implied, statutory or otherwise, with respect to the Equipment or
this Agreement or any schedule or amendment hereto or affecting the rights of
the Parties hereby and Westaim shall not be deemed to make, now or hereafter
at any time, any representation or warranty, express or implied, as to the
quality of the material or workmanship of the Equipment, or the conformity of
the Equipment to the provisions and specifications of S&N, or to the
condition, design, merchantable quality, durability, operation or fitness for
use or for any particular purpose of the Equipment or freedom thereof from any
Liens or rights of others or any other representation or warranty whatsoever,
express or implied with respect to the Equipment.










 



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Section 11.11 New Equipment




At least once each calendar year, commencing in 2002, the Parties shall discuss in good faith
the issue of whether additional Production Capacity is required to carry out the terms of this
Agreement in view of the expected level of Net Sales for the following two year period. Such
discussion shall also consider the expected requirements of third parties with whom Westaim has
commitments to manufacture Products using the Equipment. If following such discussions:




	 	11.11.1	 	Westaim determines in its sole discretion that additional or new equipment
is required in order to carry out the terms of this Agreement (“New
Equipment”), Westaim shall manufacture, or have manufactured, the New Equipment,
at its sole cost. S&N shall have the option to purchase the New Equipment, or
any part thereof, at any time during the six (6) months following the date
Westaim advises S&N in writing that it has determined to acquire New Equipment,
or at any time during the six (6) months following its decision to practice
the Manufacturing License pursuant to Section 4.1, exercisable by written
notice to Westaim. The purchase price for the New Equipment shall be the net
book value of the New Equipment, as determined by the Parties, with
such adjustments to the purchase price as necessary such that, from
Westaim’s perspective, the purchase price shall have a neutral effect from a
tax perspective; and
	 
	 	11.11.2	 	Westaim determines that it will not acquire New Equipment, S&N shall have the
right to manufacture, or have manufactured, the New Equipment at its sole cost.
Westaim shall cooperate with S&N by providing reasonable assistance to permit S&N
to manufacture, or have manufactured, the New Equipment; provided that S&N shall
reimburse Westaim for all out-of-pocket costs it incurs in providing such
assistance.





ARTICLE 12

MISCELLANEOUS




Section 12.1 Force Majeure




Subject to Section 4.1.4:





	 	12.1.1	 	Means an event, the cause of which is beyond the reasonable control of the Party
affected thereby and which could not reasonably have been foreseen and provided
against, including, without limitation, acts of God, strikes, lock-outs or other
labour or industrial disturbances, accidents, fires, explosions, weather conditions
materially affecting or preventing work, inability to secure fuel, power, materials,
contractors or labour, mechanical breakdown, failure of equipment or machinery, delays
in transportation, wars, civil commotion, riot, sabotage, interruptions by government,
court orders, or orders or rulings by regulatory bodies; provided that an event caused
by or materially contributed to by a Party’s financial difficulty shall not be
included as a force majeure event.










 



- 32 -


	 	12.1.2	 	Notwithstanding any other provision of this Agreement, if by reason of
Force Majeure, either Party is wholly or partly unable to perform certain of its
obligations under this Agreement, it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability and
nature, cause and expected duration of the Force Majeure. The Party affected by
Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to settle labour disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction. The
Party affected by Force Majeure shall give prompt notice of the cessation and the
cause thereof, and shall provide reports at least every seven (7) days as to its
progress in dealing with the Force Majeure. Should the Force Majeure event
continue for a period longer than thirty (30) business days, the Party shall no
longer be relieved of its obligations under this Agreement.





Section 12.2 Notice




Any notice or other communication required or permitted to be given hereunder shall be in writing
and shall be delivered in person, transmitted by facsimile or similar means of recorded electronic
communication or sent by registered mail, charges prepaid, addressed as follows:



if to S&N:





Smith & Nephew, Inc.

11775 Starkey Road

P.O. Box 1970

Largo, Florida, 33799-1970

Attention: President

Facsimile: (727) 398-4206




with a copy to:




Smith & Nephew, Inc.

1450 Brooks Road 

Memphis, Tennessee, 38116

Attention: General Counsel

Facsimile: (901)396-7824



if to Westaim:





Westaim Biomedical Corp.

10102—114 Street

Fort Saskatchewan, Alberta T8L 3W4

Attention: President

Facsimile: (780) 992-5300









 



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with a copy to:




Westaim Biomedical Corp.

1010, 144—4th Avenue S.W.

Calgary, Alberta T2P 3N4

Attention: President

Facsimile: (403) 237-8181




and a copy to:




Westaim Biomedical Corp.

One Hampton Road, Suite 302,

Exeter, New Hampshire 03833

Attention: President

Facsimile: (603)778-6393



Any such notice or other communication shall be deemed to have been given and received on the day
on which it was delivered or transmitted (or, if such day is not a Business Day, on the next
following Business Day) or, if mailed, on the fifth (5th) Business Day following the
date of mailing; provided, however, that if at the time of mailing or within five (5) Business
Days thereafter there is or occurs a labour dispute or other event that might reasonably be
expected to disrupt the delivery of documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by means of recorded electronic communication as aforesaid.
Either Party may at any time change its address for service from time to time giving notice to the
other Party in accordance with this Section 12.2.



Section 12.3 Waivers




No waiver of any term, provision, or condition of this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such term, provision, or condition of this Agreement unless reduced to
writing signed by an authorized representative of each Party.



Section 12.4 Dispute Resolution




Should any dispute arise between the Parties concerning this Agreement, the Parties agree to
first attempt to resolve the dispute in good faith. If within sixty (60) days of one Party
providing written notice of such dispute to the other Party such dispute is not resolved as
aforesaid, then the dispute shall immediately thereafter be referred for resolution to the
President of T.J. Smith & Nephew Limited, and the President of Westaim before resorting to any
other forum for a remedy. If resolution of the dispute is not reached between the Presidents within
sixty (60) days of such dispute being referred to the Presidents, then the Parties shall refer the
dispute to binding arbitration by a single arbitrator under the Arbitration Act (Ontario) which
shall be held at a neutral site in Toronto, Ontario, Canada.



Section 12.5 Assignment




The Parties agree that this Agreement, (except for assignments by Westaim pursuant to Section









 



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12.6 or 12.7 which S&N shall be deemed to have consented to, assignments by S&N as a part
of the disposition by S&N of all or substantially all of its wound care business and the
assignment by a Party to one or more of its Affiliates, which may be done without consent provided
the Party remains responsible to the other Party for the performance of this Agreement by its
Affiliate) may not be assigned or otherwise transferred, nor may any right or obligations
hereunder be assigned or transferred directly or indirectly by either Party, whether voluntary, by
operation of law or otherwise, without the written consent of the other Party, such consent not to
be unreasonably withheld. In connection with Westaim determining whether to consent to an
assignment, the Parties agree that Westaim shall be deemed to be acting reasonably if it withholds
its consent in circumstances where the proposed assignee is not a corporation of equal or greater
financial resources, marketing strength and expertise (including in the burn and wound care area),
and stature in the burns and wounds industry as S&N. Any purported assignment in violation of this
Section 12.5 shall be void. Any permitted assignee (which
includes assignments by Westaim pursuant
to Section 12.6 or 12.7 and assignments by S&N as a part of the disposition by S&N of all or
substantially all of its wound care business, but excludes assignments to Affiliates without
consent) shall assume all obligations of the assignor under this Agreement other than the
obligations set out in Sections 12.6 and 12.7 and the assignor shall be released from all
obligations under this Agreement, in each case from the date of such assignment. For
clarification, nothing in this Agreement shall restrict in any manner whatsoever the ability to
transfer shares in the capital of Westaim and its Affiliates, issue shares in the capital of
Westaim or its Affiliates or to otherwise effect a change of control of Westaim or one or more of
its Affiliates.



Section 12.6 Right of First Offer




If Westaim desires to sell all or substantially all of its assets used to manufacture and supply
Product to S&N under this Agreement, including without limitation assignment of this Agreement,
(the “Manufacturing Assets”), Westaim shall give written notice (the “Transfer Notice”) to S&N of
that desire. The Transfer Notice shall describe the Manufacturing Assets in sufficient detail to
permit S&N to make an informed decision regarding whether to offer to purchase the Manufacturing
Assets and on what terms. During the [***] (the “Negotiation Period”) immediately
following the date the Transfer Notice is given, Westaim and S&N shall in good faith negotiate the
sale and purchase of the Manufacturing Assets by Westaim to S&N. If during the Negotiation Period
S&N determines that it is not interested in purchasing the Manufacturing Assets, it shall forthwith
advise Westaim of such determination in writing, and Westaim shall be free to sell the
Manufacturing Assets to any other Person on any terms at any time, and the provision of this
Section 12.6 shall have no further application. If during the Negotiation Period Westaim and S&N
reach an agreement concerning the sale and purchase of the Manufacturing Assets and such sale and
purchase transaction is completed, the provisions of this Section 12.6 shall have no further
application. If Westaim and S&N fail to reach an agreement during the Negotiation Period
concerning the sale and purchase of the Manufacturing Assets, S&N shall be entitled at any time
prior to the expiry of the Negotiation Period to make an offer (the “S&N Offer”) to purchase the
Manufacturing Assets, which offer shall be maintained in confidence by Westaim. If S&N does not
make the S&N Offer by the expiry of the Negotiation Period, Westaim shall be free to sell the
Manufacturing Assets to any other person on any terms at any time, and the provisions of this
Section 12.6 shall have no further application. The S&N Offer shall be in writing and shall
indicate the offered price (“S&N









 



- 35 -


Purchase Price”) for the purchase of the Manufacturing Assets and the proposed terms (“S&N Purchase
Terms”) for such purchase. The S&N Offer shall be capable of acceptance by Westaim for a period
(the “Transfer Period”) ending no earlier than 11:59 p.m. Calgary time on the [***] following
the expiry of the Negotiation Period. The S&N Offer shall specify a closing date (the “Transfer
Closing Date”) for the sale and purchase, which shall not be earlier than [***] or more
than [***] after the date the S&N Offer is accepted. The S&N Purchase Price shall
be paid in cash by S&N on the Transfer Closing Date. During the Transfer Period, Westaim shall have
the option of either selling the Manufacturing Assets to S&N pursuant to the S&N Offer or selling
the Manufacturing Assets to a third party on terms no less favourable than the terms of the S&N
Offer, having regard for both the S&N Purchase Price and the S&N Purchase Terms. During the [***]
(the “Free Transfer Period”) following the later of the expiry of the Transfer Period, or
the date it determined that the sale pursuant to an accepted S&N Offer will not close for any
reason other than the default of Westaim, Westaim shall be entitled to sell the Manufacturing
Assets to a third party on terms no less favourable than the terms of the S&N Offer, having regard
for both the S&N Purchase Price and the S&N Purchase Terms. Any transfer of the Manufacturing
Assets made after the last day of a Free Transfer Period, other than where S&N did not deliver the
S&N Offer, without strict compliance with the terms, provisions and conditions of this Section 12.6
and the other terms, provisions and conditions of this Agreement, shall be null, void and of no
force or effect. The provisions of this Section 12.6 shall not apply to the transfer of the
Manufacturing Assets to a transferee that is an Affiliate of Westaim; provided that the Affiliate
agrees to be bound by the terms of this Section 12.6. Any assignment of this Agreement to a third
party as a part of the transfer of the Manufacturing Assets pursuant to this Section 12.6, whether
as a result of S&N not making the S&N Offer by the expiry of the Negotiation Period or as a result
of Westaim selling the Manufacturing Assets to a third party during the Free Transfer Period on
terms no less favourable than the S&N Offer, shall be considered an assignment to a permitted
assignee for purposes of Section 12.5.



Section 12.7 Right of First Refusal




If Westaim receives from a competitor of S&N in the wound care market a bone fide offer
(“Qualifying Offer”) to purchase the Manufacturing Assets and Westaim desires to accept the
Qualifying Offer, Westaim shall give written notice (the “First Refusal Transfer Notice”) to S&N of
that desire. The First Refusal Transfer Notice shall describe the Manufacturing Assets and the
proposed price (“Offered Purchase Price”) for the sale of the Manufacturing Assets and the proposed
terms (“Offered Purchase Terms”) for such sale as set forth in the Qualifying Offer. Westaim shall
not be obligated to provide to S&N a copy of the Qualifying Offer or disclose the name of the
competitor of S&N that made the Qualifying Offer. S&N shall have the option (the “Purchase Option”)
to purchase all of the Manufacturing Assets for the Offered Purchase Price and on the Offered
Purchase Terms. The Purchase Option shall be and remain irrevocable for a period (the “First
Refusal Transfer Period”) ending on the earlier of (i) 11:59 p.m. Calgary time on the 10th day
following the date the First Refusal Transfer Notice is given by Westaim to S&N; and (ii) 11:59 pm
Calgary time on the Business Day prior to the day the Qualifying Offer expires pursuant to its
terms. S&N may elect to exercise the Purchase Option by giving written notice of its election to
Westaim, which exercise shall be maintained in confidence by Westaim. If S&N elects to exercise the
Purchase Option, S&N’s notice of election shall fix a closing date (the ‘First Refusal Transfer
Closing Date”) for the purchase of the Manufacturing Assets, which shall not be later than









 



- 36 -


the Business Day prior to the expiry of the Qualifying Offer. The Offered Purchase Price shall be
paid in cash by S&N on the First Refusal Transfer Closing Date. If S&N does not exercise the
Purchase Option or if the Purchase Option is exercised but the transition does not close by the
expiry of the First Refusal Transfer Period for any reason other than the default of Westaim,
Westaim shall be permitted to accept the Qualifying Offer or another offer on substantially similar
or better terms at any time during the period ending 365 days
(the “First Refusal Free Transfer
Period”) after the expiry of the First Refusal Transfer Period. If Westaim does not transfer the
Manufacturing Assets pursuant to the Qualifying Offer or another offer on substantially similar or
better terms within a First Refusal Free Transfer Period, Westaim’s right to transfer the
Manufacturing Assets pursuant to this Section 12.7 shall cease and terminate. Any transfer of the
Manufacturing Assets made after the last day of the First Refusal Free Transfer Period without
strict compliance with the terms, provisions and conditions of this Section 12.7 and the other
terms, provisions and conditions of this Agreement, shall be null, void and of no force or effect.
Any assignment of this Agreement to a third party as part of the transfer of the Manufacturing
Assets pursuant to this Section 12.7, whether as a result of S&N not exercising the Purchase Option
or as a result of S&N exercising the Purchase Option but the transaction not closing by the expiry
of the First Refusal Transfer Period for any reason other than the default of Westaim, shall be
considered an assignment to a permitted assignee for purposes of Section 12.5.



Section 12.8 Limitation




The maximum aggregate liability of Westaim under this Agreement, the Asset Purchase Agreement, the
License and Distribution Agreement and all other agreements and documents referred to therein
shall at no time exceed [***]. Neither Party shall have any
liability to the other Party or any other Person pursuant to this Agreement for any special,
indirect or consequential damages, including but not limited to loss of profits, loss of business
opportunities or loss of business investment.



Section 12.9 Survival




The representations and warranties of the Parties contained in this Agreement, in the Schedules
annexed to this Agreement or in any certificate or other document delivered or given pursuant to
this Agreement shall survive the expiration of the Term and will remain in full force and effect
for a period of [***] months following such expiration except for any representation and
warranty in respect of which a claim based on fraud or intentional misrepresentation is made, which
in each case shall be unlimited as to duration (“Survival Period”). Any Claim for indemnification
made during the Survival Period will result in the representations and warranties relating thereto
remaining in effect for purposes of indemnification notwithstanding such claim may not be resolved
within the Survival Period. The covenants set forth herein will survive without limitation. All
representations, warranties and covenants and agreements made by the Parties will not be affected
by any investigation made by and on behalf of a Party and will not be deemed merged into any
instruments or agreements delivered in connection with this Agreement or otherwise in connection
with the transactions contemplated hereby. Except as expressly provided in this Agreement, neither
Party makes any representation or warranty of any kind to the other Party, express or implied.









 



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Section 12.10 Integration Clause




This Agreement is the sole agreement with respect to the subject matter hereof, and supersedes all
proposals, negotiations, conversations, discussions, agreements and/or representations, whether
oral or written, including any industry custom or past dealing between the Parties relating to the
subject matter of this Agreement. The Parties agree that any and all obligations between the
Parties that are outside the terms of this Agreement and that relate to the subject matter of this
Agreement that preceded the Effective Date of this Agreement have been satisfactorily executed or
are null and void.



Section 12.11 Independent Contractors





	 	12.11.1	 	This Agreement shall not constitute or give rise to an agency, partnership
or joint venture between the Parties and each Party’s performance hereunder
is that of a separate, independent entity.
	 
	 	12.11.2	 	Nothing in this Agreement shall be deemed to be the grant by either Party
to the other of any right, title or interest in any product, material or
proprietary rights of the other except as may be expressly provided for in this
Agreement.





Section 12.12 Severability and Survival




To the extent that any provision of this Agreement shall be prohibited by or held to be invalid or
unenforceable under applicable law, such provision shall be ineffective to the extent of such
prohibition, invalidity, or unenforceability, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.



Section 12.13 U.S. Dollars




Unless otherwise provided, any reference in this Agreement to dollars shall be to U.S. dollars.



Section 12.14 Amendment of Agreement




No change, modification, extension, termination, waiver or other amendment of this Agreement or
any of the provisions contained herein, shall be valid unless made in writing and signed by a duly
authorized representative of each Party.



Section 12.15 Expenses




Each Party agrees to pay, without right of reimbursement from the other Party, the costs incurred
by such Party incident to the preparation and execution of this Agreement and performance of its
obligations hereunder, including without limitation the fees and disbursements of legal counsel,
accountants and consultants employed by such Party in connection with the transactions contemplated
by this Agreement.









 



 


Section 12.16 Governing Law and Attornment




This Agreement is subject to and shall be governed by the laws of the Province of Alberta (without
giving effect to the conflict of law provisions thereof) and the Parties agree to irrevocably
attorn to the jurisdiction of the courts of Alberta.



Section 12.17 Counterparts




This Agreement may be executed in several counterparts, each of which when so executed shall be
deemed to be an original and shall have the same force and effect as an original but such
counterparts together shall constitute but one and the same instrument.



IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.



	 	 	 	 	 	 	 	 	 
	Westaim Biomedical Corp.	 	Smith & Nephew Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	Per:
	 	/s/ Scott H. Gillis	 	Per:	 	/s/ David A. Trollope	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Per:

	 	/s/ [ILLEGIBLE]
	 	Per:
	 	/s/ Stephen Lang	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Smith & Nephew, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ David A. Trollope	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ Stephen Lang	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	T.J. Smith & Nephew Limited	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ David A. Trollope	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ Stephen Lang