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Exhibit 10.5
Confidential Treatment. The portions of this exhibit that have been replaced
with "[*****]" have been filed separately with the Securities and Exchange
Commission and are the subject of a request for confidential treatment.
================================================================================
MANAGEMENT SERVICES AGREEMENT
BETWEEN
UNIVERSITY OF FLORIDA TISSUE BANK, INC. AND
SOFAMOR DANEK GROUP, INC.
================================================================================
[CONFIDENTIAL]
<PAGE>
MANAGEMENT SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE I COMMITMENTS AND LICENSES ........................................ -2-
Section 1.1 Exclusive Commitments .................................. -2-
Section 1.2 License of UFTB Marks .................................. -2-
ARTICLE II UFTB PRODUCTS .................................................. -3-
Section 2.1 UFTB Product Specifications ............................ -3-
Section 2.2 UFTB Products Warranties ............................... -4-
Section 2.3 Processing Capacity .................................... -5-
ARTICLE III MANAGEMENT SERVICES IN CONNECTION WITH UFTB PRODUCTS .......... -5-
Section 3.1 Danek's Management Services on Behalf of UFTB .......... -5-
Section 3.2 Ordering and Shipping Procedures ....................... -9-
Section 3.3 Initial Exclusivity Fees Paid by Danek ................. -13-
Section 3.4 Management Services Fees to be Paid by UFTB ............ -13-
Section 3.5 Packaging Specifications ............................... -17-
Section 3.6 Delivery; Right to Use ................................. -18-
Section 3.7 Rejected Product ....................................... -18-
Section 3.8 Taxes .................................................. -20-
ARTICLE IV CERTAIN AGREEMENTS OF UFTB AND DANEK ........................... -21-
Section 4.1 Inspections ............................................ -21-
Section 4.2 Regulatory Filings ..................................... -21-
Section 4.3 Ownership of Intellectual Property Rights .............. -21-
Section 4.4 Rights of First Refusal ................................ -22-
ARTICLE V TERM AND TERMINATION ............................................ -22-
Section 5.1 Term ................................................... -22-
Section 5.2 Early Termination ...................................... -22-
Section 5.3 Accrued Obligations .................................... -23-
(i)
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ARTICLE VI INDEMNIFICATION ................................................ -23-
Section 6.1 Indemnification by Danek ............................... -23-
Section 6.2 Indemnification By UFTB ................................ -23-
Section 6.3 Survival of Obligations ................................ -24-
ARTICLE VII MISCELLANEOUS ................................................. -24-
Section 7.1 Entire Agreement ....................................... -24-
Section 7.2 Amendments ............................................. -24-
Section 7.3 Governing Law; Jurisdiction ............................ -24-
Section 7.4 Force Majeure .......................................... -24-
Section 7.5 Severability ........................................... -25-
Section 7.6 Waiver ................................................. -25-
Section 7.7 No Third Party Beneficiaries ........................... -26-
Section 7.8 Notices ................................................ -26-
Section 7.9 Assignment ............................................. -27-
Section 7.10 Headings .............................................. -27-
Section 7.11 Counterparts .......................................... -27-
Schedule A CURRENT PRODUCTS
Schedule 2.1 SPECIFICATIONS FOR UFTB PRODUCTS
Schedule 2.3 PROCESSING CAPACITY
Schedule 3.4(d) FULL PROCESSING COSTS
(ii)
<PAGE>
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") effective July 23,
1996, by and between THE UNIVERSITY OF FLORIDA TISSUE BANK, INC. ("UFTB"), a
Florida non-profit corporation, and SOFAMOR DANEK GROUP, INC., an Indiana
corporation ("Danek").
W I T N E S S E T H:
WHEREAS, UFTB is a Direct Support Organization of The University Of
Florida.
WHEREAS, UFTB's role as a Direct Support Organization of The University of
Florida will be significantly enhanced through the relationship with Danek as
agreed herein.
WHEREAS, UFTB and Danek each acknowledge that the processing and use of
human tissue for human transplantation purposes is in the public interest and in
the interest of medicine generally and that the entering into of this Agreement
will enhance these interests through facilitating the availability of processed
allograft bone and/or tissue for use in spinal and cranial medical procedures
and thereby advancing the medical and scientific application thereof.
WHEREAS, UFTB and Danek each desire that UFTB (i) process allograft bone
and/or tissue for use in spinal and cranial medical procedures (the "Current
Products") and future line extensions of the Current Products (together, the
"CFTB Products") and (ii) distribute such UFTB Products in conjunction with
exclusive worldwide management services provided by Danek, all in accordance
with the terms and subject to the conditions contained herein. A list of all
Current Products is set forth on the attached Schedule A.
WHEREAS, UFTB and Danek each desire that all UFTB Products processed for
distribution throughout the world (the "Territory") shall be subject to Danek's
management services.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Danek and UFTB hereby agree as follows:
ARTICLE I
COMMITMENTS AND LICENSE
Section 1.1 Exclusive Commitments. UFTB hereby agrees to exclusively
permit Danek to perform Management Services (as defined in Section 3.1 hereof)
in connection with all UFTB Products processed and distributed by UFTB in the
Territory, and Danek hereby agrees to perform Management Services in connection
with all UFTB Products processed and distributed by UFTB in the Territory,
subject to the terms and conditions of this Agreement.
Section 1.2 License of UFTB Marks. During the term of this Agreement, UFTB
grants to Danek a royalty-free, non-transferable license to use the mark
"University of Florida Tissue Bank" (the "UFTB Mark") in the Territory in
connection with Danek's provision of Management Services.
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ARTICLE II
UFTB PRODUCTS
Section 2.1 UFTB Product Specifications. All Current Products to be
distributed by UFTB using Danek's Management Services (as defined in Section 3.1
hereof) shall conform to and otherwise comply with the specifications set forth
in Schedule 2.1 hereto, as such Schedule 2.1 may be amended from time to time by
mutual written agreement of the parties (the "UFTB Product Specifications"). If
any UFTB Product that is not a Current Product is distributed by UFTB pursuant
to this Agreement, the parties hereto shall negotiate in good faith to amend
Schedule 2.1 as provided in the preceding sentence to set forth the
specifications for such UFTB Product, and such UFTB Product shall conform to and
otherwise comply with the UFTB Product Specifications. If regulatory approval is
found to be required for any part or all of the UFTB Product Specifications in
any country located in the Territory and should such regulatory approval be
refused, modified or withdrawn by the applicable regulatory authorities in the
Territory, UFTB shall promptly notify Danek of such refusal, modification or
withdrawal and the parties shall negotiate in good faith to amend appropriately
the UFTB Product Specifications; provided, however, that in the event of any
such refusal, modification or withdrawal, UFTB may refuse to process or
distribute the affected UFTB Product, and/or Danek may refuse to provide
Management Services in connection with such UFTB Product, pending the resolution
of such regulatory matter. In the event of any such refusal, modification or
withdrawal, UFTB shall use its best efforts to favorably and promptly resolve
such regulatory matter, which best efforts shall include, but not be limited to,
full communication to Danek of all information and correspondence, except for
materials subject to the attorney-client
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privilege, relating to any issues raised by such refusal, modification or
withdrawal and full participation with Danek in connection with the resolution
of such regulatory matter.
Section 2.2 UFTB Products Warranties.
(a) Compliance With Laws and Specifications. UFTB warrants that the UFTB
Products will be processed, packaged, stored and shipped (i) biomechanically
suitable for use in cranial and spinal medical procedures in which human tissue
is needed to replace human tissue and (ii) in conformity in all respects with
all applicable federal, state and local laws, rules and regulations relating
thereto, including particularly the Federal Food, Drug and Cosmetic Act and the
National Organ Transplant Act, the Guidelines of the American Association of
Tissue Banks (the "Guidelines") and the UFTB Product Specifications pursuant to
Section 2.1 hereof UFTB warrants that the packaging of UFTB Products will be in
conformity in all respects with the Packaging Specifications described in
Section 3.5 hereof.
(b) Authority; Licenses. UFTB further warrants that it is fully authorized
to enter into and perform this Agreement, that the UFTB Products and any manuals
prepared by UFTB in connection with the UFTB Products and made available to
recipients of the UFTB Products (the "UFTB Customers") will not violate or
infringe upon any common law or statutory rights of any third party, and that
UFTB is the owner of all rights in and to the UFTB Mark. To the extent that UFTB
has proprietary rights in any form of intellectual property that may relate to
the performance of the Management Services by Danek, UFTB grants a non-exclusive
license with respect to such rights so as to permit all such activity. This
express license grant shall not be construed to limit implied licenses otherwise
granted to Danek or UFTB's customers under applicable law.
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(c) Incorporated Materials. UFTB warrants that it has full right and
authority to incorporate all materials (e.g., human tissue) into the UFTB
Products and that such raw materials shall be in full compliance with all
applicable federal, state and local laws, rules and regulations, the Guidelines
and with the UFTB Product Specifications.
Section 2.3 Processing Capacity.
(a) UFTB Current Products. Schedule 2.3 sets forth UFTB's current as well
as projected processing capacity for each of the Current Products by UFTB, in
terms of the number of units that may be processed, packaged and delivered by
UFTB per month. The projected processing capacity shows UFTB's anticipated
expanded process capacity after upgrading its processing systems upon receipt of
the Initial Exclusivity Fee pursuant to Section 3.3 hereof.
(b) Other UFTB Products. If any UFTB Product that is not a Current Product
is processed pursuant to this Agreement, the parties hereto shall amend Schedule
2.3 by mutual agreement to set forth the information required by Section 2.3(a)
with respect to such product, and using, to the extent reasonably practicable
and appropriate, the capacity information with respect to the Current Product as
to which such product is an extension.
ARTICLE III
MANAGEMENT SERVICES IN CONNECTION WITH UFTB PRODUCTS
Section 3.1 Danek's Management Services on Behalf of UFTB.
(a) Danek's Rights and Responsibilities. Danek shall have the exclusive
responsibility to facilitate the distribution of the UFTB Products to UFTB
Customers in accordance with this Agreement (the "Management Services"). The
Management Services shall be comprised of (i) the
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installation of computer hardware and Danek's proprietary software at UFTB's
Alachua, Florida facility (the "UFTB Facility") that will facilitate the
transfer of information concerning the UFTB Products between the parties (the
"UFTB Product System"), which UFTB Product System shall be subject to Danek's
standard license agreement, (ii) the provision, either through employees, or
agents of Danek of customer service to UFTB Customers (e.g., responding to
questions UFTB customers may have concerning how the UFTB Products were
processed and the various surgical applications for which they are designed),
(iii) the facilitation of the shipment of UFTB Products to UFTB Customers in
accordance with Sections 3.1(c) and 3.2 hereof and (iv) the marketing of the
aforementioned Management Services, which marketing may be combined with
marketing for separate Danek product lines and services; provided, however, that
the UFTB Products will be distributed by UFTB separately from any Danek
distributed products. Upon mutual agreement of the parties and subject to
separate written agreements, Danek may also provide UFTB Product design,
professional management information system and computer programming and
installation Support services. Danek reserves the right to develop, at its sole
discretion, non-exclusive management arrangements for the UFTB Products with
selected third parties which third parties will provide Management Services
subject to all of the covenants made by Danek hereunder.
(b) Market Opportunity Estimates.
(i) Quarterly Forecast Dates. Each September 15, December 15, March
15 and June 15 shall be a "Quarterly Forecast Date."
(ii) Forecasts. To assist UFTB in estimating market opportunities
for UFTB Products, Danek will on each Quarterly Forecast Date, beginning with
[June 15, 1996], provide to
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UFTB a forecast of its estimate of the number of units of UFTB Products that
will be obtained by UFTB Customers in the Territory including the following
information:
(A) a monthly forecast for each month of the three-month period
(months one, two and three) beginning with the month following
the month in which the forecast is delivered (the "First Three
Months Forecast") setting forth Danek's estimate of the
quantity of units of each UFTB Product for which a market
opportunity exists in each month covered by the forecast;
(B) a quarterly forecast for the three-month period (months four,
five and six) following the months covered in the First Three
Months Forecast (the "Second Quarter Forecast") setting forth
Danek's estimate of the quantity of units of each UFTB Product
for which a market opportunity exists in the quarter covered
by the forecast;
(C) a quarterly forecast for the three-month period (months seven,
eight and nine) following the quarter covered in the Second
Quarter Forecast (the "Third Quarter Forecast") setting forth
Danek's estimate of the quantity of units of each UFTB Product
for which a market opportunity exists in the quarter covered
by the forecast; and
(D) a quarterly forecast for the three-month period (months ten,
eleven and twelve) following the quarter covered in the Third
Quarter Forecast (the "Fourth Quarter Forecast") setting forth
Danek's estimate of the quantity of units of each UFTB Product
for which a market opportunity exists in the quarter covered
by the forecast.
UFTB shall be required to provide to UFTB Customers 100% of the quantity
of the requirements of each UFTB Product forecasted for each month of the First
Three Months Forecast. The quantity of UFTB Products set forth in the Second
Quarter Forecast, the Third Quarter Forecast and the Fourth Quarter Forecast,
shall be for informational purposes only and shall not bind the parties in any
way; provided, that UFTB shall use its best efforts to supply quantities of UFTB
Product required by UFTB Customers in excess of quantities set forth in the
forecasts.
(iii) UFTB's Non-Compliance with Forecast. UFTB shall notify Danek
within five (5) days of discovery that it will be unable to supply the number of
units of UFTB Products that
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Danek forecasted under any First Three Months Forecast. In such case, UFTB will
assist Danek to develop or find an alternate source of the affected UFTB Product
for the time period during which UFTB is unable to supply the affected UFTB
Product.
(c) Procedures for Receiving UFTB Customer Instructions. Danek shall be
responsible for receiving UFTB Customers' shipping instructions containing
shipping requirements for the UFTB Products sought to be obtained by such UFTB
Customers (the "UFTB Customer Instructions") throughout the Territory in
accordance with Section 3.2 hereof UFTB will maintain records of its transfers
of the UFTB Products in accordance with generally accepted accounting
principles.
(d) Distribution of UFTB Products. Danek will use its best efforts to
actively support the distribution and use of the UFTB Product consistent with
Danek's standards. Danek shall offer commission rates to Danek's agents and
independent representatives with respect to the UFTB Products distributed to
UFTB Customers as the result of Danek's Management Services hereunder equal to
or greater than the commission rates offered to such agents and independent
representatives on any product that Danek may then be marketing that is deemed
by Danek to be a device that competes with the UFTB Products, it being
understood that any device that is listed in Danek's current catalogue is not a
device that competes with the UFTB Products.
(e) No Warranties. In connection with its provision of Management
Services, Danek agrees that it will give no warranties or representations as to
the UFTB Products on behalf of UFTB, including without limitation, as to
quality, durability, merchantability, fitness for a particular use or purpose or
any other features of the UFTB Products being distributed by UFTB pursuant to
UFTB Customer Instructions. To ensure Danek's compliance with this Section
3.1(e), Danek shall, prior to publication, deliver, for UFTB's review,
advertising or other materials associated with the
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distribution of the UFTB Products or the use of the UFTB Mark or the
relationship between Danek and UFTB or The University of Florida and Danek and
not previously published by Danek. If UFTB responds within forty eight (48)
hours (excluding weekends and holidays) of UFTB's receipt of such proposed
materials with reasonable requests for amending the materials to ensure Danek's
compliance with this Section 3.1(e) or with an appropriate description of
Danek's relationship between UFTB or The University of Florida, Danek shall
endeavor to incorporate those changes. If UFTB either approves the materials or
fails to respond within forty-eight (48) hours of receipt of the materials
sought to be approved, Danek will be free to use the materials as originally
provided to UFTB.
(f) Forfeiture of Exclusivity. If during the Contract Year (as defined in
Section 3.3(b) hereof) ending June 30, 1999, or any Contract Year ending after
that date, the total quantity of UFTB Products subject to Instructions is less
than [*****], Danek would forfeit its exclusivity to provide Management
Services for the following Contract Year. All other rights, terms and conditions
of this Agreement would continue in force. However, if Danek's exclusivity to
provide Management Services is forfeited under this paragraph for two
consecutive years, UFTB shall have, as its remedy, the fight to terminate the
Agreement upon one hundred eighty (180) calendar days written notice.
Section 3.2 Ordering and Shipping Procedures.
(a) Submission of UFTB Customer Instructions with Danek. UFTB Customers
shall submit UFTB Customer Instructions for UFTB Products with Danek in Danek's
role as exclusive Management Services provider. To the extent that an UFTB
Customer requests information concerning the purchase, sale or service of UFTB
Products from UFTB directly, UFTB will direct
[CONFIDENTIAL]
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such inquiry to Danek's customer service telephone number, which number shall be
answered by a Danek customer service representative at Danek's headquarters in
Memphis Tennessee. If Danek's customer service representative determines that
the inquiry involves a service question that may be handled more expeditiously
by one of Danek's independent agents rather than through Danek's headquarters
office, (i.e., because of geographic proximity, expertise, etc.) that inquiry
will be directed to that agent. In the case of a customer seeking to receive
UFTB Products, the representative will verify, via the UFTB Product System (as
defined in Section 3.1 (a)(i) above), inventory availability, pricing and
shipment details for the UFTB Products ordered by the UFTB Customer.
(b) Receipt and Resubmission of UFTB Customer Instructions by Danek. Upon
receipt of UFTB Customer Instructions, Danek shall cause, via the UFTB Product
System, such UFTB Customer Instructions to print at the UFTB Facility, which
UFTB shall accept; provided however, that UFTB may refuse acceptance of the UFTB
Customer Instructions, (i) if UFTB has experienced an event of force majeure
pursuant to Section 7.4 hereof, but only to the extent the event of force
majeure results in the inability of UFTB to supply UFTB Products, or (ii) to the
extent the UFTB Customer Instructions require quantities in excess of quantities
that UFTB is obligated to provide pursuant to Section 3.1(b) under the then
prevailing forecasts provided by Danek pursuant to Section 3.1(b) hereof,
provided, however that in the event of a refusal of acceptance of UFTB Customer
Instructions under this clause (ii), such refusal shall be limited to the extent
of such excess and UFTB shall, in accordance with provisions of Section 3.1(b)
hereof, use its best efforts to provide the products and quantities so ordered.
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(c) Contents and Priority of UFTB Customer Instructions. The UFTB
Customers Instructions submitted by Danek to UFTB in accordance with Section
3.2(b) shall set forth the quantity of units of each UFTB Product required to be
shipped by UFTB to UFTB Customers, and the date (or dates) by which such
deliveries are requested by the UFTB Customer to be made. Such UFTB Customer
Instructions may be submitted by UFTB Customers only in accordance with Section
3.2(a) hereof Danek agrees that UFTB Customer Instructions relating to Current
Products that are submitted by physicians practicing in hospitals affiliated
with the University of Florida shall be granted priority over other UFTB
Customers if shortages of such Current Products exist; provided, however, that
UFTB shall be required to first fulfill any preexisting commitments as the
result of UFTB Customer Instructions submitted by other UFTB Customers before
granting such priority.
(d) Effect of UFTB Customer Instructions. In no event shall the use of any
form of UFTB Customer Instructions, invoice, shipping document, confirmation or
waybill be effective to vary, alter, modify or substitute for the terms and
conditions of this Agreement. All UFTB Customer Instructions shall be subject
to, and shall be deemed to incorporate, all terms and conditions of this
Agreement, which may be amended or waived only in accordance with Sections 7.2
and 7.6 hereof, respectively.
(e) Acknowledgment of UFTB Customer Instructions. All UFTB Customer
Instructions placed by Danek pursuant to this Agreement shall be accepted by
UFTB within ten calendar days, except to the extent acceptance of any UFTB
Customer Instructions is refused pursuant to Section 3.2(b) hereof. In such
acceptance, or by other advance communication, which shall be communicated via
the UFTB Product System, UFTB shall notify Danek of (i) the anticipated date
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of release for shipment of the UFTB Products related to the particular UFTB
Customer Instructions, and (ii) the date of shipment of the UFTB Products
related to the particular UFTB Customer Instructions. Upon the Shipment of UFTB
Products subject to UFTB Customer Instructions, UFTB shall provide Danek with a
copy of the invoice sent to the UFTB Customer, which invoice shall set forth (i)
the amount invoiced for each UFTB Product subject to the UFTB Customer
Instructions, (ii) the quantity of each UFTB Product subject to the UFTB
Customer Instructions and (iii) a reference to the fact that Danek is acting on
behalf of UFTB as a Management Service Provider and as such any questions
regarding the UFTB Products subject to UFTB Customer Instructions should be
directed to Danek. Danek shall guarantee the payment of all invoices sent to
UFTB Customers (other than physicians practicing in hospitals affiliated with
the University of Florida) for UFTB Products subject to UFTB Customer
Instructions. If Danek is unable to collect payment from UFTB Customers for such
invoices within one (1) year of the date of shipment of applicable UFTB Products
subject to UFTB Customer Instructions, Danek shall remit payment of such invoice
to UFTB, less the appropriate Management Services fees owed to Danek.
(g) Failure to Meet Shipping Schedule. If UFTB discovers that it will be
unable to meet the required shipping schedule as set forth in any UFTB Customer
Instructions for any UFTB Product, UFTB shall promptly notify Danek. If UFTB
reasonably believes that such inability will result in a failure to deliver such
UFTB Product within 30 days of the required shipping date (as set forth in such
UFTB Customer Instructions), UFTB will assist Danek to develop or find an
alternate source of such UFTB Product for the time period during which UFTB is
unable to supply the UFTB Product.
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Section 3.3 Initial Exclusivity Fee Paid by Danek. For the Management
Services exclusivity and other rights granted hereby to Danek by UFTB, Danek
paid UFTB the one-time sum of Two Million Five Hundred Thousand Dollars
($2,500,000) on July 23, 1996, which fee has been and shall be used only for
purposes of fulfilling UFTB's obligations under this Agreement and for no
other purpose.
Section 3.4 Management Services Fees to be Paid by UFTB.
(a) Amount of Management Services Fees. The management fees to be paid to
Danek by UFTB for the Management Services provided hereunder (the "Management
Services Fees") shall be payable with respect to all UFTB Customer Instructions
submitted by Danek to UFTB according to the following:
(i) For Contract Years beginning on the date of this Agreement and
ending prior to July 1, 1992, the Management Services Fee
shall be eighty percent (80%) of the actual net invoiced
amount (as determined in accordance with Section 3.4(c)) from
UFTB to UFTB Customers for the particular UFTB Products
subject to UFTB Customer Instructions submitted by Danek to
UFTB during such Contract Years;
(ii) For Contract Years commencing after June 30, 1998, the
Management Services Fee shall be seventy percent (70%) of the
actual net invoiced amount from UFTB to UFTB Customers for the
particular UFTB Products subject to UFTB Customer Instructions
submitted by Danek to UFTB during such Contract Years. For
each Contract Year commencing after June 30, 1998, Danek will
guarantee UFTB that the actual net invoiced amount from
[CONFIDENTIAL]
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to UFTB Customers for UFTB Products subject to UFTB Customer
Instructions submitted by Danek to Danek during such Contract
Year less the Management Services Fee payable in connection
with such UFTB Products will equal [*****] of such UFTB
Products or Danek will refund the difference to UFTB from
the Management Services Fees.
(b) Contract Year. For purposes of this Agreement, "Contract Year" shall
mean each consecutive twelve-month period beginning on July 1 and ending June 30
during the term of this Agreement.
(c) Net Invoiced Amount. As the Exclusive Management Services provide to
UFTB, Danek will maintain a unique relationship with the market place for UFTB
Products and is therefore obligated to consult with UFTB on establishing and
publishing the net invoiced amount for Current Products to be paid by UFTB
Customers. Likewise any new UFTB Product that is not a Current Product will have
its net invoiced amount established by UFTB after consultation with Danek.
Changes in net invoiced amounts for any UFTB Product may be modified during the
term of this Agreement upon the mutual agreement of the parties.
(d) Full Processing Costs. "Full Processing Costs" for each unit of the
Current Products are set forth on Schedule 3.4(d) hereto. Full Processing Cost
is defined as the sum of direct processing costs, plus an appropriate share of
applicable indirect processing cost. Full Processing Cost is the cost at which
completed Current Product should be carried in inventory by UFTB. It is also the
cost that should be recorded as cost of transfer when Current Products are
distributed by UFTB to UFTB Customers.
[CONFIDENTIAL]
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Direct processing cost includes direct labor and direct material costs.
Direct labor cost is defined as all labor directly associated with transforming
or adding value to the Current Products. Such labor includes fabrication,
processing, process or machine tending, assembly, packaging, and on line
inspection labor. Direct material cost is defined as direct material that
becomes a physical part of the cost object and those materials that are consumed
during processing that can be specifically identified with that cost object.
Material cost should include packing supplies necessary to deliver goods to
customers.
Indirect processing cost are costs which cannot be specifically identified
with a single cost object in an economically feasible manner. Indirect
processing cost includes such costs as indirect labor, repairs and maintenance,
indirect materials and supplies, depreciation, insurance, and property taxes.
Indirect processing cost also may be referred to as processing overhead.
Costs incurred by UFTB from affiliates of UFTB shall only be included
within the Full Processing Costs to the extent of actual direct cost of such
affiliate notwithstanding any other pricing arrangement between UFTB and such
affiliate. If any UFTB Product that is not a Current Product is processed
pursuant to this Agreement, the parties hereto shall negotiate in good faith to
amend Schedule 3.4(d) by mutual agreement to set forth the Full Processing Costs
for each unit of such product and using, to the extent reasonably practicable
and if such UFTB Product is an extension of a Current Product, the Full
Processing Cost information with respect to the Current Product as to which such
UFTB product is an extension.
On or before May 15, 1998 and on or before May IS in each subsequent
Contract Year, UFTB shall provide in writing to Danek a copy of such Schedule
3.4(d) amended to reflect any increases or reductions in the Full Processing
Cost (calculated in the same manner that Schedule
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3.4(d) was originally calculated) for the next Contract Year, and shall provide
Danek with detailed cost analysis, including supporting schedules, together with
justifiable assumptions relating to increases or decreases in costs which would
support changes in the costs set forth on such Schedule for the then current
Contract Year. Each party expects, and UFTB will use its best efforts to ensure,
that the average percentage increase in such direct costs will not exceed the
percentage increase of the Index (as defined below) in the corresponding period
of time. The "Index" shall mean the Department of Labor, Bureau of Statistics,
Producer Price Index, Pharmaceutical Preparations, Proprietary
(Over-the-Counter) -- 0636 Commodity Code.
In the event that either Danek or UFTB discovers or develops a more
efficient manner of processing an UFTB Product, and such manner of processing
would or is reasonably likely to result in a reduction of Direct Processing Cost
associated with such product, each party will notify the other of such manner of
processing, and at the request of Danek, UFTB will use its best efforts to
utilize such manner of processing. Reductions in the cost of processing such
UFTB Product will be directly reflected in reductions in Full Processing Costs.
(e) Danek's Audit Rights. UFTB shall keep complete and accurate books and
records in connection with the calculation of Full Processing Costs for the UFTB
Products as well as for verifying the amounts invoiced by UFTB to UFTB Customers
for UFTB Products. Danek shall be permitted access to such books and records
during normal business hours and upon reasonable business hours during the term
of this Agreement in order to verify UFTB's compliance with the terms of the
Agreement and to permit Danek to satisfy its obligations under this Agreement,
including, but not limited to, determining the identities of any UFTB Customer
that fails to pay payment of invoices so that Danek can guarantee UFTB Customer
payments to UFTB in accordance
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with Section 3.2(e) hereof Danek shall have the right (no more often than once
yearly and in any event within three years after the close of the month to which
the audit relates) to have an audit performed during normal business hours and
upon reasonable notice to UFTB of such books and records by an independent
certified public accounting firm mutually acceptable to the parties for the sole
purpose of verifying the correct and accurate payment of Management Service Fees
which shall be the sole matter reported by such accounting firm to Danek. The
fees and expenses of the accounting firm performing such verification shall be
borne by Danek, except in the event that Full Processing Costs are overstated by
more than $100,000 for such year or in the event that the actual net invoiced
amounts are understated by more than $100,000 for such year, whereupon such fees
and expenses shall be borne by UFTB. UFTB shall within 60 days of the results of
such audit provide for payment of amounts which are overpaid, unless a bona fide
dispute exists as to the results of such audit.
(f) Payments in U.S. Dollars. All payments required by this Agreement
shall be made in United States Dollars.
(g) UFTB Customer Payments. Payment terms related to shipments of UFTB
Products to UFTB Customers shall be net 30 days from the later of the date of
invoice or the date of shipment.
(h) Management Services Fee Payments. Payment to Danek by UFTB of
Management Service Fees shall be made within ten (10) days from UFTB's receipt
of payment of an invoice during the term of this Agreement with respect to UFTB
Customers Instructions submitted by Danek.
Section 3.5 Packaging Specifications. UFTB shall supply all packaging and
labeling information and designs, including without limitation all artwork and
pharmacological information, usage instructions and warnings to be applied to
each UFTB Product (the "Packaging
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Specifications"). Specifically, the Packaging Specifications shall include the
requirement that each UFTB Product be hermetically sealed or vacuum sealed with
bottle and stopper after processing. Once a UFTB Product is supplied and
initially packaged by UFTB, Danek will not, without UFTB's concurrence, remove,
alter or modify any Packaging Specifications of such UFTB Product except in the
case of Danek's own internal use.
Section 3.6 Delivery; Right to Use.
(a) Shipping. Danek shall issue customer shipping instructions to UFTB for
the UFTB Product in accordance with the UFTB Customer Instructions, using
Danek's or the UFTB Customer's choice of carriers FOB at the plant at which the
UFTB Product is processed.
(b) Certificate of Analysis. At the time of shipment by UFTB of any UFTB
Product processed by UFTB pursuant to UFTB Customer Instructions, a Certificate
of Analysis (as defined herein) shall be delivered to Danek at the address set
forth in Section 7.8 hereof and to the UFTB Customer along with the invoice
delivered in connection with such shipment of UFTB Product. A "Certificate of
Analysis" is a certificate, signed on behalf of UFTB, certifying that the
shipped UFTB Product conforms to the UFTB Product Specifications and the UFTB
Product Warranties set forth in Section 2.2 hereof, and providing the results of
the tests that demonstrate that such product so conforms.
(c) Right to Use. All right to use and risk of loss to any UFTB Product
shall pass to the UFTB Customer upon a common carrier accepting possession or
control of such UFTB Product.
Section 3.7 Rejected Product.
(a) Procedure for Rejection. Within thirty (30) days after a UFTB
Customer's receipt of any shipment of UFTB Product, Danek shall notify UFTB in
writing if a UFTB Customer chooses
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to reject all or any part of such shipment of UFTB Product or, failing such
notification, unless such product has a latent defect, the UFTB Customer shall
be deemed to have accepted such shipment for purposes of payment for it. With
respect to latent defects, Danek shall promptly notify UFTB after a UFTB
Customer's discovery thereof, and such UFTB Customer shall have the right to
reject such product. Any notification of rejection should be for valid technical
or packaging reasons and shall state the basis for the rejection. A replacement
shipment of such product so required by a UFTB Customer shall be made by UFTB as
soon as practicable using reasonable efforts (but no later than thirty (30) days
after UFTB receives such notification), or as soon thereafter as the raw
materials are available to UFTB for the processing of such replacement product.
Such replacement product shall be invoiced by UFTB and paid for by the UFTB
Customer at the same fee as was the rejected shipment.
(b) Effect of Rejection. The UFTB Customer shall not be obligated to pay
and Danek shall not be obligated to guarantee payment for any rejected shipment
of UFTB Product shipped to UFTB Customers which fails to meet the UFTB Product
Specifications or the Packaging Specifications or otherwise breaches the UFTB
Product Warranties set forth in Section 2.2 hereof. The UFTB Customer shall not
be obligated to pay in full and Danek shall not be obligated to guarantee
payment for any shipment of the UFTB Product rejected by a UFTB Customer. UFTB
shall have fifteen (15) days within which to notify Danek and the UFTB Customer
in writing of UFTB's objection to such rejection, and the parties shall
thereafter promptly submit the issue to an independent laboratory in accordance
with subparagraph (c) below.
(c) Testing to Resolve Conflicting Test Results. If there is a conflict
between the test results of UFTB and the test results of Danek or a UFTB
Customer with respect to any UFTB
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Product, an adequate sample of same shall be submitted by the party having
possession thereof to an independent laboratory acceptable to both parties for
testing against the UFTB Product Specifications under procedures employed in the
UFTB Product Specifications. The test results obtained by such laboratory shall
be final with respect to the obligations of the UFTB Customer to pay and of
Danek to guarantee payment for such UFTB Product. The fees and expenses of such
laboratory testing shall be borne entirely by the party against whom such
laboratory's findings are made. If the laboratory's findings are in favor of
UFTB, the UFTB Customer shall pay UFTB for the rejected UFTB Products under the
terms listed in Section 3.4 hereto.
(d) Return or Disposal of Rejected UFTB Products. UFTB shall make
arrangement with Danek for the return or disposal, at UFTB's option, of any
shipment of any rejected UFTB Product. The return shipping charges or disposal
costs for such rejected shipment of Product shall be paid by UFTB and, in the
event of agreement of the parties or a laboratory determination hereunder that
such rejected shipment does meet the UFTB Product Specifications, or in the
event of agreement of the parties that such rejected shipment does meet the
Packaging Specifications, the UFTB Customer shall promptly reimburse UFTB for
such shipping charges or disposal costs.
(e) No Waiver. No acceptance or rejection of product or determination of
compliance for purposes of this Section 3.7 shall serve to waive any rights
under Article VI.
Section 3.8 Taxes. Taxes and any and all other tariffs and duties or
excise, sales or use, value added or other taxes or levies imposed upon UFTB in
connection with the process and distribution of the UFTB Products shall be paid
by UFTB.
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ARTICLE IV
CERTAIN AGREEMENTS OF UFTB AND DANEK
Section 4.1 Inspections. UFTB shall permit a representative of Danek to
inspect, at reasonable times and at a reasonable frequency, those processing
facilities and methods and operations used by UFTB in connection with the UFTB
Products as considered necessary or desirable by Danek for the purpose of
observing compliance with the undertakings set forth in Article II hereof. No
such observation shall serve to waive any rights of Danek hereunder.
Section 4.2 Regulatory Filings. UFTB shall fulfill all reporting and other
requirements of applicable regulatory agencies with respect to the UFTB
Products. Danek shall cooperate in preparing any such filings to the extent
reasonably requested by UFTB.
Section 4.3 Ownership of Intellectual Property Rights.
(a) Intellectual Property Rights. For purposes of this Agreement,
"Intellectual Property Rights" means all works, including literary works,
pictorial, graphic and sculptural works, architectural works, works of visual
art, and any other work that may be the subject matter of copyright protection;
advertising and marketing concepts; trademarks; information; data, formulas;
designs; models; drawings; computer programs; including all documentation,
related listings, design specifications and flowcharts, trade secrets and any
inventions including all processes, machines, manufactures and compositions of
matter and any other invention that may be the subject matter of patent
protection; and all statutory protection obtained or obtainable thereon.
(b) Ownership of Intellectual Property Rights. All Intellectual Property
Rights relating to the UFTB Products shall be owned or obtained under license by
UFTB (subject to grants of licenses referred to herein); provided, however, that
nothing in this Section 4.3 shall be construed
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or interpreted as granting in any manner or way any rights to UFTB in any
Intellectual Property Rights of Danek, including, but not limited to any
Intellectual Property rights to the UFTB Product System installed by Danek at
UFTB's Alachua, Florida facility in accordance with Section 3.1 hereof.
Section 4.4 Rights of First Refusal. UFTB agrees that if UFTB makes
available for distribution any product, or develops any technology, relating to
spinal or cranial medical procedures (other than the UFTB Products which are
subject to this Agreement), then Danek shall be promptly notified by UFTB with
sufficient details relating thereto to enable Danek to evaluate such products or
technology. Thereafter, Danek shall have a right of first refusal to obtain such
product or license such technology on the best terms and conditions offered by
UFTB. Danek shall have a period of sixty (60) days within which to accept such
offer to obtain such product or license such rights.
ARTICLE V
TERM AND TERMINATION
Section 5.1 Term. The term of this Agreement shall commence as of the date
hereof and shall continue until the twenty-fifth anniversary of the date hereof
unless terminated earlier in accordance with Section 5.2.
Section 5.2 Early Termination. Either party hereto may terminate this
Agreement (a) due to a material breach by the other party of any of its
obligations or covenants hereunder upon 30 calendar days' notice to the
breaching party if such breaching party fails to remedy such breach within such
30 calendar days, or if such breach cannot be remedied within such 30 calendar
days, only if such breaching party has not undertaken good faith efforts to
remedy such breach or (b) the insolvency or filing for bankruptcy by the other
party. This Agreement may not be terminated
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without cause except as specifically provided herein or by the mutual written
agreement of the parties.
Section 5.3 Accrued Obligations. In the event that this Agreement is
terminated due to the breach of either party pursuant to Section 5.2 hereof, the
duties and obligations of the breaching party which have accrued prior to
termination, including without limitation, the obligation to process and deliver
quantities of the UFTB Products for which Instructions have been validly issued
prior to notice of termination and the correlative obligation to pay for such
quantities, shall not be released or discharged by such termination.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification by Danek. Subject to UFTB's indemnification
obligations pursuant to Section 6.2 hereof, Danek shall indemnify and hold UFTB
harmless from any and all losses, damages, liabilities, costs and expenses,
including, without limitation, reasonable attorneys fees and court costs, that
may result from any demand, claim or litigation relating to, resulting from or
out of the provision of Management Services by Danek.
Section 6.2 Indemnification By UFTB. UFTB shall indemnify and hold Danek
harmless from any and all losses, damages, liabilities, costs and expenses,
including, without limitation, reasonable attorneys fees and court costs, that
may result from any demand, claim or litigation relating to, resulting from or
arising out of (i) the failure of any UFTB Product to comply with the UFTB
Product Specifications, (ii) a breach by UFTB of any warranty, representation or
covenant made by UFTB, including a breach by UFTB of the UFTB Products
warranties set forth in Section
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<PAGE>
2.2 hereof; (iii) the failure of the packaging related to any UFTB Product to
comply with the Packaging Specifications; or (iv) the distribution by UFTB of
the UFTB Products.
Section 6.3 Survival of Obligations. The respective obligations of the
parties hereto pursuant to Article VI shall survive the termination of this
Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Entire Agreement. This Agreement, together with the exhibits
and schedules hereto constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersede any prior expression of
intent or agreement of the parties with respect thereto.
Section 7.2 Amendments. This Agreement shall not be modified, altered, or
amended except by an agreement in writing signed by duly authorized
representatives of each of the parties hereto.
Section 7.3 Governing Law; Jurisdiction. This Agreement shall be governed
by the laws of the State of Florida (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies. The parties agree to submit to personal jurisdiction
and to waive any objection as to venue and forum non convenes in the federal or
state courts of the State of Florida.
Section 7.4 Force Majeure. Neither party shall be liable for
nonperformance or delay in performance due to and to the extent resulting from
an event of force majeure, including without limitation: any act of god;
regulation or law of any government; war, riot, or civil commotion; destruction
of production facilities or materials by fire, earthquake or storm; strike or
other labor
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<PAGE>
disturbances; epidemic; failure of public utilities or common carriers; or any
limitation, requirement or prohibition imposed or required by the United States
Food and Drug Administration or any other governmental agency asserting
jurisdiction with regard to the UFTB Products. In case any of the foregoing
occurrences should in any manner hinder either party hereto from fulfillment of
its obligations specified in this Agreement, said party shall promptly give
written notice to the other party. In the event that UFTB has experienced an
event of force majeure, and as a result hereof is unable to supply Danek with
any UFTB Product, Danek may procure that UFTB Product from another manufacturer.
Section 7.5 Severability. In the event that any part of this Agreement
shall for any reason be finally adjudged by a court of competent jurisdiction or
determined by a governmental body to be invalid or unenforceable, then, unless
such part is deemed material by either or both parties, this Agreement shall
continue in effect and such part shall be excised herefrom. If either party
determines that such part hereof found to be invalid or unenforceable is
material to the operation or performance of this Agreement, then such party may,
by written notice to the other party, request that the parties attempt to
renegotiate this Agreement to alleviate or eliminate any difficulty caused to
such party by such invalidity or unenforceability.
Section 7.6 Waiver. No failure or delay on the part of either party to
enforce any provision of this Agreement or to exercise any right granted hereby
shall operate as a waiver thereof unless or until the right to enforce any such
provision or to exercise any such right has been waived in writing by such
party. Any waiver of any provision hereof or right hereunder shall be effective
only in accordance with its terms and may be restricted in any way. No waiver of
any provision
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hereof or any right hereunder shall constitute a waiver of a continuance or
reoccurrence of the failure to perform, except as provided in such waiver.
Section 7.7 No Third Party Beneficiaries. This Agreement shall be
construed to be for the benefit of the parties hereto only and shall confer no
right or benefit upon any other Person.
Section 7.8 Notices. Any notice, report or consent required or permitted
by this Agreement to be given or delivered shall be in writing and shall be
deemed given or delivered if delivered in person, or sent by registered or
certified mail, postage prepaid, return receipt requested, or sent by telecopy
(if confirmed), as follows:
If to Danek:
Sofamor Danek Group, Inc.
1800 Pyramid Place
Memphis, Tennessee 38132
Attention: President and Chief Operating Officer
Telecopy: 901-344-1570
with a copy to:
Vice President and General Counsel
Sofamor Danek Group, Inc.
1800 Pyramid Place
Memphis, Tennessee 38132
Telecopy: 901-344-1576
If to UFTB:
University of Florida Tissue Bank, Inc.
1 Progress Boulevard
Box 31
Alachua, Florida 32615
Attention: President and Chief Operating Officer
Telecopy: 904-462-5131
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with a copy to:
Ms. Susan Collingwood
Associate General Counsel
University of Florida College of Medicine
P.O. Box 100215
Gainesville, Florida 32610
Telecopy: 352-392-6482
Any such notice, report or consent shall be effective upon delivery if given or
delivered in person, or upon receipt if sent by telecopy which is confirmed, or
on the third business day following mailing if mailed. Either party hereto may
change its address for purposes hereof by giving the other party written notice
of such change as above provided.
Section 7.9 Assignment. Neither party may assign its rights and
obligations hereunder without the prior written consent of the other party. No
permitted assignment hereunder shall be deemed effective until the assignee
shall have executed and delivered an instrument in writing reasonably
satisfactory in form and substance to the other party pursuant to which the
assignee assumes all of the obligations of the assigning party hereunder. The
parties acknowledge, however, that UFTB is currently considering the formation
of a subsidiary for-profit corporation to conduct the business, legal and
financial affairs contemplated by this Agreement, to which for-profit
corporation UFTB could or may assign intellectual property rights and all other
rights and properties necessary to fulfill the obligations to Danek and to
which, subject to Danek's approval, this Agreement could or may be assigned.
Section 7.10 Headings. The table of contents and the headings of the
various articles and sections hereof are for convenience of reference only,
shall not be deemed to be a part hereof, and shall not affect the meaning or
construction of any provision hereof.
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Section 7.11 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when signed by each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives on this __ day of
November, 1996 and effective July 23, 1996.
UNIVERSITY OF FLORIDA TISSUE BANK, INC.
By: /s/ James M. Grooms
-----------------------------------
Name:__________________________________
Title:_________________________________
Date:__________________________________
SOFAMOR DANEK GROUP, INC.
By: /s/ James J. Gallogly
-----------------------------------
Name: James J. Gallogly
Title: President
Date:__________________________________
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SCHEDULE A
CURRENT PRODUCTS
Cancellous Cortical Strips
ACE Fibula Shafts(1)
Femoral Cortical Shafts
Tibia Cortical Shafts
Fibula Cortical Shafts(1)
Humeral Cortical Shafts Cortical Bone Screws
Smith-Robinson Cortical Blocks
Cervical Cortical Tapered Screw
MD Series (MD-I, MD-II, MD-III) of threaded and
non-threaded tissue dowels
----------
(1) The exclusive rights to these UFTB Products are subject to exclusive
distribution rights granted to third parties, which distribution rights
shall be disclosed by UFTB to Danek within ten (10) days of the date of
this Agreement.
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SCHEDULE 2.1
SPECIFICATIONS FOR UFTB PRODUCTS
The Specifications for certain of the UFTB Products are set forth on the
attached Exhibit A to this Schedule 2.1. If specifications are not provided for
any particular Current Product, UFTB shall provide such specification within
ninety (90) days of the date of this Agreement. [Was Exhibit A ever attached?
Were additional specifications provided?]
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SCHEDULE 2.3
PROCESSING CAPACITY
UFTB shall provide its current and projected processing capacity for each
of the Current Products within ninety (90) days of the date of this Agreement.
[Has UFTB provided Danek information concerning this capacity?]
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SCHEDULE 3.4(d)
FULL PROCESSING COSTS
UFTB shall identify the Full Processing Costs within ninety (90) days of
the date of this Agreement [Has UFTB provided Danek with the Full Processing
Costs?]
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[Letterhead of SOFAMOR DANEK]
JIM GALLOGLY
President and
Chief Operating Officer
January 2, 1998
Mr. Jamie Grooms
President & Chief Executive Officer
University of Florida Tissue Bank, Inc.
One Innovation Drive
Alachua, FL 32615
RE: Management Services Agreement
Dear Mr. Grooms:
Please allow this letter to serve as an amendment to the 1996 Management
Services Agreement, as amended on April 21, 1997 ("Agreement") between Sofamor
Danek Group, Inc. ("Sofamor Danek") and the University of Florida Tissue Bank,
Inc. ("UFTB").
Section 3.4(h) of the Agreement is amended to read as follows:
Management Services Fee Payments. Payment to Sofamor Danek by UFTB of
Management Services Fees shall be made on the sixteenth (16th) day of the
second month following the month during which UFTB received payment of an
invoice with respect to UFTB Customer's Instructions submitted by Sofamor
Danek pursuant to this Agreement. Notwithstanding the previous sentence of
this Section 3.4(h), if the amount of Management Services Fees due to
Sofamor Danek in any given month during the term of this Agreement exceeds
the total accounts receivable due and payable to UFTB from UFTB Customers
("UFTB Customer Accounts Receivable"), then the amount of the payment
<PAGE>
Mr. Jamie Grooms
January 2, 1998
Page 2
required pursuant to this Section 3.4(h) shall be no greater than the UFTB
Customer Accounts Receivable; provided, however, if at the end of any
month during the term of the Agreement, UFTB has on hand cash and
unencumbered cash equivalents greater than One Million Dollars
($1,000,000), then the payment by UFTB to Sofamor Danek of Management
Services Fees on the 16th day of the next calendar month shall be
increased by the amount that such cash and unencumbered cash equivalents
exceeds One Million Dollars ($1,000,000); provided, however, that during
the term of this Agreement UFTB shall not be obligated to pay Sofamor
Danek an amount greater than all of the Management Services Fees owed to
Sofamor Danek plus interest as specified below, plus any amount required
to be paid to Sofamor Danek pursuant to Section 3.4(i). In the event that
on the 16th day of any month during the term of this Agreement UFTB does
not pay to Sofamor Danek all Management Services Fees due and payable to
Sofamor Danek, then the unpaid amount of said Management Services Fees
shall accrue interest on a daily basis at the rate of twelve percent (12%)
per annum.
On the 16th day of each month during the term of this Agreement, UFTB
shall provide the following reports to Sofamor Danek (i) all Management
Services Fees being paid to Sofamor Danek, together with a listing of all
UFTB invoice numbers applicable to those Management Services Fees; (ii)
all unpaid Management Services Fees due to Sofamor Danek from UFTB; (iii)
all UFTB Customer Accounts Receivable due to UFTB from customers of UFTB
products; (iv) all cash and unencumbered cash equivalents held by UFTB at
the end of the previous calendar month; and (v) those required by Section
3.4(i).
<PAGE>
Mr. Jamie Grooms
January 2, 1998
Page 3
The Agreement is hereby amended to add a new Section 3.4(i):
3.4(i). Monthly SR Inventory Service Fee. Each month during the term of
this Agreement that UFTB completes a SR set forecasted by SDG, Sofamor
Danek will pay to UFTB an amount equal to twenty percent (20%) of the
retail selling price of each such SR set ("Service Fee"). Upon the sale of
any such SR set or sets, the amount of the Service Fee applicable to such
SR set or sets shall be refunded to Sofamor Danek by UFTB.
On the sixteenth (16th) day of any month during the term of this
Agreement, UFTB shall submit to Sofamor Danek a report that lists (i) all
SR sets completed during the immediately preceding calendar month, (ii)
all SR sets sold during the immediately preceding calendar month, (iii)
the retail selling price of each SR set completed and each SR set sold
during the immediately preceding calendar month and (iv) the amount of the
Service Fee to be paid to UFTB and to be refunded to Sofamor Danek for the
immediately preceding calendar month. If the amount of the Service Fee to
be paid to UFTB exceeds the amount of the Service Fee to be refunded to
Sofamor Danek, then the amount of that excess shall reduce the amount of
the Management Services Fees payable to Sofamor Danek pursuant to Section
3.4 (h). If the amount of the Service Fee to be refunded to Sofamor Danek
exceeds the amount of the Service Fee to be paid to UFTB, than the amount
of that excess shall be added to Management Services Fees payable to
Sofamor Danek pursuant to Section 3.4(h).
<PAGE>
Mr. Jamie Grooms
January 2, 1998
Page 4
If these amendments are agreeable to you, please sign both of these
originals and return one.
Very truly yours,
/s/ James J. Gallogly
James J. Gallogly
JJG/dg
AGREED TO AND ACCEPTED:
UNIVERSITY OF FLORIDA TISSUE BANK, INC.
/s/ Jamie M. Grooms
-----------------------------------
Jamie M. Grooms
President & Chief Executive Officer
<PAGE>
[Letterhead of SOFAMOR DANEK]
JIM GALLOGLY
President and
Chief Operating Officer
April 21, 1997
Mr. Jamie M. Grooms
President & Chief Executive Officer
University of Florida Tissue Bank, Inc.
1 Progress Boulevard
Alachua, Florida 32615
Re: Management Services Agreement
Dear Mr. Grooms:
Please allow this letter to serve as an amendment to the Management
Services Agreement between Sofamor Danek Group and UFTB ("Agreement"). The
purpose of this amendment will be to recognize UFTB's right to reimbursement for
the following items:
1. UFTB's actual cost for product liability and general liability
insurance that is attributable to the Management Services Fees
portion of UFTB revenues.
2. The State of Florida tissue bank fee/tax of .005 that is
attributable to the Management Services Fees portion of UFTB
revenues.
3. Effective December 1, 1996, the cost that UFTB incurs to hire an
accounts receivable employee who will be responsible for accounts
receivable related to UFTB revenues generated from the UFTB Products
covered by the Agreement. Additionally, the cost that UFTB will
incur to hire an additional accounts receivable employee who will be
responsible for accounts receivable, which employee will be hired
during the calendar quarter that UFTB revenues related to this
Agreement reaches an annualized level of $50,000,000.
<PAGE>
Mr. Jamie M. Grooms
April 21, 1997
Page Two
4. The second sentence of Section 3.4(a)(ii) of the Agreement is hereby
deleted from the Agreement.
UFTB will be paid its actual costs for those items listed above by showing
the specific cost thereof and deducting it from the amounts payable to Sofamor
Danek under the terms of the Agreement.
If these amendments are agreeable to you, please sign both of these
originals and return one to me for our files.
Very truly yours,
/s/ James J. Gallogly
James J. Gallogly
JJG:mb
AGREED TO AND ACCEPTED:
UNIVERSITY OF FLORIDA TISSUE BANK, INC.
/s/ Jamie M. Grooms
-----------------------------------
Jamie M. Grooms
President & Chief Executive Officer
<PAGE>
ASSIGNMENT AND ASSUMPTION OF
MANAGEMENT SERVICES AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF MANAGEMENT SERVICES AGREEMENT (the
"Assignment") is made and entered into this 23rd day of January, 1998, by and
between UNIVERSITY OF FLORIDA ORTHOPAEDIC TISSUE BANK, INC., d/b/a UNIVERSITY
OF FLORIDA TISSUE BANK, INC., a Florida not-for-profit corporation
("Assignor"), and REGENERATION TECHNOLOGIES, INC., a Florida for-profit
corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor and Assignee are parties to that certain Patent
License Agreement, dated January 23, 1998 (the "License Agreement"), pursuant
to which Assignor has agreed to license to Assignee the patents or pending
patents listed in Exhibit "A" attached hereto and made a part hereof on the
condition that Assignee meets certain financing goals; and
WHEREAS, pursuant to the License Agreement, Assignor has agreed to
assign to Assignee all of Assignor's right, title and interest in, and all of
its obligations under, that certain Management Services Agreement, by and
between Assignor and Sofamor Danek Group, Inc. ("SDG"), a copy of which is
attached as Exhibit "B" (the "SDG Contract") (with certain exceptions) upon
the terms and conditions set forth herein; and
WHEREAS, pursuant to the License Agreement, Assignee has agreed to
accept such assignment and to assume all of the obligations of Assignor under
the SDG Contract (with certain exceptions) upon the terms and conditions set
forth herein; and
<PAGE>
WHEREAS, Assignor is willing to assign the SDG Contract and Assignee is
willing to accept such assignment of the SDG Contract and to assume all
obligations of Assignor under the SDG Contract upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. RECITALS. The recitals set forth above are true and correct in all
respects and are incorporated herein as fully as if set forth herein verbatim.
2. ASSIGNMENT AND ASSUMPTION OF SDG CONTRACTS. Assignor hereby assigns,
transfers, conveys and delivers to Assignee all of Assignor's right, title
and interest in, to and under the SDG Contract, effective on the Effective
Date of this Assignment described in Paragraph 4 below, except as otherwise
provided in Paragraph 3 below. Assignee hereby assumes all of the
obligations, terms and covenants set forth in the SDG Contract to be
observed and performed by Assignor and agrees to be bound by the terms,
conditions and covenants of the SDG Contract arising from and after the
Effective Date, except as otherwise provided in Paragraph 3 below.
3. EXCEPTIONS FROM ASSIGNMENT. Assignor shall retain and shall not
assign hereunder the following rights and obligations under the SDG Contract
(terms defined in the SDG Contract have the same meanings in this Paragraph
3), as set forth in the following Sections of the SDG Contract:
(a) SECTION 1.2. Assignor shall retain the obligation to grant a
license to Danek to use the UFTB Mark.
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<PAGE>
(b) SECTION 2.1. Assignor shall retain the right to approve any
amendments to Schedule 2.1.
(c) SECTION 2.2(b). Assignor shall remain the owner of all rights
in and to the UFTB Mark.
(d) SECTION 2.3(b). Assignor shall retain the right to approve any
amendments to Schedule 2.3.
(e) SECTION 3.1(e). Assignor shall retain the right to review and
respond to Danek regarding any advertising using the UFTB Mark or the
relationship between Danek and Assignor or Danek and the University of
Florida.
(f) SECTION 3.1(f). Assignor shall retain the right to terminate the
SDG Contract in accordance with Section 3.1(f) of the SDG Contract.
(g) SECTION 3.4(d). Assignor shall retain the right to approve any
amendments to Schedule 3.4(d).
(h) SECTION 3.5. Assignor shall retain the right to approve any
changes to the Packaging Specifications.
(i) SECTION 4.2. Assignor shall retain the right to approve any
reporting or other requirements with respect to the UFTB Products.
(j) SECTION 4.3(b). Assignor shall retain ownership of all
Intellectual Property Rights relating to the UFTB Products.
4. EFFECTIVE DATE. The assignment and assumption described in this
Assignment shall be effective on the effective date of the license granted
pursuant to the License
-3-
<PAGE>
Agreement (the "Effective Date"). In the event that the license granted
pursuant to the License Agreement does not become effective, then the
assignment hereunder shall not become effective.
5. TERMINATION AND BREACH. Any termination of the License Agreement shall
cause a simultaneous termination of this Assignment, without any further
action by Assignor or Assignee. Assignee acknowledges that Assignor may
terminate the License Agreement (which shall also cause a termination of this
Assignment) upon any material breach of this Assignment by Assignee. A breach
by Assignee of any of the obligations under the SDG Contract assumed by
Assignee hereunder shall be a material breach of this Assignment. During the
term of this Assignment, Assignor shall have the right at any reasonable time
to review Assignee's records to determine whether Assignee is complying with
all obligations of the SDG Contract assigned hereunder, and to confirm with
SDG representatives Assignee's compliance with the terms of the SDG Contract
assigned hereunder.
6. ASSIGNMENT AND ASSUMPTION UPON TERMINATION. Upon any termination of
this Assignment, the parties agree that such termination shall have the
following effect, without any other action required by Assignor or Assignee:
(a) Assignee shall assign, transfer, convey and deliver to Assignor
the rights of Assignor under the SDG Contract that are assigned to Assignee
hereunder, effective on the date of termination of this Assignment; and
(b) Assignor shall assume and shall be bound by all of the
obligations, terms and covenants set forth in the SDG Contract to be
observed and performed by Assignor and that were assumed by Assignee
hereunder, effective on the termination of this Assignment.
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<PAGE>
7. INDEMNIFICATION. Assignor hereby agrees to indemnify and hold
Assignee harmless from any and all claims, demands, damages, costs, losses,
expenses, liabilities and obligations of any kind or nature whatsoever
(including reasonable attorney's fees incurred by Assignee) incurred by
Assignee as a result of any breach by Assignor of any warranty,
representation, covenant or agreement of Assignor contained in this
Assignment or the failure of Assignor to fulfill its obligations pursuant to
the SDG Contract prior to the Effective Date. Assignee agrees to indemnify
and hold Assignor harmless from any and all claims, demands, damages, costs,
losses, expenses, liabilities and obligations of any kind or nature
whatsoever including reasonable attorneys fees incurred by Assignor) incurred
by Assignor as a result of the breach by Assignee of any covenant or agreement
of Assignee contained in this Assignment or the failure of Assignee to
fulfill its obligations pursuant to the SDG Contract arising from and after
the Effective Date.
8. ATTORNEYS' FEES. Should either party to this Assignment bring suit
for the breach of a promise, covenant, warranty or representation hereunder,
it is agreed that the successful party in such suit shall be entitled, in
addition to recovering any damages sustained thereby, to recover such party's
expenses, including court costs and reasonable attorneys' fees as part of the
judgment or other settlement. Expenses and attorneys' fees include those
incurred prior to the initiation of suit and those incurred in connection
with proceedings in courts of original jurisdiction and courts of appeal.
9. BINDING EFFECT. This Assignment shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors
and assigns.
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<PAGE>
10. GOVERNING LAW AND VENUE. This Assignment shall be governed by, and
construed in accordance with, the laws of the State of Florida, and venue for
any legal proceeding or action at law arising out of or construing this
Assignment shall lie in the state courts of Alachua County, Florida, or the
United States District Court for the Northern District of Florida,
Gainesville Division.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
executed as of the date and year first above written.
<TABLE>
<S> <C>
Signed, sealed and delivered
in the presence of: "Assignor"
UNIVERSITY OF FLORIDA ORTHOPAEDIC
TISSUE BANK, INC., d/b/a UNIVERSITY OF
FLORIDA TISSUE BANK, INC., a Florida not-for-
profit corporation
/s/ Kathleen Davis By: /s/ F. P. Glowczewskie, Jr.
------------------------- -------------------------------------------
Frank P. Glowczewskie, Jr., Chairman of the
Board
/s/ John D. Callahan
-------------------------
"Assignee"
REGENERATION TECHNOLOGIES, INC., a
Florida for-profit corporation
/s/ Kay B. Lopez By: /s/ Peter F. Gearen
------------------------- -------------------------------------------
Peter F. Gearen, President
/s/ James S. Gantler
-------------------------
</TABLE>
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<PAGE>
CONSENT TO ASSIGNMENT
The undersigned hereby consents to the assignment in the above
ASSIGNMENT AND ASSUMPTION OF MANAGEMENT SERVICES AGREEMENT, as required by
Section 7.9 of the Management Services Agreement.
SOFAMOR DANEK GROUP, INC.
By: /s/ Mark D. LoGuidice
----------------------------- -------------------------------------
Name: Mark D. LoGuidice
Title: Executive Vice President
-----------------------------
----------
APPROVED
AS TO /s/ [ILLEGIBLE]
LEGAL FORM
----------
----------
<PAGE>
EXHIBIT "A"
1. "Diaphysial Cortical Dowel," invented by Nicholas E. Grivas and James M.
Grooms, Docket No. TB-100, U.S. Patent Application S/N 08/587,070, dated
January 16, 1996, subject to that certain Management Services Agreement
by and between UFTB and Sofamor Danek Group, Inc., dated effective July
23, 1996, as amended April 21, 1997 (the "SDG Contract"), and subject to
that certain Processing License Agreement by and between UFTB and
AlloSource, Inc., dated January 1, 1997;
2. "Bone Paste", invented by John F. Wironen and James M. Grooms, Docket No.
TB-101, U.S. Patent Application S/N 08/816,079, dated March 13, 1997,
subject to that certain Agreement by and between UFTB and Exactech, Inc.
dated effective April 22, 1997, which is also owned by the University of
Florida (the "University");
3. "Cortical Bone Interference Screw," invented by James M. Grooms, Kevin
Carter and David H. Dulebohn, Docket No. TB-102, U.S. Patent Application
S/N 08/687,018, dated July 16, 1996, subject to the SDG Contract;
4. "Open Intervertebral Spacer," invented by John R. Bianchi, Kevin C.
Carter, Bradley T. Estes, Larry Boyd and John A. Pafford, Docket No.
TB-103, U.S. Patent Application S/N not available, dated June 3, 1997,
subject to that certain Joint Ownership Agreement, between UFTB and Danek
Medical, Inc., dated June 12, 1997, and the SDG Contract;
5. "Cortical Bone Cervical Smith-Robinson Fusion Implant," invented by James
M. Grooms, Kevin C. Carter, David H. Dulebohn and Tom Sander, Docket No.
TB-104, U.S. Patent Application S/N 08/920,630, dated August 27, 1997,
subject to the SDG Contract;
6. "Segmentally Demineralized Bone Implant," invented by James M. Grooms,
Kevin C. Carter and Thomas W. Sander, Docket No. TB-105, U.S. Patent
Application S/N 08/958,364 filed October 27, 1997;
7. "Cervical Tapered Dowel," Docket No. TB-106, subject to the SDG Contract;
8. "Bone Grafting Units," U.S. Patent No. 4950296, issued August 21, 1990 to
Jonathan L. McIntyre, and assigned to UFTB on September 27, 1997.
