Document:

exv10w6

 

EXHIBIT 10.6

LICENSE AGREEMENT

     This Agreement, made as of the 7th day of April, 2000 by and between ReGen
Biologics, Inc. a Delaware corporation having its principal place of business
at 509 Commerce Street, Franklin Lakes, New Jersey 07417 (hereinafter “REGEN”),
and Linvatec Corporation, a Florida corporation, having its principal place of
business at 11311 Concept Boulevard, Largo, Florida 33773 (hereinafter
“LINVATEC”).

WITNESSETH:

     WHEREAS, REGEN has designed and developed the Sharp Shooter® device, a
disposable surgical device which allows surgeons to accurately place a cannula
in the knee against the meniscus and deliver a needle and suture for meniscus
repair;

     WHEREAS, LINVATEC is in the business of marketing and selling medical
devices and desires to market, promote, sell and distribute the Sharp Shooter®
device;

     NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein, the parties hereby agree as follows:

1. DEFINITIONS

     Capitalized terms used in this Agreement shall have the meanings set forth
below.

     1.1 “Affiliate” shall mean any company or entity controlled by,
controlling, or under common control with a party hereto, and shall include
(without limitation) any company in which a party owns or controls directly or
indirectly more than fifty percent (50%) of the voting stock or participating
profit interest, and any company which owns or controls, directly or
indirectly, more than fifty percent (50%) of the voting stock of a party.

     1.2 “Approval Date” shall mean the date of a Regulatory Approval of the
Product in a country of the Territory.

     1.3 “Confidential Information” shall mean any information deemed by a
party to be its confidential or proprietary information, including without
limitation, the terms of this Agreement, any engineering designs and drawings,
know-how, trade secret, research data, process, technique, research project,
work in process, future development, scientific, manufacturing, marketing,
business plan, financial or personnel matter relating to the party, its present
and future products, sales, suppliers, customers, employees, investors or
business.

     1.4 “Distribution Phase” shall mean the initial portion of the term of
this Agreement during which REGEN supplies Product to LINVATEC and controls all
manufacturing and regulatory compliance issues related to Product.

 

 

     1.5 “Effective Date” shall mean the date on which this Agreement has been
signed by all parties.

     1.6 “Improved Product” shall mean any product which is developed based on
the Product whether or not claimed by one or more Product Patents.

     1.7 “Licensed Field” shall mean meniscal tissue repair.

     1.8 “Manufacturing Phase” shall mean that portion of the term of this
Agreement following the Distribution Phase during which LINVATEC manufactures
Product and controls all regulatory issues related to Product.

     1.9 “Net Sales” shall mean the total of the gross invoice prices for
Products sold by LINVATEC, its Affiliates, or sublicensees, less the sum of the
following actual and customary deductions where applicable: cash, trade, or
quantity discounts; sales, use, tariff, import/export duties or other excise
taxes imposed on particular sales; costs of insurance, packing, and
transportation from place of manufacture to point of delivery; and credits to
customers because of rejections or returns; and commissions and similar costs
of sales.

     1.10 “Product” shall mean a device (for example, the Sharp Shooter® in the
form as it exists on the Effective Date, as further described in Exhibit A),
the manufacture, use or sale of which would, but for this Agreement, infringe a
Valid Claim.

     1.11 “Product Patent” shall mean the patents and patent applications
listed in Exhibit B hereto and any and all other patents and/or patent
applications in the Territory now or hereafter during the term of this
Agreement owned or controlled by REGEN and disclosing and claiming the Product,
together with any and all patents that may issue or may have issued therefrom
in the Territory including any and all renewals, divisions, continuations,
continuations-in-part, reissues, substitutions, confirmations, registrations,
revalidations, revisions, extensions or additions of or to any of the aforesaid
patents and patent applications. From time to time during the term of this
Agreement, REGEN will provide LINVATEC, upon request, with an updated version
of Exhibit B.

     1.12 “Regulatory Approvals” shall mean all registrations, permits and
approvals by the competent regulatory agencies in the Territory which are
required for the importation, marketing, promotion, distribution and sale of
the Product in a country of the Territory.

     1.13 “Technology” shall mean all information, technical data and other
know-how which relates to the manufacture, use or sale of the Product
(including clinical data, medical uses and methods, product forms,
specifications and manufacturing data) which REGEN has heretofore developed or
acquired, or may hereafter develop or acquire, and possesses at any time during
the term of this Agreement and which REGEN is free to disclose and furnish to
LINVATEC hereunder.

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     1.14 “Territory” shall mean the geographical area described in Exhibit C.

     1.15 “Trademark” shall mean the trademark described in Exhibit D.

     1.16 “Valid Claim” shall be deemed to mean a claim in an unexpired patent
included within the Product Patents which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer. If in any country there should be two or more
such decisions conflicting with respect to the validity of the same claim, the
decision of the higher or highest tribunal shall thereafter control; however,
should the tribunals be of equal rank, then the decision or decisions upholding
the claim shall prevail when the conflicting decisions are equal in number, and
the majority of decisions shall prevail when the conflicting decisions are
unequal in number.

2. Grant of Rights

     2.1 License Grant. Subject to the terms of this Agreement, REGEN hereby
grants to LINVATEC an exclusive, royalty bearing license under the Product
Patents and Technology, with the right to sublicense, to make, have made, use,
offer for sale and sell the Product in the Licensed Field and in the Territory.

     2.2 Prior Distribution Rights. The rights granted to LINVATEC in Section
2.1 are exclusive but subject to the rights of Sulzer Orthopedics AG and its
Affiliates (hereinafter “Sulzer”) to distribute the Product outside of the
United States in conjunction with the sale and distribution of REGEN’s collagen
meniscus implant product. REGEN shall have the right to buy from LINVATEC, for
delivery to Sulzer, and LINVATEC shall supply to REGEN at cost, such quantities
of Product as required to comply with REGEN’s supply obligation to Sulzer, not
to exceed one Sharp Shooter® per collagen meniscal implant procedure. REGEN
shall pay the cost of shipping such Product. For purposes of the preceding
sentence, “cost” means the price currently charged REGEN by its suppliers of
Product (whether or not LINVATEC’s cost of manufacture subsequently decreases),
and “Sharp Shooter’ means one disposable handle and one box containing ten
disposable needles for use in the handle. LINVATEC shall also supply to REGEN
for delivery to Sulzer a reasonable quantity of Product literature at
LINVATEC’s cost.

     2.3 Improvements. If REGEN develops or acquires an Improved Product,
REGEN shall notify LINVATEC thereof in writing. Such Improved Product shall be
included in the License Grant and subject to the royalty requirements.

     2.4 Export and Import Licenses. LINVATEC shall obtain at its expense all
permits, approvals and licenses required for the export of the Product from the
United States of America, and any and all permits, approvals and licenses
required for the import of the Product into the various countries of the
Territory.

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3. Financial Terms

     3.1 License Fee. LINVATEC shall pay to REGEN a license fee of three
hundred thousand U.S. dollars ($300,000) in accordance with the payment
Schedule set forth in Exhibit G. In consideration for the license fee, REGEN
shall, promptly after the Effective Date, provide to LINVATEC the items set
forth in Exhibit H.

     3.2 Royalties. LINVATEC shall pay to REGEN a royalty on Net Sales of the
Product as follows: (a) at a rate of twelve percent (12%) for disposable
handles and (b) at a rate of ten percent (10%) for all other components of the
Product. Royalties are due and payable within thirty (30) days after the end
of a calendar quarter in which such Net Sales were generated. All payments
under this Agreement shall be made in U.S. dollars by wire transfer to an
account designated by REGEN from time to time. No royalty shall be due on
samples given to LINVATEC’s employee sales representatives or sold to
LINVATEC’s Manufacturer Representatives or similar agents.

     3.3 Inventory Purchase. LINVATEC shall purchase from REGEN, and REGEN
sell to LINVATEC, REGEN’s inventory of Product in the quantities and at the
prices listed in Exhibit I. REGEN shall deliver the Product no later than
sixty (60) days after the Effective Date. LINVATEC shall pay for the Product
after delivery within thirty (30) days of receipt of the invoice from REGEN.

     3.4 Taxes and Duties. LINVATEC shall pay all export and import duties,
any and all sales, use, excise, value added, transfer or other taxes or
assessments, imposed by any governmental authority on any sale to LINVATEC
under this Agreement, except for any taxes which are imposed on REGEN’s net
income.

4. Manufacture

     4.1 REGEN will, through its current suppliers, manufacture Product for
LINVATEC during the Distribution Phase. LINVATEC shall provide REGEN with a
non-binding forecast and shall place orders for Product from time to time.
REGEN shall fill the orders at a price equal to its cost and shall ship Product
to LINVATEC within eight (8) to twelve (12) weeks of receipt of the order and
with a Certificate of Regulatory Compliance. This Distribution Phase will end
at the start of the Manufacturing Phase.

     4.2 LINVATEC shall begin the Manufacturing Phase as soon as possible, but
in any event, at its discretion when it deems all necessary steps to be in
place.

     4.3 Effective upon the start of the Manufacturing Phase, REGEN hereby
assigns to LINVATEC all of its rights to have Product manufactured by those
third party suppliers, identified in Exhibit J, who are presently manufacturing
Product for REGEN. Such suppliers shall thereafter be permitted by REGEN to
manufacture Product only for LINVATEC.

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     4.4 LINVATEC shall have the right in its sole discretion to have Product
manufactured by such suppliers or to change suppliers or to assume for itself
the manufacture of Product.

     4.5 REGEN shall promptly after the Effective Date provide to LINVATEC
copies of all drawings, data, costs and other information of REGEN and it
suppliers necessary to enable LINVATEC to begin the Manufacturing Phase as soon
as possible.

     4.6 REGEN represents and warrants that the Products manufactured by such
third party suppliers comply with all U.S. and European regulatory
requirements.

     4.7 The parties will promptly after the Effective Date begin to change
Product labeling to indicate that Product is “Manufactured for” LINVATEC.

5. Regulatory Approvals; Packaging; Regulatory Compliance

     5.1 Regulatory Approval Plan. REGEN hereby represents and warrants that
it has obtained all Regulatory Approvals necessary to market Product in the
United States and has complied, and has required its Product suppliers to
comply, with all regulatory requirements necessary in the U.S. REGEN and
LINVATEC shall cooperate in obtaining the Regulatory Approvals in all other
countries of the Territory. Within ninety (90) days after the Effective Date,
the parties will agree on a plan for obtaining Regulatory Approval in Japan and
other countries of the Territory where such approval is required. Insofar as
legally permissible, all Regulatory Approvals shall be in the name of REGEN.
If the parties are unable to agree on a regulatory approval plan for a
particular country within that period, such country shall be deemed excluded
from the Territory.

     5.2 Regulatory Compliance.

     (a) Packaging Materials and Inserts. Any packaging materials and package
inserts must comply in all respects with the Regulatory Approvals and any
applicable laws. During the Distribution Phase, LINVATEC shall submit samples
of all LINVATEC originated packaging materials and package inserts to REGEN for
written approval (which approval shall not be unreasonably withheld). Approval
by REGEN does not relieve LINVATEC from its responsibility to comply with all
applicable laws and Regulatory Approvals.

     (b) Manufacturing Operations and Product Handling. All operations in
connection with the manufacture and packaging of the Product must be conducted
in accordance with the then current good manufacturing practices and quality
systems regulations applicable in the Territory. Each party shall follow safe
handling, storage, transportation, use and disposal practices with respect to
the Product as required by the Regulatory Approvals, quality systems
regulations and applicable laws.

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     (c) Reporting Requirements. Each party shall provide to the other all
information in its possession as necessary for the other party to comply with
the U.S. FDA or non-U.S. equivalent adverse reaction reporting requirements.

     (d) Regulatory Compliance. In performing its rights and obligations under
this Agreement, each party shall comply with and adhere to all Regulatory
Approvals.

     (e) Compliance with Laws. The parties shall comply with all applicable
present and future orders, regulations, requirements and laws of any and all
federal, state, provincial and local authorities and agencies in the Territory
relating to the promotion, marketing, sale and distribution of the Product.

     5.3 Regulatory and Quality System Requirements

     (a) The parties agree that responsibility for the Regulatory and Quality
System Requirements will vary during the term of this Agreement depending upon
who has control over the Product’s design history file, device master record
and design dossier as those terms are defined by FDA at 21 CFR § 820.3(e) and
MDD 93/42/EEC Annex VII Clause 3 (hereafter “Design File”). Initially, during
the Distribution Phase, the control of the Design File will be with REGEN.
Subsequently, during the Manufacturing Phase, LINVATEC will assume control of
the Design File and the manufacture of Product, either by itself or through
third party suppliers, which may or may not be the same as REGEN’s suppliers.
Therefore, during the Distribution Phase REGEN shall maintain the Design File
and during the Manufacturing Phase LINVATEC shall maintain the Design File.

     (b) The parties agree that REGEN owns the patent on the Product and the
Design File. REGEN hereby transfers to LINVATEC the responsibility to maintain
the Design File during the Manufacturing Phase. In the event of the
termination of this Agreement, LINVATEC must return the updated Design File to
REGEN within ten (10) working days.

     (c) Each party shall, during its respective period of control of the
Design File, guarantee implementation of a design system according to current
regulations and requirements, as amended from time to time, to assure all
authorizations and approvals can be obtained (for example, QSR, ISO 9001 and EN
46001). This design system shall include complete records of authorized design
changes. During the Manufacturing Phase LINVATEC shall inform REGEN, in
writing, of any significant Product design changes, including supporting
documentation describing the changes and obtain REGEN’s approval prior to
implementation.

     (d) Each party will record and forward to the other party all information
received from any source, domestic or international, alleging a deficiency
related to the identity, quality, durability, reliability, safety,
effectiveness or performance of a Product (i.e. complaint) after it is released
for distribution. This shall include all servicing of the Product which
represents a complaint in accordance with 21 C.F.R. § 820.3(b) and

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MDD 93/42/EEC Annex VII Clause 3.1 and all requirements of 21 C.F.R. Part 820
Quality System Regulations and future changes to regulations related to the
applicable regulatory statutes and directives. In particular, LINVATEC agrees
to maintain complaint files for the Products in accordance with 21 C.F.R. §
820.198 and provide REGEN a copy for its records.

     (e) Each party agrees to immediately notify the other party of any
information of which it becomes aware which relates to the safety or efficacy
of the Products. Upon receipt of any such information, the parties shall
consult in an effort to arrive at a mutually agreeable course of action, if any
is required; provided, however, that either party shall have the right
following such consultation to initiate such action as it deems appropriate in
the event the parties are unable to agree on a course of action. REGEN agrees
that it will promptly notify LINVATEC of any information suggesting that an MDR
reportable event may have occurred involving a Product it believes may have
been sold by LINVATEC, and will cooperate fully with LINVATEC to assist
LINVATEC in discharging REGEN’s obligation to submit MDR reports and associated
filings and to otherwise comply with 21 C.F.R. § 803 and 820.198.

     (f) LINVATEC shall be responsible for handling all domestic and
international complaints, repairs and service including the domestic and
international reporting of adverse events related to all Products. In
particular, LINVATEC agrees that it will, during both the Distribution and
Manufacturing Phases, discharge fully REGEN’s obligations by notifying
applicable regulatory authorities of reportable events involving the Products
as required by law including, without limitation, Medical Device Reports under
the MedWatch program of the United States Food and Drug Administration and
Device Vigilance Reports required by the countries of the European Union, and
in such event shall keep REGEN fully apprised of its actions and provide copies
of all submissions made. LINVATEC understands that duplicative or other MDR
and vigilance filings will not be made by REGEN.

     (g) LINVATEC shall, both during the terms of this Agreement and after its
expiration or termination, keep confidential its source of Product, information
and data about REGEN. LINVATEC shall not disclose such information to any
third party, expect FDA, Notified Body and/or Competent Authority as required,
without REGEN’s prior approval and except as may be required to enable LINVATEC
to manufacture Product through third party suppliers.

     (h) REGEN shall, both during the terms of this Agreement and after its
expiration or termination, keep confidential the terms of this Agreement, the
fact that its suppliers produce Product, and all other information and data
received from or about LINVATEC. REGEN shall not disclose such information to
any third party, except FDA, Notified Body and/or Competent Authority as
required, without LINVATEC’s prior approval.

     (i) Both parties shall, during normal working hours, require their
suppliers to allow full access to production facilities and records by the FDA,
Notified Body and/or

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Competent Authority for purposes of verification, confirmation, and audit
of said records and practices according to QSR, ISO 9001, EN 46001, and MDD
(93/42/EEC).

     (j) Each party shall notify the other of any communications with the FDA,
Notified Body or Competent Authority, as well as direct customers of any
Product complaints or recalls.

     (k) Both parties shall allow access to any and all quality records and
documents, and technical dossier information requested by the FDA, Notified
Body and/or Competent Authority.

     (l) Both parties shall upon any change in status of FDA registration, ISO
9001 and/or EN 46001 certification or authorization to apply CE Mark, inform
the other party in writing of these changes.

     (m) Both parties shall retain all quality records, operational procedures,
and Product related history records for an indefinite period of time.

     (n) During the Distribution Phase, if REGEN or its third party suppliers
are ISO certified, REGEN will apply REGEN’s CE mark to the Product, maintain
the technical dossier and provide LINVATEC with a Declaration of Conformity.
The labeling will state “Distributed by” LINVATEC unless LINVATEC manufactures
Product.

     (o) During the Distribution Phase, if REGEN or its third party suppliers
are not ISO certified, REGEN and its suppliers must become ISO certified under
REGEN’s quality system and apply REGEN’s CE mark to the Product. If LINVATEC
takes over the responsibility for the manufacture of the Product, LINVATEC will
apply its quality system and CE mark to the Product. REGEN will provide the
following documentation to LINVATEC to complete the technical dossier and
LINVATEC will maintain the file:

	 	 	 	Risk analysis

Essential requirements checklist

Top level assembly drawings

Sterilization method/validation

Packaging description

Description of manufacturing process or manufacturing
summary

Inspection process or quality summary

	 	5.4	 	Recall and Corrective Action and Procedures
	 
	 	 	 	Both parties must agree on any recall or general corrective action
procedures in compliance with the laws of any jurisdiction affected
by such recall or general corrective action. During the
Distribution Phase, REGEN agrees to reimburse and hold harmless
LINVATEC for any costs arising from any such recall or general
corrective action limited to the actual costs incurred by LINVATEC
and its agents (its independent distributors) for retrieving and
replacing the Products,

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	 	 	 	except to the extent such recall or corrective action is required
due to the mishandling of the Product by LINVATEC, its Affiliates,
sublicensees, agents or contractors. However, in the event REGEN
disagrees with a decision by LINVATEC to initiate a recall or
general corrective action, and such action is ultimately determined
to have not been warranted then REGEN shall be relieved of its
obligation to reimburse and hold harmless LINVATEC for its costs
arising therefrom. LINVATEC shall only be responsible for any
field action directly attributable to LINVATEC error. During the
Manufacturing Phase, LINVATEC shall pay for recalls and corrective
actions.

6. Promotion of the Product

     6.1 Diligent Efforts. LINVATEC shall diligently promote the Product in
the Territory with an adequate number of sales representatives who are trained
to promote the Product. In particular, LINVATEC shall initiate the promotion
of the Product reasonably in advance of the launch of the Product in each
country of the Territory. The launch of the Product shall occur without delay
after the execution of this Agreement or the granting of the Regulatory
Approvals required for the marketing and sale of the Product in a particular
country of the Territory, subject to availability of Product from REGEN and its
suppliers.

     6.2 Promotional Materials. REGEN shall approve all advertising and
promotional materials relating to the Product which LINVATEC has developed and
intends to use in the Territory. If permitted under applicable laws, any such
promotional materials may contain REGEN’s logo which shall be of equal size as
LINVATEC’s logo.

     6.3 Compliance with Law. LINVATEC shall comply with all health
registration laws, regulations and orders of the government of the Territory
and with all other governmental requirements relating to the promotion,
marketing, sale and distribution of the Product, and shall hold REGEN harmless
from claims brought against REGEN arising from the breach by LINVATEC of the
obligations of this Section 6.3.

7. Trademarks

     7.1 Selection and Filing. If the parties expressly agree in writing,
LINVATEC may use a trademark (“Territory Trademark”) different from the
Trademark in Exhibit D for the marketing of the Product in the Territory. The
Territory Trademark shall be filed in the name of REGEN, and REGEN shall
reimburse LINVATEC for any out-of-pocket expenses and filing fees incurred in
connection with the filing and maintenance of the Territory Trademark.

8. Product Development

     8.1 Promptly after the Effective Date, the parties will establish a
mutually acceptable development plan and budget which shall provide for the
development of the Product for use in (1) outside/in meniscus repair and (2)
shoulder repair (each a “New

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Product”). REGEN will use commercially reasonable efforts to complete the
development plan and enable commercial sale of New Products within one (1) year
of the Effective Date. LINVATEC shall pay to REGEN development expenses in
accordance with the budget.

     8.2 The parties shall meet periodically to review the progress of the
development programs starting with the commencement of each program. LINVATEC
shall have the right to terminate one or both development programs if it is not
satisfied with the progress made by REGEN. Upon such termination, LINVATEC
shall have no rights in the New Product developed in that program, and REGEN
shall be free to continue the development of and to commercialize such New
Product alone or with or through a third party without any further obligation
to LINVATEC; provided, however, that if the New Product is ever commercialized,
REGEN shall repay to LINVATEC all development deposits.

     8.3 Upon successful completion of the development programs, the resulting
New Products shall be covered by the terms of this Agreement, and the Field of
Use shall be expanded to include (1) outside/in meniscus repair, and/or (2)
shoulder repair.

     8.4 LINVATEC shall pay to REGEN a royalty on Net Sales of the New Products
at either (a) a rate of six percent (6%) for such New Products for which
LINVATEC pays all development expenses; or (b) a rate to be determined by
mutual agreement for such New Products for which LINVATEC pays less than all
the development expenses. Royalties are due and payable within thirty (30)
days after the end of the calendar quarter in which such Net Sales were
generated. All payments under this Agreement shall be made in U.S. dollars by
wire transfer to an account designated by REGEN from time to time.

9. Warranties; Limitation of Liability

     9.1 Disclaimer of Warranties. REGEN MAKES NO WARRANTIES WITH RESPECT TO
THE PRODUCT, EXPRESS OR IMPLIED, AND SPECIFICALLY, WITHOUT LIMITATION,
DISCLAIMS ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.

     9.2 Limitation of Liability.

     (a) Neither party shall be liable to the other party for any indirect
damages (including, without limitation, lost profits), or special,
consequential, incidental or punitive damages.

     (b) Nothing in this article shall limit the indemnification obligation of
the parties under Article 10.

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     (c) REGEN hereby represents and warrants that it is not aware of any patents
or other intellectual property which may be infringed by Products.

10. Intellectual Property.

     10.1 Ownership of Intellectual Property Rights. The parties acknowledge
and agree that, except for the right to distribute the Product under the
Trademark or Territory Trademark granted herein, all right, title and interest
in and to any intellectual property rights in or covering the Product shall
reside solely in REGEN or its assignee, provided, however, that LINVATEC shall
not be obligated to assign to REGEN any improvements or other developments made
by its employees or on its behalf.

     10.2 Infringement of Intellectual Property Rights.

     (a) Patent Infringement. If LINVATEC is or becomes aware of an
infringement or a potential infringement of a Product Patent, it shall promptly
notify REGEN, and the parties shall discuss on how to resolve the situation.
REGEN shall have the sole right to bring any action in court or otherwise, or
to settle the claim out of court; provided, however, that if the third party
prevails in the legal action brought against it, or if REGEN settles the patent
infringement claim with the third party such that the third party continues to
sell Product, LINVATEC’s royalties hereunder will not be greater than
royalties, if any, paid by such third party, and further provided, however,
that if patent is invalid, this Agreement shall be terminated and LINVATEC
shall pay REGEN a mutually agreed price so LINVATEC may continue to manufacture
Product with no further liability to REGEN.

     (b) Trademark Infringement. If LINVATEC is or becomes aware of an
infringement or potential infringement of the Trademark or the Territory
Trademark, it shall promptly notify REGEN. If REGEN decides not to take action
against such infringement, LINVATEC shall have the right to defend such
trademarks at its own expense.

11. Indemnity.

     11.1 Indemnification Undertaking by REGEN. REGEN shall indemnify
LINVATEC, its Affiliates and sublicensees and all their officers, directors,
employees and agents, for any reasonable out-of-pocket costs and expenses
(including court and arbitration costs and reasonable attorneys’ fees),
non-appealed or non-appealable judicial or arbitration damage awards, and
settlement payments, payable or owed by LINVATEC in connection with any
demands, law suits and other legal actions of third parties (“Third Party
Claim”) arising from (i) any negligent actions or willful misconduct by REGEN,
its Affiliates, agents or sublicensees, (ii) any manufacturing defects of the
Product manufactured by REGEN, and (iii) the misuse or mishandling of the
Product by REGEN, its Affiliates, agents or sublicensees.

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     11.2 Indemnification Undertaking by LINVATEC. LINVATEC shall indemnify REGEN,
its Affiliates and all their officers, directors, employees and agents, for any
reasonable out-of-pocket costs and expenses (including court and arbitration
costs and reasonable attorneys’ fees), non-appealed or non-appealable judicial
or arbitration damage awards, and settlement payments, payable or owed by REGEN
in connection with any Third Party Claim arising from (i) any negligent actions
or willful misconduct by LINVATEC, its Affiliates, agents or sublicensees, (ii)
any manufacturing defects of the Product manufactured by LINVATEC, and (iii)
the misuse or mishandling of the Product by LINVATEC, its Affiliates, agents or
sublicensees.

     11.3 Conditions and Limitations of Indemnification Obligation.

     (a) In order to maintain the right to be indemnified by the other party
(“Indemnitor”), the party claiming indemnification (“Indemnitee”) must:

	 	(i)	 	notify the Indemnitor promptly after learning of
a Third Party Claim;
	 
	 	(ii)	 	allow the Indemnitor to manage and control (by
way of intervention or otherwise) the defense and/or
settlement of any such Third Party Claim against the
Indemnitee;
	 
	 	(iii)	 	cooperate with the Indemnitor in the defense or
the settlement negotiations of Third Party Claims as
reasonably required by the Indemnitor;
	 
	 	(iv)	 	abstain from making any statements or taking any
actions which prejudice the defense against a Third Party
Claim (including, without limitation, any statements against
the interest of the Indemnitee or admissions of causation or
guilt);
	 
	 	(v)	 	submit to the Indemnitor for prior approval
(which shall not be unreasonably withheld) any out-of-pocket
expenditures to be made in connection with the defense against
a Third Party Claim.

     (b) The Indemnitor shall not agree to any settlement that adversely
affects the Indemnitee’s rights or interest without the Indemnitee’s prior
written approval (which approval shall not be unreasonably withheld). If the
Indemnitor assumes the control of the defense against a Third Party Claim, any
out-of-pocket costs and expenses of the Indemnitee approved pursuant to
subsection (v) above shall be reimbursed based on an invoice and receipts
showing the payment of such costs and expenses.

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12. Confidentiality.

     12.1 Disclosure of Confidential Information. Confidential Information
disclosed by one party to the other shall be subject to the confidentiality
obligations set forth below:

     (a) if disclosed in writing and marked “confidential” or “proprietary” by
the disclosing party prior to or at the time of the disclosure thereof, or

     (b) if within thirty (30) days after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential or proprietary nature of the disclosed information, describing
such information and referencing the place and date of the oral, visual or
written disclosure and the names of the employees or officers of the receiving
party to whom such disclosure was made.

     12.2 Confidentiality and Non-Use. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, for the term of this Agreement and for five
(5) years thereafter, it shall keep confidential and shall not publish or
otherwise disclose and shall not use for any purpose other than as provided for
in this Agreement any Confidential Information disclosed by the other party,
unless the receiving party can demonstrate by competent proof that such
Confidential Information:

     (a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;

     (b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving party;

     (c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission
of the receiving party in breach of this Agreement;

     (d) was disclosed to the receiving party, other than under an obligation
of confidentiality to a third party, by a third party who had no obligation to
the disclosing party not to disclose such information to others; or

     (e) was independently discovered or developed by the receiving party
without the use of Confidential Information belonging to the disclosing party.

     12.3 Authorized Disclosure.

     (a) Each party may disclose Confidential Information belonging to the
other party to the extent such disclosure is reasonably necessary in the
following: filing or prosecuting patents relating to Products; regulatory
filings; prosecuting or defending litigation; complying with applicable
governmental and stock exchange regulations;

-13-

 

conducting pre-clinical or clinical trials of Products; and disclosure to
Affiliates and sublicensees who agree to be bound by similar terms of
confidentiality, and to potential investors or acquirers of a party.

     (b) Notwithstanding the foregoing, in the event a party is required to
make a disclosure of the other party’s Confidential Information pursuant to
this section, it will, except where impracticable, give reasonable advance
notice to the other party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, the parties agree to
take all reasonable action to avoid or limit disclosure of Confidential
Information hereunder.

     12.4 Survival. The terms of this Article shall survive for five (5) years
after expiration or termination of this Agreement.

13. Compliance with Laws.

     13.1 Export Law Compliance. Each party understands and recognizes that
the Product and other materials made available to it hereunder may be subject
to the export administration regulations of the United States Department of
Commerce and other United States government regulations, as amended from time
to time, related to the export of technical data and equipment and products
produced therefrom. Each party agrees to comply with all such regulations in
connection with the distribution of the Product and agrees to cooperate with
the other party to provide it with such reasonable assistance as is required in
order to comply with the export administration regulations of the United
States.

     13.2 Foreign Corrupt Practices Act. Each party hereby agrees that it
shall comply with the requirements of the U.S. Foreign Corrupt Practices Act,
as amended from time to time (the “Act”) and shall refrain from any payments to
third parties which would cause LINVATEC or REGEN to violate the Act.

     13.3 Each party shall hold the other harmless from claims brought against
such party arising from the breach of such party’s obligations under this
article 13.

14. Term and Termination

     14.1 Term. The initial term of this Agreement shall be two (2) years from
the Effective Date. The Agreement shall be automatically renewed annually for
successive periods of one (1) year each, at LINVATEC’s option, provided that:

     (a) LINVATEC sells a total gross invoice price of five hundred thousand
U.S. dollars ($500,000) of Products during the calendar year 2000 (hereafter
“Initial Period”), or pays REGEN the royalties that would be due on such sales
giving consideration to a reasonable Product mix; and

-14-

 

     (b) LINVATEC sells a total gross invoice price of one million U.S. dollars
($1,000,000) of Products during the twelve (12) months following the Initial
Period (hereafter “Baseline Period”), or pays REGEN the royalties that would be
due on such sales giving consideration to a reasonable Product mix; and

     (c) LINVATEC sells during each subsequent twelve (12) month period
following the Baseline Period an amount of Products which grows at an annual
rate of ten percent (10%) over the sales of each preceding twelve (12) month
period, or pays REGEN the royalties that would be due on such sales giving
consideration to a reasonable Product mix.

     (d) Non-compliance with paragraphs a, b, or c shall cause the license
under this Agreement to be converted to non-exclusive subject to a decreased
royalty to be mutually agreed upon.

     In no event shall the Agreement extend beyond the expiration of the
Product Patent at which time LINVATEC may continue to manufacture, use and sell
Product without any royalty or other obligation to REGEN.

     14.2 Early Termination.

     (a) Material Breach. If the other party commits a material breach of this
Agreement and fails to cure such breach within sixty (60) days from receipt of
a written notice from the non-breaching party specifying such breach, the
non-breaching party may terminate this Agreement with written notice effective
upon receipt.

     (b) Bankruptcy. REGEN may terminate this Agreement by giving written
notice effective upon receipt if all or a substantial portion of the assets of
LINVATEC are transferred to an assignee for the benefit of creditors or to a
receiver or to a trustee in bankruptcy, a proceeding is commenced by or against
LINVATEC for relief under bankruptcy or similar laws and such proceeding is not
dismissed within sixty (60) days, or LINVATEC is adjudged bankrupt or
permanently ceases to conduct business.

     14.3 Effect of Termination.

     (a) Transfer of Regulatory Approvals and other Permits. Upon receiving
notice of termination, LINVATEC shall make all reasonable efforts to ensure a
prompt assignment to REGEN or its nominee of all Regulatory Approvals and
permits held by LINVATEC in connection with the distribution and sale of the
Product. In the event such assignment is not permitted by law, LINVATEC shall
cooperate in the cancellation of such registrations and permits standing in its
names and the reissuance of such registrations and permits to REGEN or its
nominee.

     (b) Sell-Out of Inventory. After the effective date of termination,
LINVATEC may sell Product remaining in inventory for a period not to exceed six
(6) months. The

-15-

 

parties acknowledge that as of the receipt of the notice of termination by
either party, any purchase orders accepted but not yet delivered must be
filled.

     (c) Marketing Materials. On the effective date of termination, LINVATEC
shall return to REGEN or its nominee all price lists, customer lists, catalogs,
sales literature, operating and service manuals, advertising literature and
other materials relating to the Product. Any such materials produced by
LINVATEC shall be transferred to REGEN or its nominee in exchange for payment
of their production costs.

     (d) Transfer of Trademarks. Upon termination or expiration, LINVATEC will
have no rights to REGEN trademarks.

     (e) No Distribution Activities. Except to the extent permitted for
selling its remaining inventory of the Product pursuant to subsection (b)
above, after termination LINVATEC shall not represent or hold itself out as
being an authorized licensee or sales representative for the Product or engage
in any practices which might make it appear that LINVATEC is still such an
authorized licensee or sales representative.

     14.4 No Release. Termination of this Agreement shall not release, or be
construed as releasing, any party from any liability to the other arising out
of or in connection with a party’s breach of, or failure to perform any
obligation contained in this Agreement. Neither party shall be relieved from
any obligations vested prior to the date of termination of this Agreement.

     14.5 No Compensation for Termination. REGEN shall have no obligation for,
and LINVATEC herewith expressly waives any claims which LINVATEC may have based
on lost profits or dedicated investments, or relating to good-will for the
Product, or customers of the Product generated during the term of this
Agreement, and any similar claims which LINVATEC may have in connection with
the termination of this Agreement.

15. Dispute Resolution, Venue and Governing Law.

     15.1 Dispute Resolution. If a party perceives a breach of this Agreement
by the other party, it shall inform the other party thereof in writing
describing the alleged breach in reasonable detail. Within ten (10) days from
delivery and receipt of the notice, each party shall designate a member of the
top management level who shall attempt to resolve the dispute in good faith
negotiations for an additional period of thirty (30) days.

     15.2 Jurisdiction. Any dispute which cannot be resolved pursuant to
negotiations between the parties as set forth in Section 14.1 above, shall be
resolved by binding arbitration in accordance with the commercial arbitration
rules of the American Arbitration Association.

     15.3 Choice of Law. This Agreement shall be construed in accordance with
the internal laws of the State of New Jersey applicable to agreements made and
to be performed entirely within that state. The United Nations Convention on
Contracts for

-16-

 

the International Sale of Goods (1980) is specifically excluded from and
shall not apply to this Agreement.

     15.4 Attorneys’ Fees. The prevailing party in any judicial proceedings
instituted under this Agreement shall be entitled to recover all costs,
expenses and reasonable attorneys’ fees incurred in this action.

16. Miscellaneous

     16.1 Force Majeure. Neither party shall be liable to the other for any
failure or delay in performance hereunder where such failure or delay is due,
in whole or in part, to any cause beyond its reasonable control, including but
not limited to Acts of God, fire, flood, warfare, labor disputes, government
regulations or other similar events. The party affected by force majeure shall
inform the other party promptly of the event, an estimate of the period during
which performance of its obligations is compromised, and shall undertake all
reasonable efforts to overcome the event and resume the performance of its
obligations as quickly as possible.

     16.2 Authority to Enter Into and Execute Agreement. Each party represents
and warrants to the other that, unless otherwise stipulated to the contrary in
this Agreement, it has the right and lawful authority to enter into this
Agreement for the purposes herein and that there are no other outstanding
agreements or obligations inconsistent with the terms and provisions hereof.

     16.3 Severability. In case one or more of the provisions contained in
this Agreement shall be invalid, illegal or unenforceable in any respect under
any applicable statute or rule of law, then such provision shall be considered
inoperable to the extent of such invalidity, illegality or non-enforceability
and the remainder of this Agreement shall continue in full force and effect.
The parties agree to replace any such illegal or unenforceable provision with a
new provision which has the most nearly similar permissible economic effect.

     16.4 Entire Agreement. This Agreement and any exhibits referred to herein
state the complete and final agreement of the parties with respect to the
subject matter hereof.

     16.5 No Third Party Beneficiaries. Except as expressly provided to the
contrary, provisions of this Agreement are solely for the benefit of the
parties to this Agreement, and not for the benefit of any other person or legal
entity.

     16.6 Amendments. No waiver, alteration, amendment or modification of any
of the provisions of this Agreement shall be binding unless made in writing
with express reference to this Agreement, and signed by a duly authorized
representative of each party.

     16.7 Change of Control; Assignment. Neither party may assign any of its
rights and obligations hereunder without the prior written consent of the other
party, and

-17-

 

any such assignment or purported assignment shall be void, except that
REGEN may assign its rights and obligations pursuant to a merger, or
acquisition of REGEN, or a sale of all or substantially all of the assets
relating to the Product.

     16.8 Notices. Any notice to the other party shall be in writing and shall
be sent to the attention of the chief executive officer by confirmed facsimile
transmission and either registered mail or delivery by overnight courier to the
address of such party as first set out herein. Each party may change the
address or the designated recipient of notices under this Agreement by
providing written notice as required in this section.

     16.9 Headings. The section headings are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

     16.10 Independent Contractors. In making and performing this Agreement,
REGEN and LINVATEC shall act at all times as independent contractors and
nothing contained in this Agreement shall be construed as to create an agency,
partnership or employer and employee relationship between REGEN and LINVATEC.

     16.11 Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver, and no waiver of any right arising from any breach or failure to
perform shall be deemed to be a waiver of any future such right or of any other
right arising under this Agreement.

     IN WITNESS WHEREOF, both parties hereto have executed this Agreement by
their duly authorized officers effective as of the last day and year written
below.

	 	 	 	 	 
	 	 	REGEN BIOLOGICS, INC.
	 
	 	 	 	 
	

	 	By
	 	/s/ Gerald E. Bisbee, Jr., Ph.D.
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	Name: Gerald E. Bisbee, Jr., Ph.D.
	 
	 	 	 	 
	 	 	Title: CHAIRMAN AND CEO
	 
	 	 	 	 
	Date: April 17, 2000	 	LINVATEC CORPORATION
	
 	 
	 	 	 
	 
	 	 	 	 
	

	 	By	 	/s/ Gene Warzecha
	

	 	 	 	
 
	 
	 	 	 	 
	Date: April 7, 2000	 	 Name: Gene Warzecha
	
 	 
	 	 	 
	 
	 	 	 	 
	 	 	Title: General Counsel & Assistant Secretary

-18-

 

EXHIBIT A

Description of Product

The Sharp Shooter® Repair System is a product for meniscal repair, which
includes a method to deliver sutures using a series of six cannulae that are
able to reach all areas of the meniscus.

-19-

 

EXHIBIT B

Product Patents

U.S. Patent 5,928,252

-20-

 

EXHIBIT C

Territory

All countries of the world

-21-

 

EXHIBIT D

Trademark

SHARPSHOOTER

-22-

 

EXHIBIT E

Intentionally Omitted

-23-

 

EXHIBIT F

Intentionally Omitted

-24-

 

EXHIBIT G

Payment Schedule

	1.	 	$100,000 due and payable on the Effective Date

	2.	 	$100,000 due and payable by July 1, 2000

	3.	 	$100,000 due and payable by October 1, 2000

-25-

 

EXHIBIT H

Items Included in Consideration of License Fee

	1.	 	Product brochures and surgical techniques, and product videos (and
related art work on disk for reproduction) available at ReGen on the
Effective Date.
	 
	2.	 	List of established hospital accounts
	 
	3.	 	List of hospital accounts that have expressed interest in the
Product.
	 
	4.	 	Access to ReGen personnel for training purposes for two man/days
per month during a six month period from the Effective Date.
	 
	5.	 	List of surgeon Product champions
	 
	6.	 	List of Product vendors
	 
	7.	 	Product inventory purchase at ReGen’s cost plus 20%

-26-

 

EXHIBIT I

Product Inventory

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Catalog No.
	 	Description
	 	Quantity
	 	Unit Price
	 	Total Price

	2500

	 	Disposable handles
(carton of 5)
	 	150 cartons
	 	$	300.00	 	 	$	45,000.00	 
	 
	2590

	 	Surgical Sutures
(carton of 10)
	 	150 cartons
	 	$	192.00	 	 	$	28,800.00	 
	 
	2600

	 	Anatomic Cannulae
(set of 6)
	 	150 sets
	 	$	540.00	 	 	$	81,000.00	 
	 
	2558

	 	Cannula Tray
	 	150 trays
	 	$	102.00	 	 	$	15,300.00	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 
	

	 	 	 	 	 	Total
	 	$	170,100.00	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 

-27-

 

EXHIBIT J

Suppliers of Product

	 	 	 
	Product	 	Supplier
	1. Disposable Handle

	 	Proximal Inc., Largo, FL
	 
	 	 
	2. Surgical Needles

	 	Surgical Specialties Corp., Reading, PA

          Genzyme Surgical Products, Fall River, MA
	 
	 	 
	3. Anatomic Cannulae

	 	Proximal Inc., Largo, FL 

          Enbrecht Tool, San Jose, CA
	 
	 	 
	4. Cannula Tray

	 	Paragon Medical Inc. , Pierceton, IN

-28-exv10w7

 

EXHIBIT 10.7

CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (this “Credit Agreement”) is entered into as of
March 14, 2000 between REGEN BIOLOGICS, INC., a Delaware corporation (herein
called “Borrower”), and SULZER MEDICA USA HOLDING COMPANY, a Delaware
corporation (herein called “Lender”).

          (1) Commitment. Lender hereby agrees to make loans (each a “Loan”) to
Borrower, subject to the conditions stated in Section 2 hereof, in such amounts
as Borrower shall request, up to an aggregate principal amount of Four Million
Dollars ($4,000,000). The obligation of Lender to make Loans to Borrower shall
terminate on March     , 2005 (the “Termination Date”); provided, however, that
Lender shall have no obligation to make Loans upon the occurrence and during
the continuation of an Event of Default (as hereinafter defined). Borrower may
prepay any loan without penalty or premium and any principal amounts prepaid by
Borrower may be reborrowed; provided, however, that any principal amounts
prepaid at the election of Lender pursuant to terms of the Warrant (as defined
below) may not be reborrowed by Borrower. The “Warrant” shall mean the warrant
to purchase shares of Borrower’s Common Stock to be issued to Lender in
connection with the CMI-2 Agreement.

Borrower agrees to use its reasonable best efforts to obtain additional equity
financing from parties other than Lender or its affiliates and to close such
financing by December 31, 2000. Lender shall have no present obligation to
provide additional equity or debt financing to Borrower, beyond that provided
hereunder, or under any presently existing or contemplated financing
arrangement between Borrower and Lender.

          (2) Conditions Precedent to Funding all Loans. The obligation of Lender
to make each Loan shall be subject to the satisfaction of both of the following
conditions precedent: (a) each of the operational and financial milestones
stated in Exhibit A attached hereto (the “Milestones”) shall have been
satisfied, to Lender’s reasonable satisfaction, by, or within a reasonable
period after, the applicable “Target Date” stated in Exhibit A, and (b) after
giving effect to the requested Loan, the aggregate outstanding Loans will not
exceed the maximum aggregate Loans permitted under Exhibit A (the “Maximum
Outstanding Loans”).

          (3) Procedure for Funding a Loan. From and after the occurrence of the
conditions precedent set forth in Section 2 above and prior to the Termination
Date, and subject to the credit limitation set forth in Section 1, Lender
shall, upon three (3) business days’ prior written request by Borrower to
Lender, transfer to Borrower by wire transfer in same day funds, to the account
of Borrower specified in such written notice, the amount requested to be loaned
to Borrower as set forth in such written notice. Notwithstanding any provision
to the contrary herein, in the event that Borrower completes any of the
Milestones prior to the applicable Target Date, Borrower shall upon such
completion be entitled to request a Loan hereunder and Lender shall make such
Loan in accordance with this Section 3, subject to the remaining terms hereof.

          (4) Principal and Interest. All outstanding principal and interest shall
be due and payable on March 14, 2005 or as determined in the last paragraph of
Section 8.

 

 

Interest shall accrue on the outstanding principal amount of each Loan
from the date of funding of the such Loan until payment in full, at a rate of
one-year LIBOR (as reported in The Wall Street Journal on the date of the
funding of the Loan) per annum or the maximum rate permissible by law (the laws
of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less.
Interest shall be calculated on the basis of a 365-day year for the actual
number of days elapsed and shall compound annually; provided, that no interest
so compounded shall be deemed principal for purposes of Section 1. The
interest rate on each Loan shall adjust on each anniversary of the date of the
Loan (or the next business day if such anniversary is a holiday or a weekend
day) to the interest rate which would be applicable to a Loan initially funded
on such date.

          (5) Note and Schedule of Loans. Borrower’s obligation to repay the Loans
shall be evidenced by, among other things, that certain Secured Promissory
Note, dated as of even date herewith, executed and delivered by Borrower on
behalf of Lender, (the “Note”). Upon the funding of the initial Loan under
this Credit Agreement, Borrower shall prepare and deliver to Lender the
Schedule of Loans attached hereto as Exhibit B, setting forth the information
to be provided thereon. Upon any additional funding of a Loan, any repayment
of a Loan (in part or in full) by Borrower, any reduction in amounts owed
hereunder by exercise of the Warrant, and on each anniversary of the funding of
a Loan until such Loan is paid in full, Borrower shall amend the Schedule of
Loans to reflect such event and deliver to Lender the Schedule of Loans as so
amended.

          (6) Place of Payment. All amounts payable hereunder shall be payable at
Sulzer Medica USA Holding Company, 3 East Greenway Plaza, Suite 1600, Houston,
Texas 77046-0391, unless another place of payment shall be specified in writing
by Lender.

          (7) Application of Payments. Any payment made by Borrower, or reduction
in amounts owed at the election of Lender pursuant to Section 3 of the Warrant,
on any Loan hereunder shall be applied first to accrued interest, and
thereafter to principal.

          (8) Warranties And Representations. Borrower represents and warrants to
Lender that Borrower is the lawful owner of the entire right, title and
interest in and to all the Collateral (as defined in the Intellectual Property
Security Agreement dated of even date herewith by and between Lender and
Borrower (the “Security Agreement”)), free and clear of all material liens,
charges, encumbrances and claims of infringement.

          (9) Covenants. Borrower covenants and warrants that unless compliance is
waived by Lender in writing:

               (a) Borrower will, at its expense, to the extent commercially reasonable,
(i) properly preserve and maintain the Collateral and defend the Collateral
against any adverse claims and demands; (ii) diligently prosecute all patent,
trademark or service mark or copyright applications pending on or after the
date hereof; and (iii) maintain in effect all issued patents and will renew all
trademark and service mark registrations, including payment of any and all
maintenance and renewal fees relating thereto; (iv) protect and defend all
rights in the Collateral against any claims and demands of all persons other
than Lender; and (v) enforce all rights in the Collateral against any and all
infringers of the Collateral.

2

 

               (b) Borrower will not license or transfer any of the Collateral except with
Lender’s prior written consent, except for the grant of licenses and sale of
products in the ordinary course of business.

               (c) Borrower will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including any filings with the United
States Patent and Trademark Office, and any filings of financing or
continuation statements under the UCC) that from time to time may be necessary
or appropriate, or that the Lender may reasonably request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect, confirm or
validate the security interests granted pursuant to the Security Agreement or
to enable the Lender to obtain the full benefits of this Agreement, or to
enable the Lender to exercise and enforce any of its rights, powers and
remedies hereunder or under the Security Agreement with respect to any of the
Collateral. To the extent permitted by law, Borrower hereby authorizes the
Lender to execute and file financing statements or continuation statements
without Borrower’s signature appearing thereon. Borrower agrees that a carbon,
photographic or other reproduction of this Agreement or the Security Agreement
or of a financing statement is sufficient as a financing statement. Borrower
shall pay the cost of, or incidental to, any such recording or filing of any
financing or continuation statements concerning the Collateral.

          (10) Default. Each of the following events shall be an “Event of Default”
hereunder:

               (a) Borrower fails to pay timely any amount due under this Credit
Agreement within five (5) business days after such payment becomes due;

               (b) Any representation or warranty by, made or deemed made herein, in the
Security Agreement, or which is contained in any certificate, document or
financial or other statement by the Borrower, furnished at any time under this
Agreement, or in or under the Security Agreement, is incorrect in any material
respect on or as of the date made or deemed made;

               (c) The Borrower fails to perform or observe any other term or covenant
contained in this Agreement or the Security Agreement, and such default shall
continue unremedied for a period of 20 days after the earlier of (i) the date
upon which an executive officer of Borrower knew or reasonably should have
known of such failure, or (ii) the date upon which written notice thereof is
given to Borrower by Lender;

               (d) Borrower files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law or any other law for the relief
of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or

               (e) An involuntary petition is filed against Borrower (unless such
petition is dismissed or discharged within sixty (60) days) under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors

3

 

(or other similar official) is appointed to take possession, custody or
control of any property of Borrower.

               (f) Borrower ceases in a material way to meet its supply obligations to
Lender (or its affiliates), pursuant to the terms of that certain CMI-2
Distribution Agreement contemplated by Borrower and Lender as of the date
hereof, to be hereafter executed (the “Supply Agreement”), unless such failure
is resolved to Lender’s reasonable satisfaction within one hundred fifty (150)
days.

Upon the occurrence and the continuance of an Event of Default hereunder, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Lender, and, in the case of an Event of Default pursuant to (d)
or (e) above, automatically, be immediately due, payable and collectible by
Lender pursuant to applicable law. Notwithstanding any provision to the
contrary herein, Lender shall have no right to exercise any remedies, whether
provided herein or in the Security Agreement, pursuant to the occurrence and
continuance of an Event of Default, unless Borrower shall have failed to cure
such Event of Default prior to the expiration of any applicable cure period
provided herein.

          (11) Intellectual Property Collateral. In consideration of Lender’s
making Loans from time to time hereunder, Borrower, pursuant to the Security
Agreement, grants Lender a security interest in any right, title or interest of
Borrower in certain intellectual property of Borrower, as specifically
described in the Security Agreement. Upon the full satisfaction of Borrower’s
obligations hereunder, Lender shall execute such releases of interest with
respect to Borrower’s property subject to the Security Agreement as Borrower
may reasonably request.

NOTWITHSTANDING ANY PROVISION TO THE CONTRARY HEREIN, OR IN THE SECURITY
AGREEMENT, LENDER SHALL AT NO TIME HAVE THE RIGHT TO EXERCISE ANY OF THE RIGHTS
AND REMEDIES GRANTED UNDER THE SECURITY AGREEMENT UNLESS AN EVENT OF DEFAULT
PURSUANT TO SECTION 10(D) OR (E) HEREOF SHALL HAVE OCCURRED AND BE CONTINUING.
Lender shall indemnify Borrower and its successors and assigns against, and
hold Borrower and its successors and assigns harmless from, any and all claims,
actions, damages, obligations, liabilities and all costs and expenses,
including, without limitation, legal fees and costs, incurred by Borrower or
its successors and assigns, arising out of Lender’s violation of the foregoing
restrictions or the terms of the Security Agreement.

          (12) Competitive Arrangements. Notwithstanding anything to the contrary
set forth in this Credit Agreement, in the event that Borrower shall enter into
an agreement with a Competitor (as defined below) of Lender involving either
the licensing of Borrower’s intellectual property to such Competitor or the
codevelopment of intellectual property with such Competitor in each case
relating to future generations of the collagen meniscus implant and to which
Lender shall not have given its written consent (each, a “Competitive
Arrangement”), then in such event the obligation of Lender to extend any
further Loans under this Credit Agreement shall immediately terminate. In
addition, in the event Borrower enters into a Competitive Arrangement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Lender, be due, payable and collectible by

4

 

Lender pursuant to applicable law on the date six months from the later of (i)
the date Borrower enters into such Competitive Arrangement, and (ii) the date
Lender provides Borrower written notice of its intent to exercise its option to
accelerate repayment of the amounts owing hereunder pursuant to this Section
12. For the purposes hereof, a “Competitor” of Lender shall mean a
corporation, partnership, limited liability company or other such entity a
substantial portion of the business of which is in the orthopedic and/or trauma
fields.

          (13) Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand, telecopier or by
messenger, addressed (a) if to Lender, at Lender’s address set forth on the
signature page hereof, or at such other address as Lender shall have furnished
to Borrower in writing, or (b) if to Borrower, one copy should be sent to its
address set forth on the signature page hereof and addressed to the attention
of the Corporate Secretary, or at such other address as Borrower shall have
furnished to Lender. Each such notice or other communication shall for all
purposes of this Credit Agreement be treated as effective or having been given
when delivered if delivered personally or by messenger, courier service, telex,
telegram or telecopier, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.

          (14) Governing Law. This Credit Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of laws
of any other jurisdiction.

	 	 	 	 	 
	BORROWER	 	REGEN BIOLOGICS, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Gerald E. Bisbee, Jr., Ph.D
	

	 	 	 	
 
	 	 	Gerald E. Bisbee, Jr., Ph.D
	 	 	President and Chief Executive Officer
	 	 	545 Penobscot Drive
	 	 	Redwood City, CA 94063
	 
	 	 	 	 
	LENDER	 	SULZER MEDICA USA HOLDING COMPANY
	 
	 	 	 	 
	

	 	By:	 	/s/ André Buchel
	

	 	 	 	
 
	 	 	Name: André Buchel
	 	 	Title: President
	 	 	3 East Greenway Plaza, Suite 1600
	 	 	Houston, TX 77046-0391

5

 

EXHIBIT A

MILESTONES

	 	 	 	 	 	 	 
	Milestone
	 	Target Date
	 	Maximum Aggregate Loans

	Execution and delivery
of the Credit Agreement,
the Warrant and the
lateral letter agreement
between Borrower and
Lender

	 	March 1, 2000
	 	$	400,000	 
	 
	 	 	 	 	 	 
	Execution and delivery
of the CMI-2 Agreement
and the Sharpshooter
Agreement, between
Borrower and Lender

	 	March 31, 2000
	 	$	1,200,000	 
	 
	 	 	 	 	 	 
	Completion of the first
leg of the Initial Dog
Surgeries

	 	May 15, 2000
	 	$	2,950,000	 
	 
	 	 	 	 	 	 
	Completion of Dog Study,
as evidenced by
completion of the
histological analysis

	 	September 25, 2000
	 	$	3,650,000	 
	 
	 	 	 	 	 	 
	Satisfactory evidence of
an equity financing
scheduled to close by
December 31, 2000

	 	December 1, 2000
	 	$	4,000,000	 

6

 

EXHIBIT B

SCHEDULE OF LOANS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Anniversary	 	 	 	 	 	 
	Loan	 	 	 	 	 	Interest	 	Interest Rate	 	Repayment	 	Principal	 	Interest
	Number
	 	Date
	 	Amount
	 	Rate
	 	Adjustment
	 	Date
	 	Prepaid
	 	Prepaid

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

7

 

[SulzerMedica Letterhead]

May 8, 2000                      

By Facsimile
(201-651-5141) and First Class Mail

  
Gerald E. Bisbee, Jr., Ph.D.

ReGen Biologics, Inc.

509 Commerce Street East, First Floor

Franklin Lakes, NJ 07417

Re: Credit Agreement Between Sulzer Medica USA Holding Co. and ReGen Biologics
Inc.
dated March 14, 2000 (the “Agreement”)

Dear Gary:

Attached are duplicate copies of a revised Exhibit A for the Agreement,
incorporating the change to the fourth milestone according to the proposal by
Sulzer. If this revised schedule is agreeable to ReGen, please execute one
copy of this letter and return it to my attention.

Thank you for your attention to this matter.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	/s/ David S. Wise
	

	 	

           
	

	 	David S. Wise
	

	 	Secretary,
	

	 	Sulzer Medica USA Holding Co.

Enclosure

Acknowledged and Agreed:

	 	 	 	 	 	 	 
	By:

	/s/ Gerald E. Bisbee, Jr., Ph.D.
	 	Date:
	5/15/00
	

	
 
	 	
 
	

	 	Gerald E. Bisbee, Jr., Ph.D.	 	 	 	 
	

	 	President and CEO	 	 	 	 
	

	 	ReGen Biologics, Inc.	 	 	 	 

 

 

EXHIBIT A

MILESTONES

	 	 	 	 	 	 	 
	Milestone
	 	Target Date
	 	Maximum Aggregate Loans

	Execution and delivery
of the Credit Agreement,
the Warrant and the
lateral letter agreement
between Borrower and
Lender

	 	March 1, 2000
	 	$	400,000	 
	 
	 	 	 	 	 	 
	Execution and delivery
of the CMI-2 Agreement
and the Sharpshooter
Agreement, between
Borrower and Lender

	 	March 31, 2000
	 	$	1,200,000	 
	 
	 	 	 	 	 	 
	Completion of surgery on
the first leg of nine
animals in the Dog Study

	 	May 15, 2000
	 	$	2,950,000	 
	 
	 	 	 	 	 	 
	Completion of the
histological analysis of
nine animals in the Dog
Study

	 	September 25, 2000
	 	$	3,650,000	 
	 
	 	 	 	 	 	 
	Satisfactory evidence of
an equity financing
scheduled to close by
December 31, 2000

	 	December 1, 2000
	 	$	4,000,000	 

6

 

[SulzerMedica Letterhead]

April 6, 2000                      

By Facsimile and First
Class Mail

Gerald E. Bisbee, Jr., Ph.D.

ReGen Biologics, Inc.

509 Commerce Street East, First Floor

Franklin Lakes, NJ 07417

Re: Intellectual Property Security Agreement Between Sulzer Medica USA
Holding Co. and ReGen Biologics Inc. dated March 14, 2000 (the
“Agreement”)

Dear Gary:

Attached is a revised Schedule B for the Agreement, incorporating the correct
serial number for the one pending patent application. Please acknowledge
ReGen’s assent to the substitution of the enclosed revised Schedule B for the
original Schedule B by countersigning this letter and returning a copy to my
attention.

Thank you for your attention to this matter.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	/s/ David S. Wise
	

	 	

           
	

	 	David S. Wise
	

	 	Secretary,
	

	 	Sulzer Medica USA Holding Co.

Enclosure

Acknowledged and Agreed:

	 	 	 	 	 	 	 
	By:

	/s/ Gerald E. Bisbee, Jr., Ph.D.
	 	Date:
	4/6/00
	

	

           
	 	

           
	

	 	Gerald E. Bisbee, Jr., Ph.D.	 	 	 	 
	

	 	President and CEO	 	 	 	 
	

	 	ReGen Biologics, Inc.	 	 	 	 

 

 

SCHEDULE B

UNITED STATES PATENTS AND PATENT APPLICATIONS

	 	 	 	 	 	 	 
	Description
	 	Reg./Application
	 	Reg./Application Date

	Meniscal Augmentation Device

	 	 	5,681,353	 	 	10/28/97
	 
	 	 	 	 	 	 
	Meniscal Augmentation Device

	 	 	5,735,903	 	 	4/7/98
	 
	 	 	 	 	 	 
	Meniscal Augmentation Device

	 	 	09/028,284	 	 	2/24/98 (Filed)
	 
	 	 	 	 	 	 
	Prosthetic Meniscus

	 	 	4,880,429	 	 	11/14/89
	 
	 	 	 	 	 	 
	Prosthetic Meniscus

	 	 	5,007,934	 	 	4/16/91
	 
	 	 	 	 	 	 
	Prosthetic Meniscus

	 	 	5,116,374	 	 	5/26/92
	 
	 	 	 	 	 	 
	Prosthetic Meniscus

	 	 	5,158,574	 	 	10/27/92

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