Document:

exv10w31

 

EXHIBIT 10.31

SEPARATION AGREEMENT

     SEPARATION AGREEMENT (this “Agreement”) dated as of December 1, 2003 by
and among Global eXchange Services, Inc., a Delaware corporation (together with
its successors, the “Company”), GXS Holdings, Inc., a Delaware corporation
(together with its successors, “GXS”), and Harvey Seegers (“Executive”), to be
effective as of the Effective Date.

     WHEREAS, the Company, GXS and Executive entered into the Employment
Agreement dated as of September 28, 2002 (the “Employment Agreement”), pursuant
to which Executive agreed to serve as President and Chief Executive Officer;

     NOW THEREFORE, in consideration of the mutual covenants and agreements of
the parties set forth in this Agreement, the parties hereto agree as
follows:

     1. Separation. Effective as of December 1, 2003 (the “Separation Date”),
Executive’s employment as President and Chief Executive Officer of the Company
has terminated, together with all other positions which he holds with the
Company, GXS, and their subsidiaries and affiliates, including his position on
the Board of Directors of such entities. The termination of Executive’s
employment shall constitute a termination without Cause (other than by reason
of Executive’s death or disability) for purposes of the Employment Agreement.

     2. Separation Payments and Benefits. Subject to Executive’s execution of the
release set forth in Section 3 hereof and his compliance with theprovisions of
this Agreement and the Proprietary Information and Inventions Agreement dated
September 30, 2002 (the “Proprietary Agreement”) between Executive and the
Company, Executive shall receive the following benefits and payments, reduced
by any required withholding of taxes, in satisfaction of the Company’s
obligations to Executive under the Employment Agreement or otherwise:

     (a) Accrued Compensation. The Company has paid or shall
pay Executive any accrued but unpaid compensation through the
Separation Date as required by applicable law.

     (b) Severance Payments. As soon as practicable after the
Effective Date, the Company shall pay to Executive a lump sum in cash
equal to $1,443,145, which represents the sum of (i) the pro rata portion
(through the Separation Date) of the First-Year Bonus (as defined in the
Employment Agreement) paid to Executive (which was $333,000 for
calendar year 2002) and (ii) 1.5 times the sum of (A) Executive’s current
base salary (which is $425,000 on an annualized basis) and (B) the First
Year Bonus paid to Executive (which was $333,000 for calendar year
2002).

 

 

     (c) Equity. As of the Effective Date, each option to purchase shares of stock of GXS (the “Options”) held by Executive as of the
Separation Date shall become immediately vested and exercisable. The
Options shall remain exercisable for 12 months following the Separation
Date, at which time they will terminate if not exercised. The Options
(and
any stock acquired on exercise thereof) shall remain subject to the terms
of
the GXS Stock Incentive Plan and the applicable option agreement
(together, the “Option Agreement’’, including but not limited to any
rights of repurchase by GXS.

     3. Release. Executive agrees to and does fully and completely release,
discharge and waive any and all claims, complaints, causes of action or demands
of whatever kind which Executive has or may have, whether known or unknown,
against the Company, GXS, their subsidiaries, stockholders, affiliates,
predecessors and successors and all their officers, directors, and employees by
reason of, matter, cause or thing which has occurred prior to the
Effective Date in Executive’s capacity as an employee or securityholder of the
Company or its affiliates or otherwise (“Claims”). Executive understands and
accepts that this Agreement specifically covers, but is not limited to, any and
all
Claims which Executive has or may have against the Company, GXS and their
affiliates relating in any way to his employment arrangements or to
compensation,
or to any other terms, conditions or circumstances of his former employment
with
the Company and its affiliates, and to the termination of such employment,
whether for severance or based on statutory or common law claims for
employment discrimination (including under the Age Discrimination in
Employment Act), wrongful discharge, breach of contract or any other theory,
whether legal or equitable. Executive acknowledges that this Release shall
extend
to unknown, as well as known claims, and hereby waives the application of any
provision of law that purports to limit the scope of a general release.
Notwithstanding the foregoing, Executive does not waive any rights which he
may be entitled to seek to enforce this Agreement or to seek indemnification
with
respect to liability incurred by Executive as an officer or director of the
Company
or its affiliates. Executive agrees the obligations set forth in Section 2 of
this
Agreement are the only outstanding obligations of the Company and its
affiliates
to Executive.

     4. Confidentiality; No Disparagement. (a) Executive agrees not
to
make negative statements or representations, or otherwise communicate
negatively, directly or indirectly, in writing, orally, or otherwise, or take
any
action which may, directly or indirectly, disparage or be damaging to the
Company, its subsidiaries, affiliates, successors or their officers, directors,
employees, business or reputation. Executive agrees not to participate in the
publication of any information concerning the facts underlying the termination
of
his employment and this Agreement, other than in cooperation with the Company.

 

 

The Company and GXS agree not
to make any negative statements or representations, or otherwise communicate negatively, directly or indirectly,
in writing, orally or otherwise, or take any action which may, directly or
indirectly,
disparage or be damaging to Executive. The Company and GXS agree not to
participate in the publication of any information concerning the facts
underlying the termination of Executive’s employment and this agreement, other
than in cooperation with the Executive.

     (b) Each of the Company and GXS agrees that it shall not, and shall not
authorize any of its officers, agents, employees or other representatives to,
make negative statements or representations, or otherwise communicate
negatively, directly or indirectly, in writing, orally or otherwise, which may,
directly or indirectly, in any way disparage or be damaging to Executive.

     5. Covenants. (a) Executive acknowledges and agrees that he will continue to be
bound by the Proprietary Agreement. Without limiting the foregoing, Executive
agrees that all Proprietary Information (as defined in the Proprietary
Agreement) obtained by Executive as a result of his position or involvement
with the Company and its affiliates shall be considered confidential. In
recognition of such fact, Executive agrees not to disclose any of such
Proprietary Information to any person or other entity for any reason or purpose
whatsoever and not to make use of any Proprietary Information for his own
purposes or for the benefit of any person or other entity. Executive agrees to
deliver to the Company all memoranda, notes, devices documents, and other data,
together with all copies thereof, and any other material relating to the
business of the Company and its affiliates.

     (b) For a period of 18 months after the Separation Date, Executive shall
not, on his account, or as an employee, consultant, independent contractor,
partner, owner, officer, director or stockholder, engage in, be connected with,
have any interest in, or aid or assist anyone else to engage in, be connected
with, or have any interest in, any firm or person which directly competes with
a line or lines of business which the Company, GXS or any of their subsidiaries
was engaged in or sought to be engaged in during the Employment Term; provided
that Executive may (i) purchase securities in any corporation whose securities
are listed or traded on a national securities exchange or in an
over-the-counter securities market if such purchases do not result in Executive
beneficially owning, directly or indirectly, at any time 5% or more of the
equity securities of any such corporation and (ii) be an employee, independent
contractor or officer of any such firm or person provided Executive has no
direct or indirect duties or responsibilities with respect to any activities of
such firm or person which are competitive with any line or lines of business of
the Company, GXS or any of their subsidiaries.

     (c) For a period of 18 months after the Separation Date, Executive
shall not, directly or indirectly:

 

 

     (i) induce or attempt to induce any employee of the Company, GXS or
their subsidiaries be employed or perform services elsewhere;

     (ii) solicit or attempt to solicit the trade of any individual or
entity which, at the time of such solicitation, is a customer of the
Company, GXS or any of their subsidiaries or which the Company, GXS or
any of their subsidiaries is undertaking reasonable steps to procure as a
customer at the time of or immediately preceding termination of
employment; provided, however, that this limitation shall only apply to
any product or service which is in competition with a product or service
of’ the Company, GXS or any of their subsidiaries.

     (d) In connection with the termination of Executive’s employment
hereunder, Executive shay cooperate with the Company and its affiliates to
ensure
an orderly transition, in such a manner and at such times as the Company shall
reasonably request.

     6. Remedies. (a) Executive acknowledges and agrees that the
Company’s remedies at law for a breach or threatened breach of any of the
provisions of Section 5 would be inadequate and in recognition of this fact,
Executive agrees that, in the event of a breach or threatened breach, in
addition to
any remedies at law, the Company, without posting any bond, shall be entitled
to
obtain equitable relief in the form of specific performance, temporary
restraining !
order, temporary or permanent injunction or any other equitable remedy which
may then be available.

     (b) It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in Section 5 to be reasonable,
if a
final judicial determination is made by a court of competent jurisdiction that
any
restriction contained in this Agreement is an unenforceable restriction against
Executive, the provisions of this Agreement shall not be rendered void but
shall I
be deemed amended to apply to the maximum extent as such court may judicially
determine or indicate to be enforceable. Alternatively, if any court of
competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other
restrictions contained herein.

     7. Entire Agreement; Amendment. This Agreement, together with the
Proprietary Agreement and the Option Agreement, contains the entire r
understanding of the parties with respect to the termination of Executive’s
employment and supersedes any other agreements or plans with the Company,
GXS and their affiliates pursuant to which Executive may have rights (including
the Employment Agreement), except that the terms of the Proprietary Agreement
and Option Agreement shall continue in full force and effect.. It may not be

 

 

altered, modified or amended except by a written agreement signed by both
parties hereto.

     8. Effectiveness. Executive has been advised, and
understands, that
(i) Executive have 21 days to consider this Agreement (which shall be
considered
waived should Executive execute this letter prior to the lapse of such 21
days),
(ii) Executive can revoke this Agreement during a period of 7 days following
its execution, and (iii) this Agreement will become effective and enforceable
upon the expiration of the revocation period (the “Effective Date”).

     9. No Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver of such
party’s rights or deprive such party of the right thereafter to insist upon
strict adherence to that tern or any other term of this Agreement.

     10. Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect,
the validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby

     11. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only to an affiliate or successor of the
Company.

 l

     12. Acknowledgment. Executive acknowledges that Executive has carefully read
this Agreement, fully understands and accepts all of its provisions and signs
it voluntarily of Executive’s own free will. Executive further acknowledges
that he has been provided a full opportunity to review and reflect on the terms
of this Agreement and to seek the advice of legal counsel of his choice.

 

 

     13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.

GLOBAL EXCHANGE SERVICES, INC:

By: /s/ Bruce E. Hunter, Senior Vice President

GXS HOLDINGS, INC.

By: /s/ Bruce E. Hunter, Senior Vice President

Executive:

/s/ Harvey Seegersexv10w3

 

EXHIBIT 10.3

DISTRIBUTORSHIP AGREEMENT

BETWEEN

REGEN BIOLOGICS, INC.

AND

ALLO PRO AG

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	ARTICLE 1
	 	 	 	 
	DEFINITIONS
	 	 	1	 
	1.1 “ReGen Territory”
	 	 	1	 
	1.2 “Allo Pro Territory”
	 	 	1	 
	1.3 “CMI Product”
	 	 	1	 
	1.4 “Net Sales Price
	 	 	1	 
	ARTICLE 2
	 	 	 	 
	APPOINTMENT OF EXCLUSIVE DISTRIBUTORSHIP
	 	 	2	 
	2.1 Distributorship
	 	 	2	 
	2.2 Sub-Distributors
	 	 	2	 
	2.3 Right of First Negotiation for the ReGen Territory
	 	 	2	 
	2.4 Non-Compete
	 	 	2	 
	2.5 Non-Compete of Affiliated Companies
	 	 	2	 
	ARTICLE 3
	 	 	 	 
	FINAL DEVELOPMENT AND COMMERCIALIZATION OF THE CMI PRODUCT
	 	 	3	 
	3.1 Development Responsibilities
	 	 	3	 
	3.2 Annual Plan and Budget; Reports
	 	 	3	 
	3.3 Funding of Costs
	 	 	3	 
	3.4 Clinical Trials Supply
	 	 	3	 
	3.5 Applicability of this Article
	 	 	3	 
	3.6 Publications
	 	 	3	 
	3.7 Government Approvals; Registrations
	 	 	4	 
	ARTICLE 4
	 	 	 	 
	SECOND GENERATION CMI PRODUCT
	 	 	4	 
	ARTICLE 5
	 	 	 	 
	COMMERCIAL SUPPLY OF CMI PRODUCT; PRICES; TERMS OF PAYMENT
	 	 	4	 
	5.1 Commercial Supply
	 	 	4	 
	5.4 Sales Milestones Payments
	 	 	5	 
	5.5 Initial Suggested Price of CMI Product
	 	 	5	 
	5.6 Suggested Price of CMI Product
	 	 	5	 
	5.7 Reports on CMI Product Sales
	 	 	6	 
	5.8 Purchase Orders; Payments
	 	 	6	 
	5.9 Point of Delivery
	 	 	6	 
	5.10 Passing of Title and Risk of Loss
	 	 	6	 
	5.11 Warranty
	 	 	6	 

i

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page

	ARTICLE 6
	 	 	 	 
	DISTRIBUTION AND MARKETING OF CMI PRODUCT
	 	 	7	 
	6.1 Marketing Diligence
	 	 	7	 
	6.2 Other Promotion and Marketing Obligations
	 	 	7	 
	6.3 Reimbursement for Expenses
	 	 	8	 
	ARTICLE 7
	 	 	 	 
	PROCEDURE FOR PAYMENTS; RECORDS; AUDIT
	 	 	8	 
	7.1 Manner and Place of Payment
	 	 	8	 
	7.2 Records and Audit of Sales and Expenses
	 	 	8	 
	ARTICLE 8
	 	 	 	 
	REGULATORY MATTERS
	 	 	9	 
	8.1 Regulatory Compliance; Adverse Reactions
	 	 	9	 
	8.2 Post-Launch Testing and Reporting
	 	 	9	 
	8.3 Product Recall
	 	 	9	 
	8.4 Reports
	 	 	9	 
	ARTICLE 9
	 	 	 	 
	CONFIDENTIALITY
	 	 	10	 
	9.1 Nondisclosure and Non-Use Obligations
	 	 	10	 
	9.2 Exceptions
	 	 	10	 
	9.3 Authorized Disclosure
	 	 	11	 
	9.4 Confidentiality of Agreement
	 	 	11	 
	ARTICLE 10
	 	 	 	 
	INTELLECTUAL PROPERTY
	 	 	11	 
	10.1 Filing, Prosecution and Maintenance of Patents
	 	 	11	 
	10.2 Infringement of ReGen Patents
	 	 	12	 
	10.3 Infringement of Third Party Patents
	 	 	12	 
	ARTICLE 11
	 	 	 	 
	TERM AND TERMINATION; BANKRUPTCY; CHANGE OF CONTROL
	 	 	12	 
	11.1 Term
	 	 	12	 
	11.2 Termination by Allo Pro
	 	 	13	 
	11.3 Termination for Material Breach
	 	 	13	 
	11.4 Default of Allo Pro
	 	 	13	 
	11.5 Supply Default of ReGen
	 	 	13	 
	11.6 Bankruptcy Events
	 	 	14	 
	11.7 Change of Control
	 	 	14	 
	11.8 Escrow
	 	 	14	 
	11.9 Remedies for Allo Pro; License to Manufacture
	 	 	14	 
	11.10 Surviving Terms of Distributorship Agreement
	 	 	14	 
	11.11 License Terms
	 	 	15	 
	11.12 Termination of Agreement in Case of Patent and Trademark Lawsuits
	 	 	15	 

ii

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page

	ARTICLE 12
	 	 	 	 
	THIRD PARTY CLAIMS; INDEMNIFICATION
	 	 	16	 
	12.1 Handling of Third Party Claims
	 	 	16	 
	12.2 Indemnification
	 	 	16	 
	12.4 Exclusive Remedy
	 	 	17	 
	12.5 Limitation of Liability
	 	 	17	 
	ARTICLE 13
	 	 	 	 
	REPRESENTATION AND WARRANTIES
	 	 	17	 
	13.1 Representation and Warranties of ReGen
	 	 	17	 
	13.2 Representations and Warranties of Allo Pro
	 	 	18	 
	ARTICLE 14
	 	 	 	 
	MISCELLANEOUS
	 	 	18	 
	14.1 Export Law Compliance
	 	 	18	 
	14.2 Foreign Corrupt Practices Act
	 	 	18	 
	14.3 Benefits and Binding Nature of Agreement
	 	 	18	 
	14.4 Entire Agreement; Amendments
	 	 	19	 
	14.5 No Other Terms and Conditions
	 	 	19	 
	14.6 Force Majeure
	 	 	19	 
	14.7 Notice
	 	 	19	 
	14.8 English Language; Governing Law
	 	 	20	 
	14.9 Waiver
	 	 	20	 
	14.10 Severability
	 	 	20	 
	14.11 Independent Contractors
	 	 	20	 
	14.12 Counterparts
	 	 	20	 
	14.13 Assignment
	 	 	20	 
	Schedule I            Suggested Price and Discount Schedule of CMI Product
	 	 	 	 
	Schedule II          Major Countries
	 	 	 	 
	Schedule III         Form of Escrow Agreement
	 	 	 	 

iii

 

DISTRIBUTORSHIP AGREEMENT

     This Distributorship Agreement effective February 16, 1996 (“Effective
Date”), by and between ReGen Biologics, Inc., a Delaware corporation having its
offices at 2730 Sand Hill Road, Menlo Park, California 94025 (hereinafter
“ReGen”), and Allo Pro AG, a Swiss corporation having its offices at Baar,
Switzerland (hereinafter “Allo Pro”).

RECITALS

     WHEREAS, ReGen is engaged in the development of a collagen meniscus
implant (“CMI”) for the treatment of knee injuries involving the meniscus; and

     WHEREAS, Allo Pro has substantial experience in the distribution,
marketing and sale of orthopedic health care products;

     NOW THEREFORE, in consideration of the above premises and the covenants
set forth below, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 “ReGen Territory” shall mean the United States of America, its
territories and possessions.

     1.2 “Allo Pro Territory” shall mean all countries and territories of the
world other than the United States of America, its territories and possessions.

     1.3 “CMI Product” shall mean that collagen meniscus implant product which
is under development by ReGen as of the Effective Date of this Agreement and
which is manufactured according to the proprietary manufacturing technology of
ReGen. The term CMI Product shall include the product and instrumentation as
(i) they will exist on the date of the first commercial sale as well as (ii)
they may be improved during the term of this Agreement in a manner for which
regulatory approval can reasonably be sought from the U.S. Food and Drug
Administration by way of a supplement to the PMA application anticipated to be
filed by ReGen based on the IDE on file as of the Effective Date.

     1.4 “Net Sales Price” shall mean the price charged for commercial sales of
CMI Product to the customer in the Allo Pro Territory, exclusive of any Value
Added Tax or similar sales taxes as well as shipping and handling of CMI
product to the customer.

1

 

ARTICLE 2

APPOINTMENT OF EXCLUSIVE DISTRIBUTORSHIP

     2.1 Distributorship. Subject to the terms and conditions of this
Agreement, ReGen hereby appoints and Allo Pro hereby accepts appointment as the
exclusive distributor of ReGen’s CMI Product within the Allo Pro Territory.
Allo Pro shall not sell any of ReGen’s other products without ReGen’s prior
written consent.

     2.2 Sub-Distributors. Allo Pro shall have the right to appoint
sub-distributors within the Allo Pro Territory. However, in the countries
listed on the attached Schedule II, Allo Pro shall not change distributorship
from a company affiliated with Allo Pro to a non-affiliated third party without
prior written approval of ReGen.

     2.3 Right of First Negotiation for the ReGen Territory. So long as ReGen
distributes, markets and sells the CMI Product in the ReGen Territory by itself
or through a company or companies controlled by ReGen, ReGen shall have
exclusive rights to distribute, market and sell the CMI Product in the ReGen
Territory. Allo Pro shall have a right of first negotiation if ReGen elects to
distribute, market and sell the CMI Product in the ReGen Territory through or
in cooperation with any partner other than those described above or through or
in cooperation with a company that would gain control of or be under common
control with ReGen by virtue of such cooperation or in connection therewith.
ReGen shall notify Allo Pro of its intent in writing, and the Parties shall
negotiate in good faith to reach an agreement regarding the commercialization
of the CMI Product in the ReGen Territory. If Allo Pro elects not to deliver a
written notice of interest within thirty (30) days, or the Parties are unable
to reach a definitive agreement within ninety (90) days, ReGen shall have the
unfettered right to enter into one or more transactions with third parties
without any further obligation to Allo Pro; provided that such transaction is
substantially more favorable to ReGen’s stockholders than that last offered by
Allo Pro in writing during the ninety (90) day negotiation period, as
determined in the reasonable judgement of ReGen’s Board of Directors after full
deliberation of all relevant factors.

     2.4 Non-Compete. Each party hereby covenants not to conduct, fund,
license or participate in, directly or indirectly through one or more third
parties, the research, development, distribution or commercialization in any
country in the Allo Pro Territory of any collagen-based meniscus implant
competing with the CMI Product, except pursuant to an agreement for the
development of a second generation meniscus implant pursuant to Article 4
herein below.

     2.5 Non-Compete of Affiliated Companies. A party hereto shall equally be
considered in breach of this covenant not to compete if any company under
common control with such party shall conduct, fund, license or participate in
any such activity in the Allo Pro Territory.

2

 

ARTICLE 3

FINAL DEVELOPMENT AND COMMERCIALIZATION OF THE CMI PRODUCT

     3.1 Development Responsibilities. ReGen shall have primary responsibility
for the diligent completion of the development of the CMI Product for
regulatory approval and commercialization on a worldwide basis. Allo Pro shall
review and comment on annual plans and budgets for such development and fund
costs as provided in this Article 3.

     3.2 Annual Plan and Budget; Reports. Promptly following the Effective
Date, and prior to each October 1 thereafter, Allo Pro and ReGen shall prepare
and approve a plan and budget describing activities to be undertaken in the
Allo Pro Territory for the ensuing calendar year, together with projected costs
for such period.

     3.3 Funding of Costs. Allo Pro shall bear the costs pertaining to the CMI
Product to the extent necessary and directed toward obtaining regulatory
approval for the CMI Product in any country within the Allo Pro Territory.
Such costs shall include the costs of conducting clinical studies, preparing
and pursuing regulatory submissions up to the point of obtaining regulatory
approval. If the parties agree to obtain a CE Mark for the CMI Product instead
of a CE Mark for the production facilities of ReGen, Allo Pro shall bear the
costs pertaining to obtaining such CE Mark for the CMI Product only.

     3.4 Clinical Trials Supply. ReGen shall use diligent efforts to supply or
cause to be supplied to Allo Pro all of Allo Pro’s requirements of CMI Product
units for use in the Allo Pro Territory for obtaining regulatory approval,
including clinical studies required therefor. In the event of any shortage of
worldwide supply of CMI Product, ReGen shall supply product for obtaining
regulatory approval in the Allo Pro Territory to the same extent that it
supplies product for use in the ReGen Territory, based on a pro rata of the
number of units used within the previous three (3) months in the Allo Pro
Territory and the ReGen Territory, respectively.

     If such CMI Product units are made available to study subjects for no
compensation at all or for a compensation not to exceed the cost of goods
shipped plus Allo Pro’s actual costs to make such CMI Product units available
to study subjects, ReGen shall supply such CMI Product units at ReGen’s cost of
goods shipped. If the compensation received by Allo Pro exceeds such amount,
the Parties shall agree upon an appropriate price for such CMI Product units.

     3.5 Applicability of this Article. As of the date of commercialization of
the CMI Product in a country of the Allo Pro Territory, the provisions of this
Article 3 shall only apply to those remaining countries in which CMI Product
has not yet been commercialized.

     3.6 Publications. Allo Pro and ReGen shall cooperate in the preparation
and publication of papers in support of development and marketing activities in
the Allo Pro Territory. Neither party shall present, publish or otherwise
disclose any information regarding the CMI Product in the Allo Pro Territory
except with the prior written consent of the other. Each party shall make
available to the other at no cost a copy of any publications or other marketing
support materials which such party produces for its purposes.

3

 

     3.7 Government Approvals; Registrations.

          3.7.1 Government Approvals. ReGen will prepare, file and pursue
diligently all regulatory applications necessary to obtain governmental
approvals required to permit the CMI Product to be commercially distributed and
sold in the Allo Pro Territory. Such activities shall be described and
budgeted for in the annual plan and budget described in Article 3.2. The
expenses of such activities shall be reimbursed by Allo Pro, subject to the
provisions of Article 3.3.

          3.7.2 Registrations. All applications and registrations shall be, wherever
permitted by law, in the name of ReGen, with Allo Pro named as a distributor.
If ReGen’s ownership of the application or registration is not permitted by
law, such application or registration shall be in Allo Pro’s name. As between
the Parties, Allo Pro shall take all reasonable actions requested by ReGen to
make the benefit of applications or registrations held in the name of Allo Pro
available to ReGen. ReGen shall have an irrevocable right to reference such
applications and registrations and Allo Pro shall copy ReGen on all
correspondence received regarding such applications and registrations.

ARTICLE 4

SECOND GENERATION CMI PRODUCT

     Promptly following the effective date, ReGen and the affiliate of Allo Pro
most appropriate for the task will propose one or more plans for the
development of a second generation product which shall include ReGen’s
proprietary collagen technology and proprietary technology of or available to
the affiliate of Allo Pro. ReGen and such affiliate shall negotiate in good
faith an agreement which determines all necessary issues, including, but not
limited to, the contributions of each party and compensation therefor, the
specific responsibilities of the parties, the installation of an appropriate
development supervision board, e.g. by a Senior Management Committee, and the
rights of each party to the product, the technology and intellectual property
obtained by such development, all as further described in Section 3.3 of the
Heads of Agreement, dated December 20, 1995, between ReGen and Allo Pro (which
shall survive for this purpose).

ARTICLE 5

COMMERCIAL SUPPLY OF CMI PRODUCT; PRICES; TERMS OR PAYMENT

     5.1 Commercial Supply. Subject to the terms of this Agreement, ReGen
shall use diligent efforts to supply or cause to be supplied to Allo Pro, all
of Allo Pro’s requirements of the CMI Product for commercial resale in the Allo
Pro Territory.

     5.2 Forecasts; Supply Commitment. At least fifteen (15) days before the
start of each calendar quarter, Allo Pro shall provide ReGen with a rolling
twelve (12) month forecast commencing with the next full calendar month of its
aggregate requirements for CMI Product units throughout the Allo Pro Territory.

4

 

     For two (2) years after the date of Allo Pro’s first purchase order for
products intended for commercial resale, Allo Pro shall use its best efforts to
provide ReGen with accurate forecasts, and ReGen shall use its best efforts to
supply all of Allo Pro’s requirements for CMI Product, but so long as such
efforts have been used neither party shall be in default or breach of this
Agreement by reason of any surplus or shortage of CMI Products.

     After the two (2) year period described above, ReGen’s obligation to
supply CMI Product to Allo Pro in any calendar quarter pursuant to purchase
orders following a forecast shall be limited to one hundred and twenty five
percent (125%) of the amount purchased by Allo Pro in the previous calendar
quarter. ReGen shall use its best efforts to supply Allo Pro with additional
product if requested by Allo Pro.

     5.3 Downpayment. In consideration of the exclusive distributorship
granted hereunder, Allo Pro shall pay to ReGen a downpayment of seven hundred
fifty thousand U.S. Dollars (USD 750,000) upon execution of this Agreement.
The downpayment shall not be refundable or otherwise creditable against any
future payments.

     5.4 Sales Milestones Payments. In addition to the prices for CMI Product
set forth herein, Allo Pro shall pay to ReGen three milestone payments of one
million U.S. Dollars (USD 1,000,000) each, upon the attainment of the following
sales occurrences:

	 	•	 	when the total of CMI Product sales in the Allo Pro Territory
reach one million U.S. Dollars (USD 1,000,000); and
	 
	 	•	 	when the total of CMI Product sales in the Allo Pro Territory
reach three million U.S. Dollars (USD 3,000,000); and
	 
	 	•	 	when the total of CMI Product sales in the Allo Pro Territory
reach seven million U.S. Dollars (USD 7,000,000).

	Payment shall be made to ReGen within thirty (30) days of the occurrence of the
respective sales level. Payments made pursuant to Articles 5.3 and 5.4 shall
not be creditable against any future payments under this Agreement.

     5.5 Initial Suggested Price of CMI Product. In order to allow ReGen to
determine a well informed and reasonable initial suggested price for the first
twelve (12) months of delivery of the CMI Product, Allo Pro shall establish and
provide ReGen with the projected Net Sales Price in the following countries:

	 	•	 	Switzerland, Germany, and France

which are considered representative for the initial period and market. Allo
Pro shall determine the price at which it sells CMI Product to sub-distributors
or customers in the Allo Pro territory.

	5.6	 	Suggested Price of CMI Product. The suggested price and the discounts
schedule for the CMI Product are set forth in Schedule I attached hereto.
After an initial period

5

 

of twelve (12) months, during which the suggested price and discounts schedule
of the CMI Product will remain fixed, such suggested price and discounts
schedule shall be subject to change, after consultation of the parties, upon
ninety (90) days’ notice from ReGen to Allo Pro; provided that, orders for CMI
Product placed by Allo Pro in accordance with Article 5.2 prior to the date a
price change becomes effective shall not be subject to such change.

     5.7 Reports on CMI Product Sales. Within thirty (30) days of the end of
each calendar quarter, Allo Pro shall report to ReGen the Net Sales Price and
the number CMI Product units sold for each country in the Allo Pro Territory.
Sales shall be reported ex Allo Pro (or its affiliated company) to customer,
or, if the CMI Product is sold to the customer by a non-affiliated third party
distributor in that country, sales ex Allo Pro (or its affiliated company) to
that non-affiliated third party distributor.

     5.8 Purchase Orders; Payments. All purchase orders submitted by Allo Pro
shall be binding once accepted by ReGen and product ordered shall be
deliverable within ninety (90) days of the date of the purchase order, unless
an earlier delivery date is agreed by the parties. ReGen shall be obliged to
accept purchase orders for volumes within the limits described in Section 5.2.
ReGen shall invoice Allo Pro at the time of shipment of the CMI Product units
supplied for commercial resale. Allo Pro shall make payments against such
invoices not later than thirty (30) days after receipt of the invoice.

     5.9 Point of Delivery. Unless otherwise expressly agreed by the parties
in the purchase order, the point of delivery for the CMI Product shall be FOB
ReGen’s facility.

     5.10 Passing of Title and Risk of Loss. Title and risk of loss of or
damage to the CMI Product units shall pass from ReGen to Allo Pro upon delivery
of the CMI Product units at the point of delivery designated in the preceding
paragraph or as expressly agreed by the parties in the individual purchase
order accepted by ReGen.

     5.11 Warranty. ReGen warrants that the CMI Product will be the kind and
quality described in the purchase order accepted by ReGen and will be free of
defects in workmanship or material. ReGen further warrants that the CMI
Product units shall conform to requirements imposed by law, regulation or
regulatory approval of the respective country of sale to the end-user.

     Should any failure to conform with this warranty appear within the shelf
life indicated for the CMI Product, ReGen shall replace, in complete
fulfillment of its liabilities under this warranty, FOB Allo Pro’s factory any
nonconforming or defective CMI Product unit or units; provided that such
nonconformity or defect shall appear under proper shipping, storage, handling
and use of the CMI Product and that ReGen is promptly notified upon detection
of any nonconformity or defect.

     This warranty is exclusive and is in lieu of all warranties of
merchantability, fitness for a purpose, or other warranties of quality, whether
express or implied.

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ARTICLE 6

DISTRIBUTION AND MARKETING OF CMI PRODUCT

     6.1 Marketing Diligence.

          6.1.1 Marketing Efforts. Allo Pro agrees to use diligent efforts to
promote the marketing, distribution and sale of the CMI Product throughout the
Allo Pro Territory, consistent with accepted business practices.

          6.1.2 Product Launch. Allo Pro shall commence commercial sales of the CMI
Product in each of the countries listed on Schedule II within the later of (i)
five (5) years after the first commercial sale of a CMI Product unit in any of
England, Germany, France or Japan, or (ii) two (2) years after receipt of all
required government approvals necessary to commercially sell the CMI Product in
such country. Allo Pro’s obligation under this Article 6.1.2 is subject in
each country to the availability of adequate and timely supply of CMI Product
pursuant to Articles 3 and 5.

          6.1.3 Default of Allo Pro. If for a consecutive period of more than
twenty four (24) months, no sales of CMI Product shall be registered in any one
country, or if Allo Pro will not have commenced commercial sales in any one of
the countries listed in Schedule II within the time specified above, there
shall be a presumption that Allo Pro has failed to use diligent efforts with
regard to that country and ReGen shall, upon prior consultation with Allo Pro,
proceed in accordance with Article 11.4 herein below.

     6.2 Other Promotion and Marketing Obligations.

          6.2.1 General Conduct. Allo Pro hereby covenants that it will not,
without the prior written authorization of ReGen, solicit sale of CMI Products,
or advertise, or keep a stock of CMI Products, outside of the Allo Pro
Territory. Allo Pro shall not, directly or indirectly, without the prior
written authorization of ReGen, (i) contact any of ReGen’s suppliers or vendors
of CMI Product components relating to the CMI Product, or (ii) contact any
federal, state or local regulatory agency or entity in the ReGen Territory
about the CMI Product, except as required to do so by law or regulation or in
connection with a lawsuit arising out of distribution, marketing or sale of the
CMI Product.

          6.2.2 Packaging. Where permitted by law, packaging for the CMI Product
shall contain the following language: (1) “TRADEMARK” (elected by ReGen) is a
registered trademark of ReGen Biologics, Inc.” and (2) “This product is
distributed, marketed and sold by Allo Pro AG (or the appropriate name of
distributor).” In electing a trademark for the CMI Product, ReGen shall give
due consideration to the strength of the mark in all countries of sale,
including countries in the Allo Pro Territory.

          6.2.3 Marketing Plans and Research. No later than ninety (90) days prior
to the expected date of first commercial sale in each party’s respective
territory and at the beginning of each calendar year thereafter, each party
(the “Marketing Party”) shall submit to the other party in writing, for the
other party’s review and comment, whatever annual

7

 

marketing, sales and distribution plan detailing the Marketing Party’s proposed
marketing, sales and distribution strategy and tactics for the CMI Product
during such calendar year has been developed by the Marketing Party for its
internal use. In addition, the Marketing Party shall submit to the other party
copies of any market research reports relating to CMI Product sales and CMI
Product competition which the Marketing Party commissions or otherwise obtains,
except as prohibited by copyright or similar laws (in which case the Marketing
Party will simply inform the other party of the existence of such information
and where it may be obtained). To the extent the foregoing information is
contained in plans or reports which contain information about other products or
markets, the Marketing Party may submit to the other party only those excerpts
from such plans or reports which relate to the CMI Product and CMI Product
competition.

     6.3 Reimbursement for Expenses. To the extent that expenses for the
distribution, marketing and sale of CMI Product shall be incurred by ReGen in
accordance with mutually agreed plans or upon approval of such expense by Allo
Pro, Allo Pro shall reimburse ReGen. ReGen shall invoice Allo Pro for such
expenses in a single quarterly report to be submitted not later than thirty
(30) days after the end of each calendar quarter. Reimbursement payments shall
be made by Allo Pro within sixty (60) days after receipt of such invoice by
Allo Pro.

ARTICLE 7

PROCEDURE FOR PAYMENTS; RECORDS; AUDIT

     7.1 Manner and Place of Payment. Any payments to ReGen shall be made in
U.S. Dollars by wire transfer at such bank in the United States as ReGen shall
specify from time to time. Payments shall be made for the amount of U.S.
Dollars reported by ReGen (in the case of expense reimbursement) or agreed by
the parties without regard to currency fluctuations. Not less than one (1)
business day prior to such wire transfer, Allo Pro shall telefax ReGen to
advise it of the amount of the payment to be made.

     7.2 Records and Audit of Sales and Expenses. ReGen and Allo Pro will
maintain complete and accurate records which are relevant to sales and payments
under this Agreement and such records shall be open during reasonable business
hours for a period of five (5) years from creation of individual records for
examination at the other party’s expense and not more often than once each year
by a certified public accountant selected by the other party for the sole
purpose of verifying for the inspecting party the correctness of calculations
of such sales or payments made under this Agreement. The accounting expense
shall be paid by the party requesting the audit. If material discrepancies (in
excess of 5%) are identified in such audit, the audited party shall bear the
accounting expense. Any records or accounting information given to the auditor
shall be Confidential Information. The terms of this Section 7.2 shall survive
any termination or expiration of this Agreement for a period of five (5) years.

8

 

ARTICLE 8

REGULATORY MATTERS

     8.1 Regulatory Compliance; Adverse Reactions.

          8.1.1 Compliance. Allo Pro and ReGen shall comply with all health
registration laws, regulations and orders of any government entity within the
Allo Pro Territory and with all other governmental requirements relating to the
development, promotion, marketing and sale of the CMI Product in the Allo Pro
Territory. Allo Pro shall provide all information in its possession as
necessary for ReGen to comply with its FDA or foreign equivalent reporting
requirements.

          8.1.2 Adverse Reaction Reporting. Either party shall advise the other
party, by telephone or facsimile, within such time as is required by the FDA or
foreign equivalent after it becomes aware of any adverse reaction from the use
of the CMI Product. Such advising party shall provide the other party with a
written report delivered by confirmed facsimile of any reported adverse
reaction, stating the full facts known to it, including but not limited to
customer name, address, telephone number and lot or serial number, as
appropriate.

     8.2 Post-Launch Testing and Reporting. If after first commercial sale,
adverse events or other issues arise with respect to the safety or efficacy of
the CMI Product which jeopardize the CMI Product’s performance or are deemed by
the parties to potentially limit its approved indications, the parties shall
consult with each other with respect to such events or other issues. If the
parties mutually determine that the situation requires post-launch clinical
testing, modifications to product registrations or other communication with
appropriate regulatory authorities, ReGen shall be responsible for the design
and implementation of any such testing, modifications or communication, in
consultation with Allo Pro. All expenses incurred hereunder shall be borne by
ReGen.

     8.3 Product Recall. Allo Pro and ReGen each shall notify the other
promptly if the CMI Product is alleged or proven to be the subject of a recall,
market withdrawal or correction, or if either party believes a recall, market
withdrawal or correction may be advisable. The parties shall cooperate in the
handling and disposition of any such recall, market withdrawal or correction.
In the case of a CMI Product recall, all out-of-pocket costs incurred by the
parties (excluding lost profits) by reason of such a recall, market withdrawal
or correction shall be borne by ReGen. Allo Pro shall maintain records of all
sales of the CMI Product and customers sufficient to adequately administer a
recall, market withdrawal or correction for a period of five (5) years after
termination or expiration of this Agreement.

     8.4 Reports. Each party shall keep the other fully informed of all
governmental activities and plans which potentially or actually affect the sale
of the CMI Products worldwide.

9

 

ARTICLE 9

CONFIDENTIALITY

     9.1 Nondisclosure and Non-Use Obligations.

          9.1.1 During the term of this Agreement, and for a period of five (5)
years after termination hereof, each party will maintain all Confidential
Information (as defined below) in trust and confidence and will not disclose
any Confidential Information to any third party or use any Confidential
Information for any unauthorized purpose. Each party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement. Confidential Information shall not be used for any purpose or in
any manner that would constitute a violation of any laws or regulations,
including without limitation the export control laws of the United States.
Confidential Information shall not be reproduced in any form except as required
to accomplish the intent of this Agreement. No Confidential Information shall
be disclosed to any employee, agent, consultant, sublicensee or supplier who
does not have a need for such information. To the extent that disclosure is
authorized by this Agreement, the disclosing party will obtain prior agreement
from its employees, agents, consultants, sublicensees or suppliers to whom
disclosure is to be made to hold in confidence and not make use of such
information for any purpose other than those permitted by this Agreement. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

          9.1.2 “Confidential Information” shall mean, subject to the exceptions set
forth in Section 9.2, any information or materials received by one party from
the other party. In particular, Confidential Information shall be deemed to
include, but not be limited to, the ReGen technology, any know-how, data,
process, technique, formula or biological or physical material of either party
relating to the CMI Product, and any research project, work in process, future
development, scientific, engineering, manufacturing, marketing, business plan,
financial or personnel matter relating to either party, its present or future
products, sales, suppliers, customers, employees, investors or business,
whether in oral, written, graphic or electronic form.

     9.2 Exceptions. Confidential Information shall not include any
information which:

          9.2.1 is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;

          9.2.2 is known by the receiving party at the time of receiving such
information, as evidenced by its written records;

          9.2.3 is hereafter furnished to the receiving party by a third party, as a
matter of right and without restriction on disclosure; or

          9.2.4 is the subject of a written permission to disclose provided by the
disclosing party.

10

 

     9.3 Authorized Disclosure. Notwithstanding any other provision of this
Agreement, each party may disclose Confidential Information if such disclosure:

          9.3.1 is in response to a valid order of a court or other governmental
body of the United States or any political subdivision thereof; provided,
however, that the responding party shall first have given notice to the other
party hereto and shall have made a reasonable effort to obtain a protective
order requiring that the Confidential Information so disclosed be used only for
the purposes for which the order was issued;

          9.3.2 is otherwise required by law; provided, however, that the responding
party shall first have given notice to the other party hereto and shall have
made a reasonable effort, in consultation with the other party hereto, to
secure confidential treatment of such information; or

          9.3.3 is otherwise necessary to file or prosecute patent applications,
prosecute or defend litigation or comply with applicable governmental
regulations or otherwise establish rights or enforce obligations under this
Agreement, but only to the extent that any such disclosure is necessary.

     9.4 Confidentiality of Agreement. The Parties agree not to disclose this
Agreement or any of its terms to any third party without prior written consent
of the other party.

ARTICLE 10

INTELLECTUAL PROPERTY

     10.1 Filing, Prosecution and Maintenance of Patents.

          10.1.1 Each party shall control patentable inventions it owns and will be
responsible for obtaining patent protection for such inventions in its sole
discretion. ReGen will consult with Allo Pro and consider Allo Pro’s comments
regarding ReGen’s patent applications and patents in the Allo Pro Territory
which cover the manufacture, use or sale of the CMI Product, provided that
ReGen shall retain ultimate decision-making authority with regard to such
patent applications and patents.

          10.1.2 If ReGen decides not to pursue patent protection in a certain
country within the Allo Pro Territory for any patentable invention regarding
the CMI Product, or decides to abandon any such application or patent, it shall
give Allo Pro reasonable notice to this effect. After that notice, Allo Pro
may, at its expense, file, prosecute and maintain such application or patent in
ReGen’s name in such country.

          10.1.3 Allo Pro shall reimburse ReGen for all costs incurred by ReGen
after the Effective Date in connection with the filing, prosecution and
maintenance of patents and patent applications in the Allo Pro Territory
covering the manufacturing, use or sale of the CMI Product including the costs
of any opposition or similar proceedings. ReGen will report these costs to
Allo Pro on quarterly basis.

11

 

     10.2 Infringement of ReGen Patents. In the event Allo Pro or ReGen
becomes aware of any actual or threatened infringement of any ReGen Patents in
the Allo Pro Territory, that party shall promptly notify the other. The
parties shall promptly discuss whether to jointly pursue an action against the
infringer. If no such joint action is instituted, ReGen shall have the first
right, but not the obligation, to bring any infringement action against any
person or entity infringing the ReGen Patents directly or contributorily in the
Allo Pro Territory. In the event ReGen is unable or unwilling to commence
appropriate action against the alleged infringer within one hundred twenty
(120) days of the date of ReGen’s becoming aware of such infringement, Allo Pro
may, but shall not be required to, pursue the alleged infringement or
threatened infringement. The costs of litigation associated with such action
shall be reimbursed out of any recovery. Remaining recovery shall be shared
equally by the parties if the action was instituted jointly, retained by ReGen
if the action was pursued solely by ReGen or retained by Allo Pro if the action
was pursued solely by Allo Pro. In any joint action, if ReGen so requests, the
parties shall enter into a reasonable arrangement permitting ReGen to finance
its participation in litigation funding in order to retain its right to share
in the recovery even if its financial resources are insufficient to support
half the costs of litigation. In the event either party brings an infringement
action, the other party shall cooperate as reasonably requested, including, if
requested, furnishing a power of attorney. No settlement or consent judgment
or other voluntary final disposition of a suit under this Section 10.2 may be
entered into without the joint consent of ReGen and Allo Pro.

     10.3 Infringement of Third Party Patents. If a third party asserts that a
patent or other proprietary right owned by it is infringed by the manufacture,
use or sale of the CMI Product in the Allo Pro Territory, the party against
whom such a claim was asserted shall immediately provide the other party notice
of such claim and the related facts in reasonable detail. ReGen shall have the
right, but not the obligation, to control such defense and in such event Allo
Pro shall cooperate with ReGen and shall have the right to be represented
separately by counsel of its own choice. If ReGen shall fail to accept control
of the defense within ninety (90) days after receiving such right, Allo Pro
shall have the right, but not the obligation, to so control the defense by
counsel of its own choice. In such event, ReGen shall cooperate with Allo Pro
and shall have the right to be represented separately by counsel of its own
choice. The entity (whether ReGen or Allo Pro) that controls the defense of a
given claim with respect to the CMI Product shall also have the right to
control settlement of such claim; provided, however, that no settlement shall
be entered into without the consent of the other party if such settlement would
adversely affect the interests of such other party in a manner different from
the interests of the party controlling the defense, except as set forth below.
The expenses of defense, settlements and judgments pursuant to this Section
10.3 shall be shared equally by the parties on a current basis.

ARTICLE 11

TERM AND TERMINATION; BANKRUPTCY; CHANGE OF CONTROL

     11.1 Term. This Agreement shall become effective on the Effective Date
and shall remain in effect until, after Allo Pro’s first commercial sale of CMI
Product, Allo Pro records no sales of the CMI Product for two (2) consecutive
quarters.

12

 

     11.2 Termination by Allo Pro. At any time after the Effective Date and
upon six (6) months prior written notice to ReGen, Allo Pro may terminate this
Agreement for any or no reason; provided that Allo Pro shall, in the event of
termination for no reason, cooperate with ReGen, at Allo Pro’s expense and as
reasonably requested by ReGen, to allow ReGen to assume distribution, marketing
and sale of the CMI Product in the Allo Pro Territory following such early
termination. Such cooperation shall include transferring inventory at Allo
Pro’s cost, transferring registrations of CMI Product made in Allo Pro’s name,
and providing ReGen with copies of marketing materials used in the Allo Pro
Territory. In no event shall Allo Pro be obliged to assist ReGen in
establishing a new distribution network.

     11.3 Termination for Material Breach. If either party is in material
breach of any obligation hereunder, the non-breaching party may give written
notice to the breaching party of its intention to terminate this Agreement, and
this Agreement shall terminate 60 days after the giving of such notice unless
during the 60-day period (i) the breach has been cured to the reasonable
satisfaction of the non-breaching party or (ii) the breaching party has
commenced action which is calculated to result in a cure of the breach to the
reasonable satisfaction of the non-breaching party.

     11.4 Default of Allo Pro. If Allo Pro fails to use diligent efforts as
defined in Article 6.1 herein above to promote the marketing, distribution and
sale of the CMI Product in any country of the Allo Pro Territory, ReGen, upon
prior consultation with Allo Pro, may elect to assume distributorship of the
CMI Product in the respective country or countries at its own expense and risk.
In the event of such election, ReGen shall give Allo Pro sixty (60) days’
notice of its intention, and, unless there is a good faith dispute about
whether Allo Pro has used diligent efforts, Allo Pro shall promptly transfer to
Re Gen, at ReGen’s expense, copies of all materials and information pertaining
to commercialization of the CMI Product in such country. Allo Pro shall also,
at ReGen’s expense, transfer any registrations or other regulatory materials or
approvals necessary to sell the CMI Product in such country.

     ReGen shall pay to Allo Pro a commission of twenty percent (20%) on its
net sales of the CMI Product in such country if the CMI Product or its
Manufacturing Procedures are subject matter of a valid patent or patents, and a
commission of fifteen percent (15%) if no such patent or patents exist in such
country. All records pertaining to such commission payments shall be retained
and subject to audit as provided in Article 7.2.

     Notwithstanding the above, the Distributorship Agreement shall remain
unaffected with regard to all countries of the Allo Pro Territory not in
dispute.

     11.5 Supply Default of ReGen. If ReGen is unable or unwilling for a
consecutive period of ninety (90) days to meet the volume of CMI Product
committed in accordance with Article 5.2 herein above, Allo Pro shall give
ReGen written notice of such default and give ReGen a period of at least ninety
(90) days to cure such default. If such default is not cured within the period
specified in Allo Pro’s notice, then Allo Pro may elect to obtain a license to
manufacture, use and sell the CMI Product pursuant to the terms of Article 11.9
herein below. Allo Pro’s intention to obtain such a license must be given to
ReGen within sixty (60) days from the end of the cure period specified by Allo
Pro.

13

 

     11.6 Bankruptcy Events. For purposes of this Article, a “Bankruptcy
Event” shall mean that ReGen is insolvent, or has filed for protection under,
or has had an involuntary petition filed against it by a creditor, which
petition is not discharged within sixty (60) days of filing, under the
bankruptcy laws of the United States of America. If ReGen undergoes a
Bankruptcy Event, Allo Pro may elect within sixty (60) days after receiving
notice of such event to obtain a license to manufacture, use and sell CMI
Product in accordance with the provisions of Article 11.9 herein below.

     11.7 Change of Control. If ReGen comes under the control of a competitor
of Allo Pro and such competitor is unable or unwilling to provide assurances
satisfactory to Allo Pro that it will continue to perform under this Agreement,
Allo Pro may elect within sixty (60) days after receiving notice of such event
to obtain a license pursuant to the terms of Article 11.9 (Remedies) herein
below. For the purposes of this Article, an entity shall be deemed to be a
“competitor” of Allo Pro if it is, alone or together with its affiliated
companies, a multinational organization with substantial operations in the area
of orthopedic devices.

     11.8 Escrow. ReGen shall prepare and maintain a written description of
the specific procedure by which it manufactures the CMI Product, including but
not limited to specifications of raw materials, qualitative and quantitative
descriptions of the steps used to manufacture the CMI Product and of the
sequence of such steps, specifications of the equipment and technologies used,
all in sufficient detail to permit one reasonably skilled in the area to
replicate the manufacturing process as practiced by ReGen (the “Manufacturing
Procedures”). Promptly following the Effective Date, the parties shall engage
an escrow agent and enter into an Escrow Agreement substantially similar to the
form attached as Schedule III. A copy of the Manufacturing Procedures shall be
delivered to the escrow agent in connection with the execution of the Escrow
Agreement. The Manufacturing Procedures shall be updated whenever necessary,
but not less than annually, to reflect significant changes and improvements. A
copy of such updates will be deposited with the escrow agent.

     11.9 Remedies for Allo Pro; License to Manufacture. In the event of a
supply default, a Bankruptcy Event or a change of control of ReGen according to
the provisions of Articles 11.5 (Default of ReGen), 11.6 (Bankruptcy Events),
or 11.7 (Change of Control) herein above, Allo Pro may elect to obtain a
license for the manufacturing, use and sale of the CMI Product in the Allo Pro
Territory in accordance with the terms of a license agreement as set forth in
Article 11.11 herein below. If Allo Pro elects to obtain a license, ReGen
shall promptly deliver a copy of the Manufacturing Procedures described in
Article 11.8 (Escrow) herein above to Allo Pro. Allo Pro shall have the right,
and the escrow agent shall have the corresponding obligation, to extract the
Manufacturing Procedures from the escrow if ReGen shall not have delivered the
Manufacturing Procedures to the reasonable satisfaction of Allo Pro within
thirty (30) days from Allo Pro’s notification to ReGen that Allo Pro elects to
obtain a license.

     The remedies in this Article 11.9 shall be cumulative and in addition to
any other remedies Allo Pro may have under this Agreement.

     11.10 Surviving Terms of Distributorship Agreement. In case Allo Pro
elects to obtain a license according to the precedent paragraph, all terms of
the Distributorship agreement

14

 

shall cease to be applicable, except for any rights and obligations already
accrued by the parties at such time. All terms shall be substituted by the
provisions of Article 11.11 (License Terms) herein below, except for the
following:

	 	•	 	Article 7 (Payments)
	 
	 	•	 	Article 9 (Confidentiality)
	 
	 	•	 	Article 13.4 and 13.5 (Exclusive Remedy; Limitation of Liability)

     If and to the extent Allo Pro continues to purchase CMI Product units from
ReGen parallel to its own manufacturing, the terms of the Distributorship
Agreement shall continue to be fully applicable to such purchases only.

     11.11 License Terms.

          11.11.1 Exclusive License. ReGen shall grant to Allo Pro, and Allo Pro
shall accept, the sole and exclusive license to manufacture, use and sell the
CMI Product within the Allo Pro Territory. Allo Pro shall have the right to
grant sublicenses for the CMI Product within the Allo Pro Territory.

          11.11.2 Trademarks and Trade Names. In addition to the above license
regarding CMI Product, ReGen shall grant Allo Pro the exclusive license to use
ReGen’s trade marks and trade names applicable to the CMI Product in the Allo
Pro Territory.

          11.11.3 License Fee. In consideration of the licenses granted, Allo Pro
shall pay to ReGen a royalty of twenty percent (20%) of the Net Sales Price of
each CMI Product unit for those countries of sale in which the CMI Product or
its Manufacturing Procedures are subject matter of a valid patent or patents,
and a royalty of fifteen percent (15%) in those countries in which no such
patent or patents exist.

          11.11.4 Improvements. Allo Pro shall have no rights to or in improvements
of the CMI Product made by ReGen after the date the license becomes effective.

          11.11.5 Term. The term of the license shall extend until the later of (i)
the expiration date of the last patent to expire covering the CMI Product or
the Manufacturing Procedures in such country or (ii) ten (10) years from the
first commercial sale of the CMI Product in such country.

     11.12 Termination of Agreement in Case of Patent and Trademark Lawsuits.
Allo Pro shall have the right to terminate this Agreement with immediate effect
and with no liability to ReGen for early termination, in case of a claim or
lawsuit alleging that the manufacture, distribution or sale of the CMI Product
constitutes a violation of patents (more specific conditions to be discussed).

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ARTICLE 12

THIRD PARTY CLAIMS; INDEMNIFICATION

     12.1 Handling of Third Party Claims. Except as otherwise provided in
Section 12.2, if a third party makes a claim against either party arising out
of the manufacture, use, storage, handling, sale or other disposition of the
CMI Product in the Allo Pro Territory, the party against whom such a claim was
asserted shall immediately provide the other party notice of such claim and the
related facts in reasonable detail. The parties shall discuss such matter and
seek to agree on how to handle such matter jointly. If the parties are unable
to agree, ReGen shall have the right, but not the obligation, to control such
defense and in such event Allo Pro shall cooperate with ReGen and shall have
the right to be represented separately by counsel of its own choice. If ReGen
shall fail to accept control of the defense within ninety (90) days after
receiving such right, Allo Pro shall have the right, but not the obligation, to
so control the defense by counsel of its own choice. In such event, ReGen
shall cooperate with Allo Pro and shall have the right to be represented
separately by counsel of its own choice. The entity (whether ReGen or Allo
Pro) that controls the defense of a given claim with respect to the CMI Product
shall also have the right to control settlement of such claim; provided,
however, that no settlement shall be entered into without the consent of the
other party, not to be unreasonably withheld or delayed, if such settlement
would adversely affect the interests of such other party in a manner different
from the interests of the party controlling the defense, except as set forth
below.

     12.2 Indemnification.

          12.2.1 ReGen agrees to indemnify and hold Allo Pro and its agents and
employees harmless from and against all third party claims, damages, losses,
costs and expenses, including reasonable attorney’s fees, which Allo Pro may
incur by reason of any CMI Products furnished by ReGen which result in injury,
illness or death of any person, to the extent that such claims result from the
design, manufacture or packaging of the CMI Product by ReGen and are not
attributable to any alterations to the CMI Product after its shipment to Allo
Pro or any misuse of the CMI Product by Allo Pro.

          12.2.2 Allo Pro agrees to indemnify and hold ReGen and its agents and
employees harmless from and against all third party claims, damages, losses,
costs and expenses, including reasonable attorney’s fees, which ReGen may incur
by reason of any CMI Products distributed by Allo Pro which result in injury,
illness or death of any person, if and to the extent that such claims result
from Allo Pro’s negligence in the distribution and handling of the CMI Product,
or negligence in Allo Pro’s marketing practices.

          12.2.3 If a party intends to seek indemnification under this Section 12.2,
it shall so notify the other party. If the other party disputes the obligation
to indemnify, the parties shall handle the third party claim as provided in
Section 12.1 and then seek to resolve the question of indemnification after the
third party claim is resolved. If the other party accepts the indemnification
obligation, the party seeking indemnification under this Article 12 (the
“Indemnified Party”) shall (i) give the other party (the “Indemnifying Party”)
notice of the relevant claim, (ii) cooperate with the Indemnifying Party, at
the Indemnifying Party’s expense,

16

 

in the defense of such claim, and (iii) give the Indemnifying Party the right
to control the defense and settlement of any such claim, except that the
Indemnifying Party shall not enter into any settlement that adversely affects
the Indemnified Party’s rights or interest without the Indemnified Party’s
prior written approval. The Indemnified Party shall have no authority to
settle any claim on behalf of the Indemnifying Party.

     12.3 Insurance. During clinical trials of the CMI Product, ReGen will
cause Allo Pro to be named as additional insured under ReGen’s comprehensive
general liability insurance policy in regards to such products. Post approval
of such product, each party will maintain comprehensive general liability
insurance, including coverage for products and completed operations, written on
an occurrence basis, during the term of this Agreement in the minimum amount of
$5,000,000. The liability insurance so maintained will be written by an
insurance carrier acceptable to the other party, and contain an endorsement to
provide the other party with at least thirty (30) days prior written notice of
any cancellation, non-renewal, or coverage reduction. The policy will also
contain an endorsement stating that it is primary regarding of any other
insurance which may be in effect. This insurance coverage will survive
termination of this Agreement and will, in any event, provide coverage during
the period of any products containing collagen supplied under the terms of this
Agreement remains implanted in any living patient. Either party may demand
evidence of coverage at any time during the term of this Agreement remains and
during the period coverage is required thereafter. If either party fails to
provide the other with evidence of the liability insurance required to be
maintained pursuant to the provisions of this paragraph and the failure
continues ten (10) days following receipt of a notice advising of its failure
to provide such evidence, then at any time thereafter during the pendency of
such failure, the party seeking such evidence will have the option in its sole
discretion to terminate this Agreement or to purchase the insurance at the
other party’s expense.

     12.4 Exclusive Remedy. The foregoing indemnity provisions set forth the
sole liability and the exclusive remedies for indemnification between the
Parties.

     12.5 Limitation of Liability. In no event shall one party be liable to
the other party for incidental, special, punitive or consequential damages.

ARTICLE 13

REPRESENTATION AND WARRANTIES

     13.1 Representation and Warranties of ReGen. ReGen hereby represents and
warrants as follows:

          13.1.1 Corporate Power. ReGen is duly organized and validly existing
under the laws of the state of Delaware and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.

          13.1.2 Due Authorization. ReGen is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder.

17

 

          13.1.3 Binding Agreement. This Agreement is a legal and valid obligation
binding upon ReGen and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by ReGen does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.

     13.2 Representations and Warranties of Allo Pro. Allo Pro hereby
represents and warrants as follows:

          13.2.1 Corporate Power. Allo Pro is duly organized and validly existing
under the laws of Switzerland and has full corporate power and authority to
enter into this Agreement and to carry out the provisions hereof.

          13.2.2 Due Authorization. Allo Pro is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.

          13.2.3 Binding Agreement. This Agreement is a legal and valid obligation
binding upon Allo Pro and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by Allo Pro does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.

ARTICLE 14

MISCELLANEOUS

     14.1 Export Law Compliance. Allo Pro understands and recognizes that the
CMI Products 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 related to the export
of medical products. Allo Pro represents that it is familiar with and agrees
to comply with all such regulations, including any future modifications
thereof, in connection with the distribution of the CMI Product. Allo Pro
agrees that it will not sell or distribute the CMI Product or clinical data
relating to the CMI Product without complying with all applicable regulations.
Allo Pro hereby agrees to indemnify and hold ReGen harmless from any breach of
this Section 14.1.

     14.2 Foreign Corrupt Practices Act. Allo Pro hereby agrees that it shall
refrain from any acts that would cause ReGen to violate the United States
Foreign Corrupt Practices Act. Allo Pro hereby agrees to indemnify and hold
harmless ReGen from any breach of this Section 14.2.

     14.3 Benefits and Binding Nature of Agreement. This Agreement shall be
binding upon, and inure to the benefit of, the successors, executors, heirs,
representatives, administrators and permitted assigns of the parties hereto.

18

 

     14.4 Entire Agreement; Amendments. This Agreement, together with any
exhibits and schedules attached and referenced herein, embodies the final,
complete and exclusive understanding between the parties, and replaces and
supersedes all previous agreements, understandings or arrangements between the
parties with respect to its subject matter, including but not limited to the
Mutual Nondisclosure Agreement between ReGen Biologics, Inc. and Intermedics
Orthopedics, Inc. (an affiliate of Allo Pro), dated June 15, 1994 and the Heads
of Agreement, dated December 20, 1995, between the parties (except as otherwise
provided in Article 4 above). No modification or waiver of any terms or
conditions hereof, nor any representations or warranties shall be of any force
or effect unless such modification or waiver is in writing and signed by an
authorized officer of each party hereto.

     14.5 No Other Terms and Conditions. The parties intend that this
Agreement express all of the terms and conditions applicable to the sale of the
CMI Product and accordingly agree that all provisions, terms and conditions of
any purchase order, sales or order acknowledgement, invoice or other business
form or document (a “Form"), unless an amendment to this Agreement in
accordance with Section 14.4 hereof, shall be superseded hereby and therefore
shall be disregarded and have no force and effect. If a Form purports to be
conditioned in any manner on agreement to and/or acceptance of any provisions,
terms and conditions other than those set forth herein, then such condition is
hereby waived. In no event shall either party be bound by any provisions,
terms or conditions relating to the subject matter of this Agreement not set
out herein.

     14.6 Force Majeure. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because of, or rendered impracticable or impossible due to, circumstances
beyond its reasonable control (including any failure of a third-party supplier
to supply the CMI Product under the terms of a supply agreement entered into
between ReGen and such third-party supplier), provided that the party
experiencing the delay promptly notifies the other of the delay.

     14.7 Notice. All notices concerning this Agreement shall be written in
the English language and shall be deemed to have been received (a) two (2) days
after being properly sent by commercial overnight courier, or (b) one (1) day
after being transmitted by confirmed facsimile, in each case addressed to the
address below:

	 	 	 
	

	 	If to ReGen:
	 
	 

	 	ReGen Biologics, Inc.

2730 Sand Hill Road, Suite 200

Menlo Park, CA 94025

Attention: Chief Executive Officer

Telephone: (415) 854-9855

Facsimile: (415) 854-3648

19

 

	 	 	 
	

	 	If to Allo Pro:
	 
	 	 
	

	 	Allo Pro AG

Grabenstrasse 25

CH-6341 Baar

Switzerland

Attention: President

Telephone: 011-41 42 34 32 32

Facsimile: 011-41 42 33 14 60

     14.8 English Language; Governing Law. This Agreement has been prepared in
the English language and the English language shall control its interpretation.
This Agreement shall be governed by the laws of the State of New York, without
regard to conflict of law principles. Any claim or controversy arising out of
or related to this Agreement or any breach hereof shall be submitted to a court
of applicable jurisdiction in the State of New York, and each party hereby
consents to the jurisdiction and venue of such court.

     14.9 Waiver. Any waiver (express or implied) by either party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach.

     14.10 Severability. In the event that any provision of this Agreement
shall be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such enforceability or invalidity shall not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.

     14.11 Independent Contractors. Each party shall act as an independent
contractor under the terms of this Agreement. Neither party is, nor shall it
be deemed to be, an employee, agent, co-venturer or legal representative of the
other for any purpose. Neither party shall be entitled to enter into any
contracts in the name of, or on behalf of the other, nor shall either party be
entitled to pledge the credit of the other in any way or hold itself out as
having authority to do so. This Agreement shall not be interpreted in any
manner to establish a joint venture or partnership.

     14.12 Counterparts. This Agreement may be executed in counterparts with
the same force and effect as if each of the signatories had executed the same
instrument.

     14.13 Assignment. This Agreement and the rights, duties, and obligations
hereunder may not be assigned or delegated, except as expressly provided
herein, without the prior written consent of the other party. Any assignment
of rights or delegation of duties or obligations hereunder made without the
written consent of the other party shall be void and be of no effect.
Notwithstanding the foregoing, either party may assign its rights or delegate
its duties hereunder (i) to any affiliated person or entity which controls, is
controlled by, or is under common
control with such party or (ii) in connection with an acquisition, merger
or other change or control of such party.

20

 

     It is understood and agreed that Allo Pro may assign without prior consent
the rights, duties, and obligations hereunder to its successor company “Sulzer
Orthopedics Ltd.”, a Swiss corporation having its seat in Baar, Switzerland, in
connection with the restructuring of the Suizer medical companies in
Switzerland envisaged for 1996. After the closing of such restructuring, all
references to “Allo Pro” in this Agreement shall be read as “Sulzer Orthopedics
Ltd.”.

     In Witness Whereof, the Parties have each caused this Agreement to be
signed and delivered by their duly authorized representatives as of the date
first written above.

	 	 	 	 	 	 	 
	REGEN BIOLOGICS, INC.	 	ALLO PRO AG
	 

	 	 	 	 	 	 
	By:

	 	/s/ James T. McKinley
	 	By:
	 	/s/ Felix Scherrer
	

	 	
 
	 	 	 	
 
	 

	 	 	 	 	 	 
	Name:

	 	James T. McKinley
	 	Name:
	 	Felix Scherrer
	

	 	
 
	 	 	 	
 
	 

	 	 	 	 	 	 
	Title:

	 	SVP, COO
	 	Title:
	 	Member of the Board of Directors
	

	 	
 
	 	 	 	
 
	

	 	 	 	By:
	 	/s/ Erwin Locher
	

	 	 	 	 	 	
 
	 

	 	 	 	 	 	 
	

	 	 	 	Name
	 	Erwin Locher
	

	 	 	 	 	 	
 
	 

	 	 	 	 	 	 
	

	 	 	 	Title:
	 	President
	

	 	 	 	 	 	
 

21

 

SCHEDULE I

SUGGESTED PRICE AND DISCOUNT SCHEDULE

OF CMI PRODUCT

The price shall be equal to forty percent (40%) of the Net Sales Price for the
term of this Agreement, except that the following discounts shall apply on the
first ten thousand (10,000) units purchased by Allo Pro for commercial resale,
to account for the additional expenses of launching the CMI Product:

	 	•	 	a twenty percent (20%) discount (or a price equal to thirty
two percent (32%) of the Net Sales Price) shall apply to the first
three thousand (3000) units purchased by Allo Pro for commercial
resale
	 
	 	•	 	a ten percent (10%) discount (or a price equal to thirty six
percent (36%) of the Net Sales Price) shall apply to the next seven
thousand (7000) units purchased by Allo Pro for commercial resale

 

 

SCHEDULE II

MAJOR COUNTRIES

Australia

Canada

France

Germany

Italy

Japan

The Netherlands

Spain

Sweden

Switzerland

United Kingdom

 

 

SCHEDULE III

FORM OF ESCROW AGREEMENT

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