Exhibit 10.26


 


SETTLEMENT AGREEMENT


 


THIS SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into
as of August 9, 2005 by and among MAST Biosurgery AG, a Swiss corporation
(“MAST AG”), MAST Biosurgery, Inc., a Delaware corporation and a
wholly-owned subsidiary of MAST AG (“MAST, Inc.” and, together with MAST
AG, “MAST”), and Cytori Therapeutics, Inc., a Delaware corporation
formerly incorporated under the name MacroPore Biosurgery, Inc. (“Cytori”
and, together with MAST AG and MAST, Inc., the “parties”). Capitalized
terms used but not defined herein shall have the respective meanings attributed
to such terms in the Asset Purchase Agreement, by and between MAST AG and
MacroPore Biosurgery, Inc., dated as of May 7, 2004 (as the same has
subsequently been amended through the date hereof, the “Asset Purchase
Agreement”).


 


WHEREAS, on June 2, 2005, MacroPore Biosurgery, Inc. filed
with the American Arbitration Association under the Reference Number 50 180 T
00234 05 a demand for arbitration (the “Arbitration”) asserting claims arising
out of or relating to MAST’s obligations under the Asset Purchase Agreement and
related documentation (the “Demand”);


 


WHEREAS, on June 23, 2005, MAST responded to the Demand by filing
with the American Arbitration Association an answer and counterclaims arising
out of or relating to MacroPore Biosurgery, Inc.’s obligations under the
Asset Purchase Agreement and related documentation (the “Counterclaims”);


 


WHEREAS, on June 30, 2005, MacroPore Biosurgery, Inc. and
MAST AG executed a term sheet providing, among other things, for a partial
settlement of the claims set forth in the Demand and in the Counterclaims and
certain agreements in respect of MacroPore Biosurgery, Inc.’s Japanese
Thin Film Business (as defined below); and


 


WHEREAS, on July 11, 2005, MacroPore Biosurgery, Inc. changed
its corporate name to Cytori Therapeutics, Inc.


 


NOW THEREFORE, the Parties agree as follows:


 


1.                                       Mutual
Releases and Related Matters.


 


(a)                                  Releases
by Cytori. Cytori hereby irrevocably waives, relinquishes, fully and forever
releases and discharges (i) any and all claims arising out of, or relating
to, or in connection with, the matters set forth in the Demand (including,
without limitation, any claims Cytori may have against MAST or any of MAST AG’s
or MAST Inc.’s directors, officers, employees, agents, affiliates,  shareholders or subsidiaries in respect of
MAST’s obligations under Section 2.4(b) of the Asset Purchase
Agreement), other than and excluding any such claims (collectively, the “Cytori
Japan Claims”) arising out of, or relating to, or in connection with, the
development, manufacturing, marketing and sale of Field of Use Bioabsorbable
Implants in the Territory of Japan (the “Japanese Thin Film Business”) and (ii) any Liens and security
interests granted to Cytori pursuant to Section 2.10 of the Asset Purchase
Agreement.


 


(b)                                 Release
by MAST. MAST hereby irrevocably waives, relinquishes, fully and forever
releases and discharges any and all claims it may have against Cytori or any of
Cytori’s directors, officers, employees, agents, affiliates, shareholders or
subsidiaries arising out of, relating to, or in connection with, the matters
set forth in the Counterclaims, other than and excluding any such claims
(collectively, the “MAST Japan Claims”)
arising out of, or relating to, or in connection with, the Purchase
Right (including, without limitation, MAST’s claim that Cytori depleted the
economic value of the Purchase Right) and the Japanese Thin Film Business.


 


(c)                                  Korean
Matters. Cytori shall use reasonable efforts to assist MAST in transitioning
the distribution of Bioabsorbable Implants in Korea from Dongbang Healthcare
Products Co., Ltd. (“Dongbang”) to a Korean distributor designated by MAST by
causing Dongbang to transfer any Authorizations to such new distributor. Such
efforts by Cytori are not intended to include any obligation of Cytori
representatives to travel to Korea for this specific purpose.


 


(d)                                 Rights
under the Asset Purchase Agreement. For the avoidance of doubt, any and all
obligations of MAST pursuant to Section 2.4(b), 2.4(c) and 2.10 of
the Asset Purchase Agreement shall be deemed satisfied in full and Cytori shall
have no further rights under such provisions.


 


(e)                                  Sublease.
As promptly as practicable following the execution of this Agreement, the
Parties shall enter into a sublease agreement for the premises currently
occupied by MAST at 6749 Top Gun Street, San Diego, CA 92121, such sublease to
be on terms reasonably acceptable to MAST and Cytori (the “Sublease”). For the
avoidance of doubt, nothing in this Agreement shall be construed as a release
of any rights or claims that any Party may have pursuant to the terms of the
Sublease or currently unknown claims related to MAST’s occupation of the
Premises (e.g., related to environmental contamination or property damage).


 





















 


2.                                       Certain
Agreements Relating to the Japanese Thin Film Business.


 


(a)                                  Negotiations
in Respect of the Japanese Thin Film Business. Promptly following the execution
hereof, MAST and Cytori shall negotiate in good faith regarding the acquisition
by MAST of Cytori’s Japanese Thin Film Business on terms and conditions
mutually agreeable to MAST and Cytori (such period of negotiation, the “Negotiation
Period”). Without limiting any rights to due diligence MAST may have pursuant
to Section 2.12(e) of the Asset Purchase Agreement, Cytori
acknowledges and agrees that MAST shall have the right, during such Negotiation
Period, to conduct customary (with respect to substance and scope) business,
legal and accounting due diligence in respect of Cytori’s Japanese Thin Film
Business, and MAST and Cytori shall cooperate with each other with respect to
such due diligence; provided that, unless and until MAST and Cytori agree
otherwise, neither MAST nor any of its officers, employees, equity holders or
advisors (including, for the avoidance of doubt, Dr. Kai Deusch) shall,
during such Negotiation Period, directly contact or interact with Senko, Cytori’s
regulatory advisors in Japan, the Japanese Ministry of Health, Labor and
Welfare, or any of their respective employees or agents (collectively, the “Restricted
Third Parties”) and, provided, further, that it shall not be deemed a lack of
good faith on Cytori’s part if Cytori does not agree to any direct contact or
interaction of Dr. Kai Deusch with any Restricted Third Party during the
Negotiation Period. The Negotiation Period may be terminated at any time by
either MAST or Cytori in its respective sole discretion by written notice to
the other Party.


 


(b)                                 Amendment
to Business Development Agreement. The Business Development Agreement by and
among MAST AG and Cytori, dated as of May 13, 2004 (the “Business
Development Agreement”), shall hereby be amended by deleting, in their
entirety, the provisions of Section 4.2 and Article 5 by replacing
such provisions with the words “[intentionally omitted].”


 


(c)                                  Following
Expiration of the Negotiation Period. Upon termination of the Negotiation
Period by either Party, MAST retains the right to pursue the MAST Japan Claims
and Cytori retains the right to pursue the Cytori Japan Claims, in each case in
accordance with and subject to the provisions of the Asset Purchase Agreement.


 


(d)                                 Matters
Relating to Cytori’s Japan Study. Promptly after the execution of this
Agreement, Cytori will provide to MAST a copy of the protocol of its proposed
clinical study conducted in support of the Japanese Thin Film Business (the “Japan
Study”). MAST shall have the right to comment on such protocol and Cytori shall
consider any such comments. Until all or any part of the Japan Study becomes
generally publicly available (other than through the fault of MAST), MAST will
not contact or communicate with, or attempt to contact or communicate with any
third person or institution participating in the Japan Study; provided that,
notwithstanding the foregoing, MAST shall have the right to contact or
communicate with any of its existing or prospective customers regarding matters
unrelated to the Japan Study. MAST agrees to supply all Bioabsorbable Film
Implants reasonably required for the conduct of the Japan Study; provided that
MAST shall receive full credit (on a $50 per sheet basis) in respect of such
supply upon the earlier to occur of (i) Cytori
and MAST agreeing on a supply by MAST of Bioabsorbable Film Implants for the
Territory of Japan or (ii) Cytori and MAST agreeing on the acquisition by
MAST of Cytori’s Japanese Thin Film Business.


 


3.                                       Matters
Pertaining to Pending Arbitration.  As
soon as reasonably practicable upon the execution of this Agreement, MAST and Cytori shall dismiss all
claims set forth in the Demand and in the Counterclaims in their entirety by
notification in writing to the American Arbitration Association (the “AAA”) case manager. Notwithstanding
anything in this Agreement to the contrary, if the Parties fail to reach
agreement regarding an acquisition by MAST of Cytori’s Japanese Thin Film
Business within the Negotiation Period, then, at any time following the
termination of the Negotiation Period by either Party, MAST may reassert and
pursue the MAST Japan Claims and Cytori may reassert and pursue the Cytori
Japan Claims by filing the appropriate documentation with the AAA, provided that, if MAST so elects
to assert and pursue any MAST Japan Claims, the arbitral tribunal shall make a
determination as to whether MAST or Cytori is the prevailing party in such
arbitration and, if MAST is so found to be the prevailing party, Cytori shall
promptly reimburse MAST for any filing fees paid by MAST to the AAA (up to a maximum amount of
$10,000) in connection with any such filing. In determining the “prevailing
party” for purposes of the foregoing sentence, the amount of damages awarded,
if any, shall not be the determinative factor.


 


4.                                       Certain
Representations and Warranties. Each of MAST, Inc. and Cytori represents
and warrants that it is a corporation duly formed, validly existing and in good
standing under the laws of the State of Delaware. MAST AG represents and
warrants that it is a corporation duly formed, validly existing and in good
standing under the laws of Switzerland. Each Party further represents and
warrants that it has all necessary power and authority to enter into this
Agreement to carry out the transactions contemplated herein, that all actions
required to be taken by or on behalf of such Party to authorize it to execute,
deliver and perform its obligations under this Agreement have been taken, and
that this Agreement constitutes the legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms, except as
the same may be affected by bankruptcy, insolvency, moratorium or similar laws,
or by legal or equitable principles relating to or limiting the rights of
contracting parties generally. Each Party further represents and warrants that
it currently has no actual knowledge of claims against any other Party hereto
beyond those set forth in the Demand and the Counterclaims, respectively;
provided that this representation and warranty shall not be construed as
prohibiting either Party from pursuing or asserting any claims that have not
been released by such Party in accordance with Section 1 hereof or of
which such Party acquires knowledge after the date hereof.


 


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5.                                       Miscellaneous.


 


(a)                                  No
Admission. This Agreement represents a compromise of disputed claims, and it
shall not be construed as an admission or any evidence that any Party hereto
has breached any obligation.


 


(b)                                 Further
Assurances. The parties shall execute such documents and do such other things
and acts as may be necessary to perform and fully carry out the terms and
purposes of this Agreement, including, without limitation, all such documents
and other things and acts that may be necessary to release any Liens or
security interests that Cytori may have in respect of any intellectual property
of MAST.


 


(c)                                  Application
of Agreement Only to the Parties. Subject to Section 5(i) below, this
Agreement is intended to confer rights and benefits only on the Parties and
their respective directors, officers, employees, agents, affiliates,
shareholders or subsidiaries, and only with respect to the matters described in
it.


 


(d)                                 Breach
of Terms of this Agreement. It is understood and agreed that the releases
contained in Section 1 shall not be construed to include any claims that
may arise between the Parties for breach of the terms of this Agreement.
Nothing in this Agreement shall bar the Parties from enforcing their respective
rights as provided herein.


 


(e) Advice of Counsel. This Agreement is the product of informed
negotiations. The Parties acknowledge that they have been represented by
counsel of their own choosing in connection with the negotiation and drafting
of this Agreement.                       The
language used in this Agreement shall be deemed to be language chosen by the
Parties hereto to express their mutual intent.


 


(f) Entire Agreement. This
Agreement constitutes and comprises the complete and entire agreement among the
Parties, and fully expresses the intentions of the Parties. All agreements,
covenants, representations and warranties, of any kind or nature, express or
implied, oral or written, made by the Parties or their attorneys concerning
this Agreement are fully set forth, expressed and contained herein. All prior
and contemporaneous conversations, negotiations, term sheets, possible and
alleged agreements, representations, covenants, and warranties concerning this
Agreement are merged herein, and except as expressly set forth herein, all such
prior and contemporaneous conversations, negotiations, possible and alleged
agreements, representations, covenants, warranties or omissions concerning the
subject matter hereof are null, void, unenforceable, immaterial, and have not
been relied upon in any way by any Party hereto.


 


(g)                                 Confidentiality.
The letter agreement by and between MAST and MacroPore Biosurgery, Inc.,
dated June 22, 2005, shall govern this Agreement, the good faith
negotiations and due diligence contemplated by Section 2(a) above,
and MAST’S review of the Japan Study; provided that either Cytori shall have
the right to disclose the terms of the Agreement as required by applicable
security laws.


 


(h)                                 Governing
Law; Arbitration. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws and without application of the United Nations
Convention for the International Sale of Goods. Any dispute arising out of or
relating to this Agreement (including
the formation, interpretation or alleged breach thereof) shall be settled by
final and binding arbitration conducted under the auspices of, and in
accordance with, the Commercial Arbitration Rules of the American
Arbitration Association, by a tribunal of three arbitrators in San Francisco,
California. The results of such arbitration proceedings shall be binding upon
the Parties hereto, and judgment may be entered upon the arbitration award in
any court having jurisdiction thereof. Notwithstanding the foregoing, either
party may seek interim injunctive relief from any court of competent
jurisdiction. Each of the Parties hereto expressly and irrevocably consents and
submits to the non-exclusive jurisdiction of each state and federal court
located in California in connection with any legal proceedings hereunder.


 


(i)                                     Successors. This Agreement shall be binding
upon, and inure to the benefit of, the Parties hereto, and each of them jointly
and severally, and to each of their successors and assigns.


 


(j)                                     Costs of Settlement. Except as otherwise
expressly provided herein, MAST and Cytori shall each pay their own expenses
(including, but not limited to, all compensation and expenses of counsel)
incident to this Agreement and the preparation for, and consummation of, the
transactions provided for herein.


 


(k)                                  Modification
in Writing. No change or modification
or termination of this Agreement shall be valid unless it is contained in a
writing and signed by the Parties hereto.


 


(l)                                     Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original and
all of which together shall constitute one instrument. Delivery of signed
counterparts by facsimile or other electronic means shall be fully as effective
as if the original counterparts were executed and delivered.


 


(m)                               Asset Purchase Agreement and Business
Development Agreement. The Asset Purchase Agreement and the Business


 


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Development Agreement (each as amended or modified by this Agreement)
shall remain in full force and effect.


 


(Remainder of page intentionally blank;
signatures follow on next page)


 


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IN WITNESS WHEREOF, this Agreement has been
duly executed and delivered on behalf of the parties as of the date first above
written.


 


 


	
   

  	
  MAST BIOSURGERY AG

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Urs Felder

  	
   

  
	
   

  	
  By: 

  	
  /s/ Corinne Welti

  	
   

  
	
   

  	
  Its: Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAST BIOSURGERY, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kai Deusch

  	
   

  
	
   

  	
  Its:

  	
  Secretary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CYTORI THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mark E. Saad

  	
   

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  	
   

  



 


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