<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 0-26224
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0317849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Morgan Lane
Plainsboro, New Jersey 08536
(Address of principal executive offices) (Zip code)
(609) 275-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[x] - Yes [ ] - No
As of August 10, 1999 the registrant had outstanding 15,802,976 shares of
Common Stock, $.01 par value.
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30,
1999 and December 31, 1998 (Unaudited) 3
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1999 and 1998
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998 (Unaudited) 5
Notes to Unaudited Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
Exhibits 20
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
--------------- -------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................ $ 12,020 $ 5,277
Short-term investments ........................... 11,177 14,910
Accounts receivable, net ......................... 8,048 3,106
Inventories ...................................... 11,218 2,713
Prepaid expenses and other current assets ........ 706 921
-------- --------
Total current assets ....................... 43,169 26,927
Property and equipment, net ................................ 9,395 6,291
Intangible assets and goodwill, net......................... 13,650 1,446
Other assets ............................................... 588 43
-------- --------
Total assets ............................... $ 66,802 $ 34,707
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term loans (including current maturities on long-term
loan)......................................... $ 1,763 --
Accounts payable, trade........................... 1,739 573
Accrued expenses and other current liabilities.... 7,900 2,456
Income taxes payable.............................. 594 --
-------- --------
Total current liabilities................... 11,996 3,029
Long-term loan.............................................. 8,875 --
Deferred revenue............................................ 5,964 --
Deferred tax liability...................................... 1,343 --
Other liabilities........................................... 424 312
-------- --------
Total liabilities........................... 28,602 3,341
-------- --------
Stockholders' Equity:
Preferred stock, $.01 par value (15,000 authorized shares; 500 Series A
Convertible shares issued and outstanding at June 30, 1999 and December
31, 1998, $4,000 liquidation preference; 100 Series B Convertible shares
issued and outstanding at June 30, 1999, $10,000 with a 10% compounded
annual cumulative dividend liquidation preference)...... 6 5
Common stock, $.01 par value (60,000 authorized shares; 15,785 shares
issued and outstanding at June 30, 1999 and December 31,
1998)................................................... 158 158
Additional paid-in capital.................................. 130,068 120,046
Other....................................................... (84) (183)
Accumulated other comprehensive loss........................ (132) (40)
Treasury stock at cost (52 shares at June 30, 1999 and December 31,
1998)................................................... (286) (286)
Accumulated deficit......................................... (91,530) (88,334)
-------- --------
Total stockholders' equity.................................. 38,200 31,366
-------- --------
Total liabilities and stockholders' equity.................. $ 66,802 $ 34,707
======== ========
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements
3
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
----- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Product sales .................................... $12,133 $ 3,367 $16,738 $ 6,530
Other revenue .................................... 417 460 780 1,857
------- ------- ------- -------
Total revenue ........................... 12,550 3,827 17,518 8,387
COSTS AND EXPENSES
Cost of product sales ............................ 7,689 1,604 10,383 3,330
Research and development ......................... 2,307 2,074 4,304 4,216
Selling and marketing ............................ 2,927 1,519 4,506 3,079
General and administrative ....................... 4,459 2,744 6,685 5,566
------- ------- ------- -------
Total costs and expenses ................ 17,382 7,941 25,878 16,191
Operating loss ................................... (4,832) (4,114) (8,360) (7,804)
Gain on disposition of product line .............. -- -- 4,161 --
Other income, net ................................ 9 889 262 1,279
-------- ------- ------- -------
Loss before income taxes ......................... (4,823) (3,225) (3,937) (6,525)
Income tax benefit ............................... 1,241 -- 781 --
------- ------- ------- -------
Net loss ......................................... $(3,582) $(3,225) $(3,156) $(6,525)
Basic and diluted net loss per share ............. $ (0.23) $ (0.20) $ (0.21) $ (0.41)
Weighted average number of common and common share
equivalents outstanding ...................... 16,785 15,944 16,785 15,948
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements
4
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ................................................................ $ (3,156) $ (6,525)
Changes in operating assets and liabilities, excluding business
acquisitions ........................................................ 8,896 1,115
Other adjustments to reconcile net loss to net cash provided by (used in)
operating activities ................................................ (4,119) 707
-------- --------
Net cash provided by (used in) operating activities................ 1,621 (4,703)
INVESTING ACTIVITIES:
Proceeds from sale of product line and other assets ..................... 6,354 47
Purchase of restricted securities ....................................... -- (500)
Purchases of available-for-sales investments ............................ (10,817) (16,450)
Proceeds from sale/maturity of investments .............................. 15,000 20,920
Cash used in a business acquisition, net of cash acquired ............... (14,161) --
Purchases of property and equipment ..................................... (776) (606)
-------- --------
Net cash (used in) provided by investing activities ............... (4,400) 3,411
-------- --------
FINANCING ACTIVITIES:
Net proceeds from revolving credit facility ............................. 13 --
Repayments of term loan ................................................. (375) --
Proceeds from exercise of stock options ................................. -- 8
Treasury stock purchases ................................................ -- (89)
Proceeds from sale of preferred stock ................................... 9,924 4,000
Preferred stock dividends paid .......................................... (40) --
-------- --------
Net cash provided by financing activities ......................... 9,522 3,919
-------- --------
Net increase in cash and cash equivalents ....................................... 6,743 2,627
Cash and cash equivalents at beginning of period ................................ 5,277 2,083
-------- --------
Cash and cash equivalents at end of period ...................................... $ 12,020 $ 4,710
======== ========
Supplemental disclosure of non-cash investing and financing activities:
Assumption of term loan in connection with the acquisition of
NeuroCare ........................................................... $ 11,000 $ --
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements
5
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(UNAUDITED)
1. General
In the opinion of management, the June 30 unaudited condensed
consolidated financial statements contain all adjustments (consisting
only of normal recurring accruals) which the Company considers
necessary for a fair presentation of the financial position and
results of operations of the Company. Operating results for the
periods ended June 30, 1999 are not necessarily indicative of the
results to be expected for the entire year. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, including disclosures of
contingent assets and liabilities and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company's
consolidated financial statements for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K.
2. Strategic Alliance
On June 15, 1999, the Company and Johnson & Johnson Medical, Division
of Ethicon, Inc. ("JJM") signed an agreement (the "JJM Agreement")
providing JJM with exclusive marketing and distribution rights to
INTEGRA(TM) Artifical Skin ("INTEGRA Skin") worldwide, excluding
Japan, for a minimum of ten years. JJM may extend the JJM Agreement
for successive ten-year periods solely at its discretion. Under the
JJM Agreement, the Company will continue to manufacture INTEGRA Skin
and will collaborate with JJM to conduct research and development and
clinical research aimed at expanding indications and developing future
products in the field of skin repair and regeneration.
Upon signing the JJM Agreement, the Company received a payment from JJM
of $5.3 million for the exclusive use of the Company's trademarks and
regulatory filings related to INTEGRA Skin and certain other rights.
This amount has been recorded as deferred revenue and will be amortized
over the ten-year term of the JJM Agreement. Additionally, the JJM
Agreement requires JJM to make non-refundable payments to the Company
each year based upon minimum purchases of INTEGRA Skin. As a result, the
Company received a $1.2 million prepayment upon signing the JJM
Agreement for minimum purchases in 1999, which was recorded in current
liabilities as customer advances.
The JJM Agreement also provides for annual research funding beginning
in 2000 and additional payments upon achieving certain clinical
and regulatory milestones and for funding expansion of the Company's
INTEGRA Skin production capacity as certain sales targets are achieved.
6
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Acquisition
On March 29, 1999 the Company acquired the business, including certain
assets and liabilities, of the NeuroCare group of companies
("NeuroCare"), a leading provider of neurosurgical products. The $25.4
million acquisition price was comprised of $14.0 million of cash,
$11.0 million of assumed indebtedness under a term loan from Fleet
Capital Corporation ("Fleet"), and $0.4 million of contingent purchase
price adjustments. Fleet is also providing a $4.0 million revolving
credit facility to fund working capital requirements, of which $13,000
was drawn down as of June 30, 1999. The cash portion of the purchase
price was financed in part by affiliates of Soros Private Equity
Partners LLC, through the sale of $10 million of Series B Convertible
Preferred Stock and warrants. The convertible preferred shares are
convertible into 2,617,801 shares of the Company's common stock, have
a liquidation preference of $10.0 million with a 10% compounded annual
return and are senior to all other equity securities of the Company.
The warrants issued are for the right to acquire 240,000 shares of the
Company's common stock at an exercise price of $3.82 per share. The
acquisition has been accounted for under the purchase method of
accounting. The purchase price has been preliminarily allocated based
on estimated fair values at the date of acquisition. This preliminary
allocation has resulted in acquired intangibles and goodwill of
approximately $13.5 million, which is being amortized on a
straight-line basis over 15 years. The following is a summary of the
preliminary allocation (in thousands):
Cash................................................. $ 285
Accounts receivable.................................. 4,958
Inventory............................................ 10,803
Property and equipment............................... 3,654
Other assets......................................... 559
Intangibles and goodwill............................. 13,456
Accrued expenses and other liabilities............... (8,312)
Term loan............................................ (11,000)
----------
$ 14,403
==========
The following unaudited pro forma financial information assumes that the
acquisition had occurred as of the beginning of each period (in
thousands):
For the Six Months
Ended June 30,
------------------------
1999 1998
---- ----
Total revenue............. $ 24,690 $ 24,306
Net loss.................. (6,624) (5,969)
Basic and diluted loss
per share............... $ (0.43) $ (0.41)
The pro forma amounts for the six months ended June 30, 1999 exclude the
$3.7 million aftertax gain ($0.22 per share) from the sale of the
Panafil(R) product line (see Note 4). The pro forma amounts are based
upon certain assumptions and estimates, and do not reflect any
activities that might have occurred as a result of the acquisition. The
pro forma results do not necessarily represent results that would have
occurred if the acquisition
7
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
had taken place on the basis assumed above, nor are they indicative of
the results of future combined operations.
4. Panafil(R) Product Line Disposition
In January 1999, the Company sold the Rystan Panafil(R) product line,
including the brand name and related production equipment, to
Healthpoint, Ltd. for $6.4 million in cash. The Company recognized a
pre-tax gain of $4.2 million after adjusting for the net cost of the
assets sold and for expenses associated with the divestiture, including
the closing of the Rystan facility.
5. Loss per share and comprehensive loss
Basic and diluted net loss per share and comprehensive loss for the
three and six months ended June 30 were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic and diluted loss per share:
Net loss .......................................... $ (3,582) $ (3,225) $ (3,156) $ (6,525)
Dividends on Series A preferred stock ............. (20) -- (40) (7)
Dividends on Series B preferred stock ............. (250) -- (250) --
-------- -------- -------- --------
Net loss applicable to common
stock ......................................... $ (3,852) $ (3,225) $ (3,446) $ (6,532)
Average number of shares outstanding .............. 16,785 15,944 16,785 15,948
Basic and diluted loss per share .................. $ (0.23) $ (0.20) $ (0.21) $ (0.41)
======== ======== ======== ========
Comprehensive loss:
Net loss .......................................... $ (3,582) $ (3,225) $ (3,156) $ (6,525)
Unrealized (loss) gain on investments ............. (108) 6 (92) (45)
-------- -------- -------- --------
Comprehensive loss ................................ $ (3,690) $ (3,219) $ (3,248) $ (6,570)
======== ======== ======== ========
</TABLE>
Options and warrants to purchase 4,018,077 and 2,275,000 shares of
common stock and preferred stock convertible into 2,867,801 and 250,000
shares of common stock at June 30, 1999 and 1998, respectively, were not
included in the computation of diluted loss per share because their
effect would be antidilutive.
6. Inventory
Inventories consist of the following (in thousands):
June 30, 1999 December 31, 1998
------------- -----------------
Finished goods ................ $ 4,877 $1,433
Work-in-process ............... 2,622 802
Raw materials ................. 3,719 478
------- ------
$11,218 $2,713
======= ======
8
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. Current Liabilities
Accrued expenses and other liabilities consist of the following (in
thousands):
June 30, 1999 December 31, 1998
------------- -----------------
Customer advances ............... $1,715 $ 249
Acquisition costs ............... 1,325 --
Legal fees ...................... 826 591
Provision for facility closing .. 828 --
Contract research ............... 499 401
Vacation ........................ 582 260
Other ........................... 2,125 955
------ ------
$7,900 $2,456
====== ======
8. Segment Reporting
The Company's reportable business segments are outlined in the Company's
1998 audited financial statements. As a result of the NeuroCare
acquisition, the Company operates its neurosurgical business activities
as a separate business segment. The majority of the Company's
neurosurgical activity was previously included in the medical products
business segment. Additionally, subsequent to the transfer of all
INTEGRA Skin sales and marketing activities to JJM under the JJM
Agreement signed in June 1999 (see Note 2) and the sale of the
Panafil(R) product line in the first quarter of 1999, the results of the
former skin repair and burns segment are now included in the medical
products segment (which will now be referred to as the surgical products
segment), as these products are now sold under OEM arrangements.
<TABLE>
<CAPTION>
(In thousands) Reportable Corporate
Surgical Segments and All
Business Segment Neurosurgical Products Sub-total Other Total
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three months ended June 30,
1999
----
Total revenue ................. $ 8,265 $ 4,255 $ 12,520 $ 30 $ 12,550
Operating costs ............... 10,318 5,339 15,657 1,725 17,382
Net operating income (loss) ... (2,053) (1,084) (3,137) (1,695) (4,832)
1998
----
Total revenue ................. $ -- $ 3,772 $ 3,772 $ 55 $ 3,827
Operating costs ............... 582 4,651 5,233 2,708 7,941
Net operating income (loss) ... (582) (879) (1,461) (2,653) (4,114)
Six months ended June 30,
1999
----
Total revenue ................. $ 8,786 $ 8,591 $ 17,377 $ 141 $ 17,518
Operating costs ............... 11,205 11,315 22,520 3,358 25,878
Net operating income (loss) ... (2,419) (2,724) (5,143) (3,218) (8,360)
1998
----
Total revenue ................. $ 1,000 $ 7,280 $ 8,280 $ 107 $ 8,387
Operating costs ............... 1,188 9,625 10,813 5,378 16,191
Net operating income (loss) ... (188) (2,345) (2,533) (5,271) (7,804)
</TABLE>
9
<PAGE>
INTEGRA LIFESCIENCES HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. Legal Matters
In July 1996, the Company filed a patent infringement lawsuit against
three parties: Merck KGaA, a German corporation, Scripps Research
Institute, a California nonprofit corporation, and David A. Cheresh,
Ph.D., a research scientist with Scripps. The complaint charges, among
other things, that the defendant Merck KGaA willfully and deliberately
induced, and continues to willfully and deliberately induce, defendants
Scripps Research Institute and Dr. David A. Cheresh to infringe on one
of the Company's patents. This patent is one of a group of five patents
granted to The Burnham Institute and licensed by the Company that are
based on the interaction between a family of cell surface proteins
called integrins and the arginine-glycine-aspartic acid (known as "RGD")
peptide sequence found in many extracellular matrix proteins. The
defendants have filed a countersuit asking for an award of defendants'
reasonable attorney fees.
The ultimate liability of any litigation matter cannot be determined
because of the considerable uncertainties that exist. The Company's
financial statements do not reflect any significant amounts related to
possible unfavorable outcomes of the matter above. However, it is
possible that the Company's results of operations, financial position
and cash flows in a particular period could be materially affected by an
unfavorable outcome of the above matter.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the Company's
consolidated financial statements, the notes thereto and the other financial
information included elsewhere in this report and in the Company's 1998 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
General
The Company has developed principally by combining existing businesses,
acquiring synergistic technologies and forming strategic business and
technological alliances. As a result of the Company's acquisition of Rystan
Company, Inc. ("Rystan") in September 1998 and the acquisition of the
NeuroCare Group of companies ("NeuroCare") in March 1999, the Company's
consolidated financial results for the three and six months ended June 30,
1999 and 1998 may not be directly comparable. In addition, the Company's
financial information discussed below should be considered in light of the
Company's sale of the Panafil(R) product line on January 5, 1999.
Results of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Total revenues increased significantly to $12.6 million for the three months
ended June 30, 1999 from $3.8 million for the three months ended June 30, 1998
due to the acquisitions of NeuroCare and Rystan. Excluding the effects of the
NeuroCare and Rystan acquisitions, total revenues decreased to $3.6 million for
the three months ended June 30, 1999, primarily from a decrease in product
sales. Product sales, excluding the NeuroCare and Rystan acquisitions, decreased
from $3.4 million for the three months ended June 30, 1998 to $3.2 million for
the three months ended June 30, 1999. This decrease resulted from a decrease of
$0.4 million in sales of INTEGRA(TM) Artificial Skin ("INTEGRA Skin"), which was
partially offset by an increase of $0.2 million in sales of other surgical
products. On June 15, 1999, the Company and Johnson & Johnson Medical, Division
of Ethicon, Inc. ("JJM") signed an agreement (the "JJM Agreement") providing JJM
with exclusive marketing and distribution rights to INTEGRA Skin worldwide,
excluding Japan, for a minimum of ten years. Under the JJM Agreement, the
Company will continue to manufacture INTEGRA Skin and will collaborate with JJM
to conduct research and development and clinical research aimed at expanding
indications and developing future products in the field of skin repair and
regeneration. The Company believes that growth in the use and sale of INTEGRA
Skin will depend on JJM's ability to market the product for reconstructive and
other additional indications.
Excluding the NeuroCare and Rystan acquisitions, sales of the Company's other
surgical products increased to $2.1 million for the three months ended June 30,
1999 from $1.9 million for the three months ended June 30, 1998. This increase
was related a $0.4 million increase in sales of infection control products,
offset by a $0.2 million decrease in sales of other OEM products. Because
significant portions of the Company's surgical products segment sales are made
to marketing partners and distributors, quarter-to-quarter sales in the
segment can vary significantly depending on the timing of shipments to these
partners and distributors.
11
<PAGE>
Product sales from NeuroCare and Rystan were $8.9 million in the current
quarter, with the Panafil(R) product line providing $0.5 million of sales.
Although under the terms of the Panafil(R) disposition agreement the Company is
entitled to revenue based on identified sales into the podiatry and burn care
markets (less certain fees), the Company currently anticipates a decline in
Panafil(R) revenue in future periods.
Export sales for the three months ended June 30, 1999 were $3.2 million,
compared to $0.7 million for the three months ended June 30, 1998, primarily
due to the acquisition of NeuroCare.
Other revenue, which includes grant revenue, license fees, product development
revenue and royalties, was approximately $0.4 million for the three months
ended June 30, 1999 compared to $0.5 million for the three months ended June
30, 1998. The Company continues to seek research grants, licensing
arrangements and development funding for several of its technologies, although
the timing and amount of such revenue, if any, can not be predicted.
Cost of product sales increased significantly to $7.7 million (63% of product
sales) for the three months ended June 30, 1999 from $1.6 million (48% of
product sales) for the three months ended June 30, 1998 because of the effects
of the NeuroCare and Rystan acquisitions. The significant increase in cost of
product sales as a percentage of product sales is primarily attributable to $1.8
million of fair value purchase accounting adjustments related to NeuroCare and
Rystan inventory sold in the second quarter of 1999 and $0.5 million of
inventory reserves related to certain slow-moving products within the
neurosurgical business where the Company is reducing its sales and marketing
efforts. Excluding purchase accounting adjustments, cost of product sales would
have been 49% of product sales in the second quarter of 1999. Excluding the
NeuroCare and Rystan acquisitions, cost of product sales increased to $1.8
million (53% of product sales) for the three months ended June 30, 1999. The
Company anticipates that the inclusion of INTEGRA Skin sales in the surgical
products segment and the lower gross margin percentage associated with sales
of INTEGRA Skin under the JJM Agreement will adversely affect the gross margin
percentage within the surgical products business. The impact on gross margin
percentage will depend on capacity utilization and product mix within the
surgical products business. The Company's consolidated gross margin should
improve in the fourth quarter of 1999 after all inventory affected by the fair
value purchase accounting adjustments has been sold.
Research and development expense increased to $2.3 million for the three-month
period ended June 30, 1999 from $2.1 million for the three-month period ended
June 30, 1998 because of the effect of the NeuroCare acquisition. Excluding the
NeuroCare acquisition, research and development expense decreased to $1.6
million for the three months ended June 30, 1999. This decrease resulted from
the elimination of several collaborative research programs in non-core
development programs. The Company anticipates adjusting the allocation of
research and development resources as it combines NeuroCare's development
activities. The JJM Agreement will provide the Company with research funding for
INTEGRA Skin beginning in 2000. Additional funding to support the Company's
research and development programs will be available if certain clinical and
regulatory milestones related to INTEGRA Skin are achieved. The amount and
allocation of resources to fund research and development will vary depending
upon a number of factors, including the progress of development of the Company's
technologies, the timing and outcome of pre-clinical and clinical results,
changing competitive conditions, continued program funding levels, potential
funding opportunities and determinations with respect to the commercial
potential of the Company's technologies.
12
<PAGE>
Selling and marketing expense increased to $2.9 million for the three-month
period ended June 30, 1999 from $1.5 million for the three-month period ended
June 30, 1998 because of the effect of the NeuroCare acquisition. Excluding
the NeuroCare acquisition, selling and marketing expense decreased to $1.3
million for the three months ended June 30, 1999. This decrease resulted from
the reduction of INTEGRA Skin selling and marketing activities, which was
partially offset by increased expenses relating to the Company's DuraGen(TM)
dural graft matrix ("DuraGen") product pre-launch activities. In July 1999,
the Company received FDA 510(K) clearance in the United States for DuraGen as
a dura substitute for the repair of the dura mater of the brain. In February
1999, the Company received CE Mark Certification for DuraGen which allows the
Company to market this new neurosurgical implant throughout the 18 member
countries of the European Union. In the future, selling and marketing expenses
related to INTEGRA Skin are expected to decrease, as these activities will be
assumed by JJM.
General and administrative expense increased to approximately $4.5 million for
the three-month period ended June 30, 1999 from $2.7 million for the
three-month period ended June 30, 1998 primarily due to the effect of the
NeuroCare and Rystan acquisitions. Included in the amount for the three months
ended June 30, 1999 is $0.8 million of employee severance costs relating to
NeuroCare's recently closed Wisconsin facility. Excluding these charges and
the remainder of the effect of the NeuroCare and Rystan acquisitions, general
and administrative costs decreased to $2.3 million for the three months ended
June 30, 1999. This decrease is primarily the result of decreased legal fees,
as the Company resolved various litigation matters in 1998.
While the Company believes that the consolidation of its corporate and
distribution facilities will result in an overall cost reduction, the Company
is anticipating a short-term increase in operating costs related to the
NeuroCare acquisition, including additional severance costs, the transfer and
installation of distribution and telecommunication equipment and other
transition and training costs required as a result of the Wisconsin facility
closing.
Other income, net, decreased from $0.8 million for the three months ended June
30, 1998 to $9,000 for the three months ended June 30, 1999. This decrease is
primarily the result of a $0.5 million litigation settlement gain recorded in
the second quarter of 1998 and interest expense of $0.2 million in the current
quarter on the Fleet term loan assumed in the NeuroCare acquisition.
The income tax benefit of $1.2 million for the three months ended June 30,
1999 is due to the deferred tax benefits recognized on the consolidated
post-acquisition losses to the extent of the deferred tax liability recorded
in the NeuroCare acquisition. Additional income tax benefit is expected
through the remainder of 1999 as anticipated additional consolidated losses
are incurred and the deferred tax liability is further reduced.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Total revenues increased significantly to $17.5 million for the six months
ended June 30, 1999 from $8.4 million for the six months ended June 30, 1998
as a result of the NeuroCare and Rystan acquisitions. Excluding the effects of
the NeuroCare and Rystan acquisitions, total revenues decreased to $7.5
million for the six months ended June 30, 1999, primarily from a decrease of
$1.1 million in other revenue. Excluding the effects of the NeuroCare and
Rystan acquisitions, product sales increased to $6.7 million for the six
months ended June 30, 1999 from $6.5 million for the six months ended June 30,
1998. This increase was the result of a $0.8 million increase in sales of other
surgical products, which was offset by a $0.6 million decrease in sales of
INTEGRA Skin. Excluding the
13
<PAGE>
NeuroCare and Rystan acquisitions, sales of the Company's other surgical
products increased to $4.4 million for the six months ended June 30, 1999 from
$3.6 million for the six months ended June 30, 1998. This increase was primarily
related to increased sales of the Company's dental and other OEM products.
Product sales from NeuroCare (post-acquisition) and Rystan were $10.0 million in
the six months ended June 30, 1999, with the Panafil(R) product line providing
$0.9 million of sales. Export sales for the six months ended June 30, 1999
increased to $4.2 million from $1.3 for the six months ended June 30, 1998.
Other revenue was $0.9 million for the six months ended June 30, 1999 compared
to $1.9 million for the six months ended June 30, 1998. The decrease related
primarily to a non-refundable $1.0 million licensing fee from Century Medical,
Inc. in the first quarter of 1998. The Company continues to seek research
grants, licensing arrangements and development funding for several of its
technologies, although the timing and amount of such revenue, if any, can not
be predicted.
Cost of product sales increased significantly to $10.4 million (62% of product
sales) for the six months ended June 30, 1999 from $3.3 million (51% of product
sales) for the six months ended June 30, 1998 because of the effects of the
NeuroCare and Rystan acquisitions. The significant increase in cost of product
sales as a percentage of product sales is primarily attributable to $2.0 million
of fair value purchase accounting adjustments related to NeuroCare and Rystan
inventory and $0.5 million of inventory reserves related to certain slow-moving
products within the neurosurgical business. Excluding purchase accounting
adjustments, cost of product sales would have been 50% of product sales for the
six months ended June 30, 1999. Excluding the NeuroCare and Rystan acquisitions,
cost of product sales increased to $3.8 million (57% of product sales) for the
six months ended June 30, 1999, compared to $3.3 million (51% of product sales)
for the six months ended June 30, 1998, largely due to lower utilization of the
INTEGRA Skin manufacturing capacity in the first quarter of 1999.
Research and development expense increased to $4.3 million for the six months
ended June 30, 1999 compared to $4.2 million for the six months ended June 30,
1998 due to the NeuroCare acquisition. Excluding the NeuroCare acquisition,
research and development expense decreased to $3.6 million for the six months
ended June 30, 1999. This decrease resulted from the elimination of several
collaborative research programs in non-core development programs.
Selling and marketing expense increased to $4.5 million for the six-month
period ended June 30, 1999 from $3.1 million for the six-month period ended
June 30, 1998 because of the effect of the NeuroCare acquisition. Excluding
the NeuroCare acquisition, selling and marketing expense decreased to $2.8
million for the three months ended June 30, 1999. This decrease resulted from
the reduction of INTEGRA Skin selling and marketing costs, which was partially
offset by increased expenses relating to the Company's pre-launch activities
for DuraGen.
General and administrative expense increased to $6.7 million for the six-month
period ended June 30, 1999 from $5.6 million for the six-month period ended
June 30, 1998 due primarily to the effects of the NeuroCare and Rystan
acquisitions. Included in the amount for the six months ended June 30, 1999 was
$0.8 million of employee severance costs relating to NeuroCare's recently
closed Wisconsin facility. Excluding these charges and the remainder of the
effect of the NeuroCare and Rystan acquisitions, general and administrative
costs decreased to $4.3 million for the three months ended June 30, 1999. This
decrease is primarily the result of a significant decrease in legal fees in
1999, as the Company resolved various litigation matters in 1998, and a $0.2
million asset impairment charge recorded in the first quarter of 1998.
14
<PAGE>
Other income, net increased to $4.4 million for the six months ended June 30,
1999 from $1.3 million for the six months ended June 30, 1998. This increase
is primarily the result of a $4.2 million gain ($3.7 million net of taxes)
related to the sale in January 1999 of the Panafil(R) product line along with
certain other assets related to the product. Offsetting this gain is a $0.5
million litigation settlement gain recorded in the second quarter of 1998 and
interest expense of $0.3 million in the six months ended June 30, 1999 on the
Fleet term loan assumed in the NeuroCare acquisition.
The income tax benefit of $0.8 million for the six months ended June 30, 1999
included $0.5 million of taxes associated with the gain on the sale of the
Panafil(R) product line, offset by a $1.2 million deferred tax benefit discussed
above.
Liquidity and Capital Resources
The Company has funded its operations to date primarily through private and
public offerings of equity securities, product revenues, research and
collaboration funding, borrowings under a revolving credit line and cash
acquired in connection with business acquisitions. At June 30, 1999, the Company
had cash, cash equivalents and short-term investments of approximately $23.2
million and $10.6 million in short and long-term debt. The Company's principal
uses of funds during the six-month period ended June 30, 1999 were $14.1
million in the acquisition of NeuroCare, $0.8 million in purchases of property
and equipment and $0.4 million in repayments of term loans. Cash flows provided
by operations for the six months ended June 30, 1999 were $1.6 million, which
included $6.5 million received from the JJM Agreement. During the six months
ended June 30, 1999, the Company also raised $10.0 million with the sale of
Series B Preferred Stock and warrants to Soros Private Equity Partners LLC,
assumed $11 million of term debt in connection with the NeuroCare acquisition
and received $6.4 million in connection with the sale of the Panafil(R) product
line.
The Company anticipates that it will continue to use its liquid assets to fund
operations until sufficient revenues can be generated through product sales and
collaborative arrangements. With the acquisition of NeuroCare, the Company has
approximately $2.4 million in liabilities related to the acquisition that will
need to be funded over the remainder of 1999, including $0.4 million of a
contingent purchase price adjustment. As part of the assumption of the NeuroCare
term loan, the Company obtained a $4.0 million revolving credit facility to
fund working capital needs of NeuroCare, of which $13,000 was drawn down at June
30, 1999. The Company anticipates that NeuroCare will utilize the revolving
credit facility to fund its capital needs. In the short-term, the Company
believes that it has sufficient resources to fund its operations. However, in
the longer-term, there can be no assurance that the Company will be able to
generate sufficient revenues to obtain positive operating cash flows or
profitability.
Year 2000 Disclosure
As is true for most companies, the potential for problems involving existing
information systems as we approach and pass January 1, 2000 creates a risk for
the Company. These potential problems are the result of the inability of
certain date-sensitive computer programs and embedded controls to recognize a
two-digit date field designated as "00" as the year 2000 instead of the year
1900, the consequences of which could lead to system failures or
miscalculations causing disruptions to operations and normal business
activities. This is a significant issue with far reaching implications, some
of which cannot be anticipated or predicted with any degree of certainty and
is commonly referred to as a Year 2000 (Y2K) compliance issue.
15
<PAGE>
The Company's Businesses
The Company has completed its initial assessment as well as its correction
plan for all areas previously identified as potentially compromised by the
advent of Y2K. This correction plan was comprised of (i) the assessment of
information technology systems ("IT systems") and non-IT systems for Y2K
compliance, (ii) the modification and/or replacement of non-compliant systems,
(iii) the testing of modified and/or replaced systems, and (iv) the deployment
of Y2K compliant systems. Actions taken to achieve Y2K compliance included
upgrading current hardware and software as well as purchasing additional
hardware and software to enhance current IT systems. The majority of the
capital expenditures and operating costs associated with these upgrades and
purchases would have occurred in the normal course of business regardless of
the Y2K issue, although a portion of such expenditures and costs is
attributable to the Company's Y2K correction plan. The Company's upgrades and
purchases for all critical systems have been implemented and tested. We have
tested and confirmed that all critical systems are fully Y2K compliant or only
require a simple manual update on the first of the new year to be compliant.
The few remaining non-critical systems will be made Y2K compliant before
December 31, 1999 as part of regularly scheduled system upgrades.
The only business division of the Company that makes and sells products that
contain computer processors is Integra NeuroCare. The Company has determined
that the Camino line of intracranial pressure monitors does not include a
dating function, and therefore will not be affected by Y2K considerations. The
Neuro Navigational line of neuroendoscopy products does contain certain dating
functions that will be affected by Y2K considerations, but the substantive
performance of the devices will not be affected. The Company is providing its
customers with instructions for resetting the dating function to overcome
effects of the Y2K considerations. No other products manufactured by the
Company contain any materials that would make such products susceptible to
disruptions relating to the Y2K.
Suppliers
The Company has been reviewing and has requested assurances on the status of
the Y2K readiness of its critical suppliers. Many of these suppliers, however,
have provided limited assurances on the status on their Y2K readiness. The
Company plans to continue to monitor critical suppliers during 1999. As a
precaution, Integra LifeSciences is beginning to build inventories of both raw
materials and finished goods so that temporary shortages or an increase in
product demand will not negatively effect the companies operations. The
Company has also reviewed information regarding its major customers to assess
their readiness for Y2K. If a significant number of suppliers and customers
experience disruptions as a result of the Y2K issue, this could have a
material adverse effect on the financial position and results of operations of
the Company. Although the Company is formulating contingency plans to deal
with Y2K problems of key business partners and major customers, there can be
no assurance that these plans will address all Y2K problems or that the
implementation of these plans will be successful.
Given the information available at this time, the Company currently
anticipates that the amount that will be spent to complete its Y2K correction
plan will not have a material adverse impact on the Company's business,
results of operations, financial position and cash flow. Furthermore, Integra
does not expect that the effects of any Y2K non-compliance on its systems
will have any material adverse impact on the Company's business, results of
operations, financial positions or cash flows. However, there can be no
assurance that Integra will not incur additional expenses or experience
business disruption as a result of systems problems associated with the
century change, including system and equipment problems with third parties
with which Integra does business.
16
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 17, 1999 and in
connection therewith, proxies were solicited by management pursuant to
Regulation 14 under the Securities Exchange Act of 1934. An aggregate of
15,730,933 shares of the Company's common stock ("Common Stock"), 500,000
shares of Series A Preferred Stock (which are convertible into 250,000 shares
of Common Stock) and 100,000 shares of Series B Preferred Stock (which are
convertible into 2,617,801 shares of Common Stock) (collectively, "Shares")
were outstanding and entitled to a vote at the meeting. At the meeting the
following matters (not including ordinary procedural matters) were submitted
to a vote of the holders of Shares, with the results indicated below:
1. Approval of Company Name Change. The proposal to approve and adopt an
amendment to the Company's Amended and Restated Certificate of Incorporation
to change the name of the Company to "Integra LifeSciences Holdings
Corporation" was approved. The tabulation of votes was as follows:
For Against Abstentions
--- ------- -----------
14,068,244 34,806 18,591
2. Approval of the Company's 1999 Stock Option Plan. The Company's 1999 Stock
Option Plan was approved. The tabulation of votes was as follows:
For Against Abstentions
--- ------- -----------
10,470,286 1,729,929 1,976,752
3. Approval of the Company's Deferred Compensation Plan. The Company's
Deferred Compensation Plan was approved. The tabulation of votes was as follows:
For Against Abstentions
--- ------- -----------
13,971,862 123,118 17,110
4. Election of directors to serve until the 2000 Annual Meeting. The following
persons, all of whom were serving as directors, except for Mr. Moszowski, and
were management's nominees for election, were elected. There was no solicitation
in opposition to such nominees. The tabulation of votes was as follows:
Nominee For Withheld
------- --- --------
Keith Bradley 14,069,091 50,950
Richard E. Caruso 14,066,800 53,241
Stuart M. Essig 14,069,941 50,100
George W. McKinney, III 14,069,091 51,292
Neil Moszkowski 14,068,749 52,750
James M. Sullivan 14,069,263 50,778
Edmund L. Zalinski 14,066,889 53,152
17
<PAGE>
5. Ratification of independent auditors. The appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year was ratified. The tabulation of votes was as follows:
For Against Abstentions
--- ------- -----------
13,276,727 11,458 4,275
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Supply, Distribution and Collaboration Agreement between
Integra LifeSciences Corporation and Johnson & Johnson
Medical, a Division of Ethicon, Inc. dated as of June 3,
1999, certain portions of which are subject to a request
for confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 13, 1999, a Report on Form 8-K dated March 29, 1999 was
filed relating to the acquisition of certain assets and stock held by
Heyer-Schulte NeuroCare, L.P. and its subsidiaries, Heyer-Schulte
NeuroCare, Inc., Camino NeuroCare, Inc. and Neuro Navigational, LLC
(collectively, the "NeuroCare Group") on March 29, 1999.
On June 14, 1999, a Report on Form 8-K/A was filed to present and
disclose the financial statements and pro forma financial information
required to be filed in connection with the acquisition of the
NeuroCare Group.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
Date: August 16, 1999 By: /s/ Stuart M. Essig
--------------------------
Stuart M. Essig
President and Chief Executive Officer
Date: August 16, 1999 By: /s/ David B. Holtz
-----------------------
David B. Holtz
Vice President, Finance and Treasurer
19
<PAGE>
Exhibit Index
-------------
Exhibit No.
- -----------
10.1 Supply, Distribution and Collaboration Agreement between Integra
LifeSciences Corporation and Johnson & Johnson Medical, a Division
of Ethicon, Inc. dated as of June 3, 1999, certain portions of
which are subject to a request for confidential treatment under
Rule 24b-2 of the Securities Exchange Act of 1934.
27 Financial Data Schedule
<PAGE>
EXECUTION COPY
SUPPLY, DISTRIBUTION AND COLLABORATION AGREEMENT
between
INTEGRA LIFESCIENCES CORPORATION
and
JOHNSON & JOHNSON MEDICAL(Trademark), A DIVISION OF ETHICON, INC.
Dated as of June 3, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.................................................1
Section 1.1. Certain Defined Terms...............................1
ARTICLE II. APPOINTMENT AND SCOPE OF DISTRIBUTORSHIP....................8
Section 2.1. Appointment and Acceptance of Appointment...........8
Section 2.2. Extent of Territory.................................8
Section 2.3. JJM's Exclusivity Commitment.......................10
Section 2.4. Integra's Commitment to JJM on Other Wound
Care Products....................................13
Section 2.5. Integra Dental/Endodermis Products.................14
ARTICLE III. JJM's MARKETING OBLIGATIONS AS DISTRIBUTOR.................15
Section 3.1. Purchase of Products; Minimum Effort...............15
Section 3.2. Certain Duties of JJM as Distributor...............16
Section 3.3. Marketing Plan.....................................17
ARTICLE IV. SUPPLY OF PRODUCTS.........................................17
Section 4.1. Orders.............................................17
Section 4.2. Supply Difficulties; Supply Default................18
Section 4.3. Expansion of Production Capacity...................21
Section 4.4. Shipping and Delivery..............................22
Section 4.5. Certain Duties of Integra..........................23
Section 4.6. Sampling...........................................23
Section 4.7. Supply for [**]and [**] Trials.....................24
Section 4.8. Regulatory and Quality Audits; Integra
Obligations......................................24
ARTICLE V. INITIAL PAYMENTS; TRADEMARK LICENSE........................25
Section 5.1. Initial Payments...................................25
Section 5.2. Limited License to Integra's Trademarks............26
ARTICLE VI. PRODUCT SUPPLY PRICE; MINIMUM PREPAYMENTS AND
ADJUSTMENTS..............................................27
Section 6.1. Supply Price..................................... 27
Section 6.2. Supply Price Adjustments...........................29
Section 6.3. Invoicing/Payment..................................30
Section 6.4. Quarterly Adjustment...............................30
Section 6.5. Accounting.........................................31
Section 6.6. Records............................................31
Section 6.7. Annual Minimum Prepayments.........................32
Section 6.8. Adjustments........................................33
- -----------------
[**]Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
ARTICLE VII. COMPLAINTS/RECALLS OF PRODUCTS.............................37
Section 7.1. Complaints.........................................37
Section 7.2. Recall.............................................38
ARTICLE VIII. TRADEMARK/TRADE DRESS OF PRODUCTS..........................39
Section 8.1. General............................................39
Section 8.2. Use of Trademarks..................................39
Section 8.3. Promotional Materials..............................40
ARTICLE IX. PRODUCT WARRANTY...........................................40
Section 9.1. Product Warranty...................................40
SECTION 9.2. Disclaimer of Warranties...........................41
ARTICLE X. INDEMNIFICATION............................................41
Section 10.1. Indemnity.........................................41
Section 10.2. Notice and Procedures.............................42
Section 10.3. Insurance.........................................43
ARTICLE XI. RESEARCH & DEVELOPMENT PROGRAM.............................43
Section 11.1. Product Improvement Research......................43
Section 11.2. JJM Collaboration.................................44
Section 11.3. Annual Plan.......................................44
ARTICLE XII. RESEARCH FUNDING...........................................44
Section 12.1. Funding Through 2004..............................44
Section 12.2. Funding After 2004................................45
Section 12.3. Funding for Extension Period......................45
Section 12.4. Utilization and Allocation of Research
Payments..........................................45
Section 12.5. Additional Technology Acquisition Funding.........46
Section 12.6. Utilization of Animal Testing Facility............46
Section 12.7. Development of [**]Product........................47
Section 12.8. Reports and Exchange of Information...............47
ARTICLE XIII. CLINICAL AND REGULATORY EVENT PAYMENTS.....................48
Section 13.1. Clinical and Regulatory Event Payments.............48
Section 13.2. C&R Event Payments Upon Termination................50
ARTICLE XIV. CLINICAL RESEARCH..........................................51
Section 14.1. Responsibilities of the Parties...................51
Section 14.2. Clinical Protocol; Selection of Sites.............52
Section 14.3. Japan Studies.....................................53
- ----------------
[**]Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
(ii)
<PAGE>
ARTICLE XV. REGULATORY APPROVALS.......................................53
Section 15.1. General Responsibilities..........................53
Section 15.2. Responsibilities in Specific Countries............54
Section 15.3. JJM Regulatory Participation......................54
ARTICLE XVI. JOINT STEERING COMMITTEE...................................55
Section 16.1. Appointment of Members............................55
Section 16.2. Role of Committee.................................55
Section 16.3. Designation of Members............................55
Section 16.4. Meetings..........................................56
Section 16.5. Disputes..........................................56
ARTICLE XVII. EXECUTIVE COMMITTEE........................................56
Section 17.1. Executive Committee...............................56
ARTICLE XVIII. PERSONNEL; CONSULTANTS.....................................57
Section 18.1. Liaison Officers..................................57
Section 18.2. Salespeople.......................................57
Section 18.3. Assignment and Assumption of Consultant
and Other Contracts.............................58
ARTICLE XIX. NON-SOLICITATION...........................................58
Section 19.1. Non-Solicitation..................................58
ARTICLE XX. STANDSTILL.................................................58
Section 20.1. Standstill.........................................58
Section 20.2. Shareholder Rights Plan............................59
ARTICLE XXI. INTELLECTUAL PROPERTY......................................59
Section 21.1. Ownership of Inventions...........................59
Section 21.2. Out-licensing of Funded Inventions................60
Section 21.3. Product Improvements to Distributors..............60
ARTICLE XXII. PATENT/FILING/MAINTENANCE..................................60
Section 22.1. Prosecution.......................................60
Section 22.2. Costs.............................................61
ARTICLE XXIII. REPRESENTATIONS AND WARRANTIES OF INTEGRA..................61
Section 23.1. Organization, Standing, Etc.......................61
Section 23.2. Authorization, Noncontravention...................61
Section 23.3. Binding Effect....................................62
Section 23.4. No Infringement of Third Party Rights.............62
(iii)
<PAGE>
ARTICLE XXIV. REPRESENTATIONS AND WARRANTIES OF JJM......................62
Section 24.1. Organization, Standing, Etc.......................62
Section 24.2. Authorization, Noncontravention...................62
Section 24.3. Binding Effect....................................63
ARTICLE XXV. PATENT INFRINGEMENT........................................63
Section 25.1. Third Party Infringement..........................60
Section 25.1.1. Enforcement by Integra..........................63
Section 25.1.2. Joint Enforcement...............................63
Section 25.1.3. Enforcement by JJM..............................64
Section 25.2. Costs.............................................64
Section 25.3. Assistance........................................64
ARTICLE XXVI. CONFIDENTIALITY, DISCLOSURE AND PUBLICATION................65
Section 26.1. Confidentiality...................................65
Section 26.2. Exceptions........................................65
Section 26.3. Publications......................................66
ARTICLE XXVII.PUBLIC STATEMENT AND PRESS RELEASES.........................67
Section 27.1. Public Statements and Press Releases..............67
Section 27.2. Transaction Press Release.........................67
Section 27.3. SEC Filing........................................67
ARTICLE XXVIII.DISPUTE RESOLUTION.........................................68
Section 28.1. Executive Resolution...............................68
Section 28.2. Mediation..........................................68
Section 28.3. Court Resolution of Claims.........................69
ARTICLE XXIX. TERM AND TERMINATION.......................................69
Section 29.1. Term..............................................69
Section 29.2. Termination.......................................69
Section 29.3. Effect of Termination or Expiration...............71
Section 29.4. Additional Effects of Termination
Pursuant to Sections 29.2(a), 29.2(b) or
29.2(c).........................................73
ARTICLE XXX. FORCE MAJEURE..............................................74
Section 30.1. Force Majeure......................................74
ARTICLE XXXI. GENERAL PROVISIONS.........................................75
Section 31.1. Relationship of the Parties.......................75
Section 31.2. Limitation of Liability...........................75
Section 31.3. Assignment........................................76
Section 31.4. Entire Agreement; Amendments......................76
Section 31.5. Successors and Assigns; No Third-Party
Beneficiaries.....................................76
(iv)
<PAGE>
Section 31.6. Specific Performance..............................76
Section 31.7. Nonwaiver.........................................76
Section 31.8. Governing Law.....................................77
Section 31.9. Severability......................................77
Section 31.10. Notices..........................................77
Section 31.11. Counterparts.....................................78
Section 31.12. U.S. Accounts....................................78
Section 31.13. Rights Upon Insolvency...........................78
(v)
<PAGE>
THIS SUPPLY, DISTRIBUTION AND COLLABORATION AGREEMENT, dated as of June
3, 1999, is made and entered into by and between Integra LifeSciences
Corporation, a Delaware corporation, having offices at 105 Morgan Lane,
Plainsboro, New Jersey 08536, U.S.A. ("Integra") and Johnson & Johnson
Medical(Trademark), a Division of Ethicon, Inc., a New Jersey corporation,
having offices at 2500 Arbrook Blvd., Arlington, Texas 76014, U.S.A. ("JJM").
WHEREAS, Integra has developed the Integra(Trademark) Dermal Regeneration
Template(Trademark) for use as a skin implant that provides a matrix structure
to facilitate the orderly regeneration of human tissue on wound sites; and
WHEREAS, Integra desires to engage JJM as its exclusive distributor to
market, distribute and sell the Integra(Trademark) Dermal Regeneration
Template(Trademark) and other Products within the Territory and JJM desires to
serve in such capacity; and
WHEREAS, both parties recognize that Integra will continue to develop,
market, distribute and sell Integra(Trademark) Dermal Regeneration
Template(Trademark) for dental/gingival use under a different trademark, as well
as any other products Integra may develop, purchase or in-license outside the
Field; and
WHEREAS, JJM wishes to provide financial and other support for Integra in
its ongoing research, development and clinical efforts relating to the
Integra(Trademark) Dermal Regeneration Template(Trademark) to facilitate
Integra's development of improvements to such product and its development of
additional approved indications for such product; and
WHEREAS, JJM and Integra wish to define various elements of their
collaboration regarding the Integra(Trademark) Dermal Regeneration
Template(Trademark) and its related improvements;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings.
(a) "Affiliate" means, with respect to any specified Person (as
hereinafter defined), any other Person that directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, such specified Person. "Control", with respect to an entity, shall be
deemed to include but not be limited to the power to vote or direct the
<PAGE>
voting (by reason of ownership of securities, contractual rights or otherwise)
of 50% or more of the voting securities of such entity. Any references in this
Agreement to the Affiliates of JJM shall hereby be deemed to include JJM's
Parent and the Affiliates of JJM's Parent.
(b) "Annual Plan" means the written plan describing the research
goals, clinical trials (other than the Excisional Wound and Chronic Wound
Trials), specific budgets and priorities to be carried out pursuant to this
Agreement during a calendar year by Integra and JJM, whether utilizing Integra
or JJM personnel, or both, or utilizing third party providers, as annually
approved by the Joint Steering Committee.
(c) "Business Day" means a day other than a Saturday, Sunday or
other day on which banks in the State of New Jersey are not required or
authorized to close.
(d) "Calendar Quarter" means the three month periods commencing on
January 1, April 1, July 1 and October 1 in each year.
(e) " [**] Wound Trials" means the first two completed clinical
research studies conducted under an IDE with the intent of obtaining regulatory
approval for indications for the treatment of [**] Wounds, the results of which
will be included in a PMA and other submissions for Regulatory Approval of the
Products for such [**] Wound indications.
(f) "[**] Wounds" means [**]
(g) "Competitive Products" means products in the Field that are
marketed by or approved for marketing in the United States or any country of the
European Union and that are regulated by the FDA (or foreign agency) as medical
devices or biologics (or regulated by a Tissue Banking Authority).
Notwithstanding the foregoing, no pharmaceutical product which has or is
expected to have an NDA (or foreign equivalent) classification and no product
which is or is expected to be sold through retail distribution channels or
otherwise sold to consumers shall be deemed a "Competitive Product".
(h) "Competitive Transaction" means a transaction in which a Person
obtains rights from a non-Affiliate to manufacture, market or sell a Competitive
Product.
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(i) Information is "Confidential Information" to the party receiving
it if it is presented in writing by one party to the other party and identified
in such writing as confidential, or if it is disclosed orally by one party to
the other party and outlined and identified as confidential in writing to the
other party within thirty (30) days of the oral disclosure. By way of example,
Confidential Information shall include, without limitation, all information
relating to existing and potential customers, suppliers, markets, contracts,
prices, products, personnel, strategies, policies, systems, procedures,
technologies, know-how, information, data, processes, inventions, research,
developments, formulations, applications, methods of manufacture and any other
information relating to either party or any of its Affiliates.
(j) "Complaint" means any oral, written or electronic
communication that alleges deficiencies related to the identity, quality,
durability, reliability, safety, effectiveness or performance of a Product
that has been manufactured by Integra after it is released for distribution.
(k) "Effective Date" means June 15, 1999.
(l) "Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens), charge,
encumbrance, option, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, transfer,
receipt of income or other exercise of any attributes of ownership.
(m) "[**] Wounds" means [**]
(n) "Existing Distributor Countries" means the countries set forth
on Schedule 1.1(n) hereto for so long as Integra maintains distributors other
than JJM in such countries.
(o) "FDA" means the United States Food and Drug Administration, or
any successor body.
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(p) "Field" means all devices, products and biologics, regardless of
physical form, that (A) are comprised of a matrix which is implanted as a dermal
or epidermal replacement, (B) are integrated, resorbed or remodeled to resemble
native tissue, (C) have a mode of action which is primarily dependent upon the
three-dimensional matrix or matrix elements [**] and (D) are intended to
facilitate the repair and/or regeneration of human skin (which includes dermis,
epidermis, epidermal and dermal basal laminas, and skin appendages (excluding
all endodermis and dental and gingival tissues)).
(q) "Governmental Authority" means any relevant national, federal,
state, provincial, or local governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body, in each case wherever located.
(r) "Integra Change of Control" means (i) the sale of all or
substantially all of the assets of Integra's Parent to any Person, (ii) the
merger or consolidation of Integra's Parent with or into any other Person in
which Integra's Parent does not retain a majority of the voting power of the
corporation or entity surviving the merger of consolidation or (iii) the
acquisition by any Person of shares of Common Stock of Integra's Parent
representing a majority of the issued and outstanding shares of Common Stock
then outstanding.
(s) "Integra Dental/Endodermis Product" means a product which is
intended to facilitate the repair, healing and/or regeneration of endodermis or
dental or gingival tissues and which would have been a "Product" had it been
intended to facilitate the repair, healing and/or regeneration of human skin
(which includes dermis, epidermis, epidermal and dermal basal laminas, and skin
appendages).
(t) "Integra's Parent" means Integra LifeSciences Holdings
Corporation, a Delaware corporation.
(u) "Invention" means the Patents and all copyrights, inventions
(patentable or otherwise), developments, designs, applications, improvements,
trade secrets, formulae, concepts, ideas, know-how, methods or processes,
discoveries and techniques necessary or desirable for the development,
manufacture, sale or distribution of, or otherwise relating to, Products,
whether owned as of the date hereof or hereafter acquired or licensed pursuant
to the terms of this Agreement.
(v) "Joint Steering Committee" shall have the meaning attributed
to such term in Section 16.1 of this Agreement.
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(w) "JJM's Parent" means Johnson & Johnson, a New Jersey
corporation.
(x) "JJM's Wound Care Business" means JJM's business comprising all
medical devices or biologics that are used to treat diseased or damaged skin, as
well as any other products sold by JJM in the Field, but specifically does not
include (i) wound or skin care products which are or are expected to be sold
through retail distribution channels or otherwise sold to consumers or (ii)
pharmaceutical products which have an NDA classification.
(y) "Licensed Trademark" means the trademark identified in
Schedule 1.1(y) hereto.
(z) "Manufacturing Yield" shall mean, with respect to any
manufactured lot of Products, a percentage equal to the number of units of such
Product produced in such lot available for shipment to customers divided by the
maximum number of units of such Product that could have been produced given the
raw materials and processes deployed in such manufactured lot.
(aa) "Net Sales" means the revenue received by JJM and its
Affiliates from sales of Products to non-Affiliated purchasers, less cash
discounts, refunds, rebates, group fees, duties, freight charges, replacements
or credits allowed to purchasers for return of such Products or as reimbursement
for damaged Products, sales and use taxes, customs, and any other governmental
tax or charge (except income taxes) imposed on or at the time of production,
importation, use, or sale of Products. If such Products are sold in combination
with other components (a "Combination"), Net Sales for purposes of determining
the payments to be made by JJM to Integra on such Combination shall be
calculated as follows:
P = the price of the Product which is part of such
Combination when such Product is separately sold
O = the other component price in such Combination when
separately sold, or if not sold separately the price
of an equivalent component that is sold separately
C
T = the total net revenues from the Combination sold during the
applicable quarter
Net Sales for Combinations shall be calculated as follows:
Net Sales = C * [P / (P + O)]
T
In instances where more than one Combination is sold as to which all elements
(namely P, 0 and C) are known, the above described fraction shall be
calculated for each such Combination, the
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results will be weighted for unit sales of each such combination and added,
the resulting number will then be divided by the number of units of such
Combinations, and the resulting fraction shall be used in calculating Net
Sales for Combinations.
(bb) "Other Wound Care Product" means a product which would have been a
"Product" insofar as it is intended to facilitate the repair, healing and/or
regeneration of human skin (which includes dermis, epidermis, epidermal and
dermal basal laminas, and skin appendages (excluding all endodermis and dental
and gingival tissues)), including the treatment of Chronic Wounds and Excisional
Wounds, but which is outside the Field (and thus not a "Product") because it
lacks one or more of the characteristics defined in clauses (A), (B) or (C) of
the definition of the Field.
(cc) "Patent" means (i) the U.S. and foreign patent applications and
patents owned or licensed by Integra that are directly related to or have
application in the Field, (ii) U.S. and foreign patent applications and patents
owned solely by Integra, that claim inventions that are directly related to or
have application in the Field (and that are conceived or reduced to practice as
part of the research and development program contemplated by this Agreement) and
(iii) all divisions, continuations, continuations-in-part, and substitutions
thereof, and all extensions, reissues and re-examinations of any of the
foregoing. Exhibit A hereto sets forth each patent described in (i) above;
provided that failure to include a patent or an application on Exhibit A shall
not affect its status as a Patent.
(dd) "PMA" means a Pre-Market Approval application filed with the FDA
or a Pre-Market Approval Supplement.
(ee) "Person" means any individual, partnership, firm, corporation,
Limited Liability Company, joint venture, association, trust, unincorporated
organization or other entity, as well as any syndicate or group acting in
concert.
(ff) "Producer Price Index" means the final annual Producer Price
Index for Finished Goods without any seasonal adjustment as reported by the
Bureau for Labor Statistics of the U.S. Department of Labor or its successor
agency.
(gg) "Products" means any product in the Field which is or will be
manufactured by or on behalf of Integra, including, without limitation, the
INTEGRA(Trademark) Dermal Regeneration Template(Trademark) and approved
indications and all future Product Improvements and expanded indications in the
Field. Products only include those products which are regulated by the FDA (or
foreign agency) as medical devices or biologics and specifically excludes
pharmaceutical products which have or are reasonably expected to have an NDA (or
foreign equivalent) classification ("NDA Drug") and products which are or are
expected to be sold through retail distribution channels or otherwise sold to
consumers. Any
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determination that a product is a Product by virtue of its
regulation by the FDA (or a foreign agency) as a medical device or biologic, or
that it is not a Product by virtue of its regulation by the FDA (or a foreign
agency) as an NDA Drug, shall be made with reference to the Food, Drug and
Cosmetic Act, rules and regulations thereunder, and authoritative
interpretations thereof (or foreign equivalents thereof, as the case may be), in
each case as the same prevailed on the date of this Agreement. Notwithstanding
the foregoing, (i) enhancements to the Integra Artificial Skin planned by the
Joint Steering Committee shall be considered Products regardless of their
classification by applicable regulatory authorities, and (ii) products owned or
sold by Integra, other than the INTEGRA(Trademark) Dermal Regeneration
Template(Trademark), which have received regulatory clearance or approval in the
United States or Europe as of the date hereof shall not constitute Products
hereunder.
(hh) "Product Improvements" means any improvement to the Products
that are conceived or reduced to practice by Integra (or to which Integra
acquires rights) or as part of the research and development program
contemplated by this Agreement, together with any additional approved
indications within the Field for such Products or Product Improvements. For
the avoidance of doubt, any improvements to the Products incorporating the RGD
peptide technology shall be included in Product Improvements.
(ii) "Regulatory Approval" in any country means a PMA approval,
European approvals or registration and other international regulatory
approvals, including CE mark approvals or any other regulatory approval to
commence commercial sale of a Product for one or more indications in such
country.
(jj) "Research Payments" shall have the meaning ascribed to such
term in Section 12.1 below.
(kk) "Termination Date" means the expiration date of the Term, as
defined in Section 29.1 hereof, or any earlier date on which termination of
provisions of this Agreement become effective pursuant to Article XXIX hereof.
(ll) "Technology" means: (a) inventions (whether or not patentable,
reduced to practice or made the subject of a pending patent application or
applications), (b) ideas and conceptions of potentially patentable subject
matter, including, without limitation, all patent disclosures (whether or not
reduced to practice or made the subject of a pending patent application or
applications), (c) patents, patent registrations and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations thereof) and all rights therein and improvements
thereto, (d) computer software, including, without limitation, source code,
operating systems and specifications, data and data bases and files, and (e)
know how and trade secrets.
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(mm) "Territory" means all of the countries or other geographical
areas in the world except (i) Japan and (ii) any of the Existing Distributor
Countries, provided that the exception relating to Existing Distributor
Countries shall apply to a particular country only so long as it shall remain
an Existing Distributor Country as contemplated by Section 2.2 of this
Agreement.
ARTICLE II.
APPOINTMENT AND SCOPE OF DISTRIBUTORSHIP
Section 2.1. Appointment and Acceptance of Appointment. Integra
hereby appoints JJM for the term of this Agreement, and JJM hereby accepts
Integra's appointment, as Integra's exclusive distributor to market, promote
and sell the Products in the Territory, pursuant to the terms and subject to
the conditions set forth in this Agreement. In furtherance of the foregoing,
Integra shall not sell Products in the Territory or appoint any other Person
as a distributor to distribute or sell Products in the Territory.
Section 2.2. Extent of Territory.
(a) In countries where the Products are approved for sale and there
is not an Integra appointed distributor ("Direct Countries"), each of Integra
and JJM shall use its commercially reasonable efforts to transition sales of
the Products to JJM commencing on the Effective Date. In Direct Countries, all
sales shall be credited to JJM commencing on the Effective Date. Integra shall
work diligently to ensure an orderly and efficient transition of sales and
related support activity to JJM.
(b) If JJM has requested that Integra terminate its existing
distributor in one of the Existing Distributor Countries and Integra so
terminates such distributor pursuant to Section 2.2(c) below, then JJM shall
use its commercially reasonable efforts to commence selling the Products
within four months of such termination.
(c) Integra shall diligently seek to (i) terminate its current
distribution agreements for Products in [**] and (ii) at JJM's discretion to
terminate or assign its current distribution agreements for Products in the
other Existing Distributor Countries within four months of the Effective Date,
provided, however, that Integra shall not be obligated to terminate any
agreements if such termination cannot be achieved at a Reasonable Termination
Cost (as defined below). Integra shall not renew any such distribution agreement
upon the expiration of its term, provided, however, that Integra may renew
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any such agreement if failure to renew such agreement is reasonably
expected to result in Damages (as defined in Section 10.1 below) to Integra(**)
Following the termination of any such distribution agreement, the
relevant country shall automatically no longer be deemed an Existing Distributor
Country, but rather shall be deemed to be a part of the Territory, and the
adjustments to the Minimum Prepayments (as defined in Section 6.7 below)
pursuant to Section 6.8 hereof shall no longer be made with respect to such
country. Nothing herein shall require, or be deemed to require, either Integra
or JJM to breach any of its current distribution agreements for Products.
(d) "Reasonable Termination Cost" means, for each Existing
Distributor Country, [**]of the Net Sales of Products achieved by Integra's
distributor in such country in the twelve month period prior to the Effective
Date, provided that such cost shall not exceed (a) [**] for [**] (b) [**] for
[**] and (c) [**] for [**]
(e) Integra shall seek to enforce the geographic restrictions of its
current distribution agreements for Products in the Existing Distributor
Countries; provided that Integra may determine not to initiate an action for
the enforcement of such geographic restrictions if [**]
(f) JJM shall have up to [**] from the Effective Date to elect
whether it wants Integra to assign an existing distribution agreement to JJM
rather than to have Integra seek to terminate such agreement. Other than [**]
Integra shall not terminate any distributor within the first [**] from the
Effective Date. Those countries, other than the Core Countries, as to which
existing distribution agreements are assignable, and as to which JJM elects to
have the applicable distribution agreement assigned to it, shall be subject to
the [**] such distribution agreement is either terminated or expires in
accordance with its original term and without regard to any extension to which
JJM may subsequently agree, [**], and such countries shall no longer be deemed
Existing Distributor Countries once such assignment has been effected.
(g) If Integra has not terminated a distribution agreement with
respect to a [**] within [**] of the
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Effective Date, Integra will, to the extent the same is assignable, assign such
distribution agreement to JJM. On [**] Integra will transfer to JJM, to the
extent the same is assignable, any distribution agreements covering an Existing
Distributor Country that has not been terminated or assigned prior to that date.
(h) Integra represents and warrants that annexed hereto on Schedule
1.1(n) is a true, complete and accurate list of the countries in which Integra
maintains or might be alleged to maintain a distributor for the Product as of
the date hereof, whether Integra has a signed agreement in place with any such
distributor, and whether or not the terms of any such signed agreements
prohibit or otherwise restrict their assignment by Integra.
Section 2.3. JJM's [**] Commitment.
(a) Neither JJM nor any of its Affiliates shall engage in the
distribution, marketing, promotion or sale of any Competitive Product in any
country in the Territory in which Integra has obtained or has filed for
Regulatory Approval, [**]
(b) Notwithstanding Section 2.3(a) above, JJM and its Affiliates may
design, develop, manufacture, distribute, market, promote and sell any
Competitive Product which is based on (i) Technology owned or licensed by JJM
or one of its Affiliates on the date hereof or (ii) Technology (other than
Jointly-Owned Inventions or Funded Inventions) internally developed by JJM or
one of its Affiliates after the date hereof. In addition, JJM and its
Affiliates shall have the right, notwithstanding Section 2.3(a) above, to
design, develop, manufacture, distribute, market, promote and sell any
Competitive Product which is based on Early Stage Technology licensed or
acquired by JJM or one of its Affiliates from a third party other than Integra
after the date hereof. "Early Stage Technology" shall mean Technology in the
Field which, at the time of its acquisition or licensing by JJM or such
Affiliate, has not yet been incorporated into a Competitive Product which (i)
has received Regulatory Approval from the FDA or comparable foreign regulatory
authority or (ii) is the subject of a filed application for Regulatory
Approval from the FDA or comparable foreign regulatory authority.
(c) JJM shall keep Integra reasonably informed of any significant
advances it makes regarding the design, development or manufacture of
Competitive Products resulting from its own efforts or from
acquired/in-licensed Technology after the date hereof, and shall (i) report
the status of any such progress at all meetings of the Joint Steering
Committee (as defined in
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Section 16.1 below) and (ii) promptly notify Integra in writing of any
Competitive Transaction which JJM has entered into and any material development
milestones (i.e. patent filings, prototype developments, completion of Phase I
and II studies, etc.) with respect to any Competitive Product of JJM.
(d) [**]
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(e) [**]
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(f) Nothing herein contained in this Section 2.3 shall be
construed to require JJM or its Affiliates to violate any confidentiality
agreement to which they may be a party. JJM shall, however, use reasonable
efforts to structure any confidentiality agreement to which it may become a
party after the date hereof and that relates to a transaction that, if
consummated, would constitute a Competitive Transaction, in such a manner as
to permit full compliance with the provisions of this Section 2.3.
Section 2.4 Integra's Commitment to JJM on Other Wound Care Products.
(a) If Integra intends to commercialize an Other Wound Care Product
internally developed by Integra or arising from Early Stage Technology
acquired by Integra, then Integra shall identify such Other Wound Care Product
to JJM in writing. JJM shall have [**] to determine whether or not to
undertake marketing and distribution of such Other Wound Care Product. [**]
If JJM does not elect within the [**] period to undertake the
marketing and distribution of such Other Wound Care Product or, if in good faith
negotiations a supplemental agreement has not been executed within a further
period of [**] following receipt of JJM's election, then Integra shall be free
to commercialize such Other Wound Care Product on its own or with another
distributor [**]
(b) Notwithstanding the foregoing, Integra shall not be required to
comply with the provisions of Section 2.4(a) with respect to any Other Wound
Care Product which Integra may have acquired in connection with an Extraordinary
Transaction nor shall Integra be required to comply with such provisions as to
any Other Wound Care Product if compliance would constitute a breach of any
agreement to which it is a party.
Section 2.5. Integra Dental/Endodermis Products. In the event that
Integra shall intend to sell, market, distribute or promote, or license or
authorize any Person to sell, market, distribute or promote, any Integra
Dental/Endodermis Product in the Territory, the following provisions shall
apply:
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(a) Such Integra Dental/Endodermis Product shall clearly be marketed,
promoted and labeled as indicated solely for endodermis, dental or gingival
use, as the case may be, and expressly not for facilitating the repair,
healing and/or regeneration of human skin (which includes dermis, epidermis,
epidermal and dermal basal laminas, and skin appendages). Such Integra
Dental/Endodermis Product shall be contained in packaging different from
packaging used in connection with the Products.
(b) Integra shall not market or promote, or allow its sales
representatives, licensees or distributors to market or promote such Integra
Dental/Endodermis Product as similar or comparable to the Products, nor shall
Integra allow any of its sales representatives, licensees or distributors to
market, promote, distribute or sell any Integra Dental/Endodermis Product in
contravention of the terms of this Section 2.5.
(c) In the event that JJM has evidence that the provisions of this
Section 2.5 are being violated or that, notwithstanding such provisions, JJM
shall establish that there shall have been use of Integra Dental/Endodermis
Products to facilitate the repair, healing and/or regeneration of human skin
(which includes dermis, epidermis, epidermal and dermal basal laminas, and
skin appendages), the Joint Steering Committee shall convene promptly,
following written notice from one party to the other, to discuss such matter.
If the Joint Steering Committee cannot resolve such matter to the satisfaction
of both parties within thirty (30) days of when such written notice is
delivered, then either party shall have the option of appointing an
independent auditor (an "Auditor") to examine and investigate the matter. The
Auditor shall be selected from one of the six largest certified public
accounting firms in the United States at such time (excluding any of such
certified public accounting firms which shall have served as the independent
auditor of either of the parties in the prior three years). The parties shall
cooperate fully with, and make available all books and records to, the
Auditor. The Auditor shall be directed to (i) examine and audit all alleged
cross-over use of the Integra Dental/Endodermis Products, as described above,
(ii) discuss the alleged cross-over use with each of the parties and (iii)
within ninety (90) days, issue a written report of its findings to the
parties. If the Auditor determines that such cross-over use has occurred, then
the Auditor shall set forth in such report the Auditor's conclusion as to the
equitable compensation for profits and expenses associated with such
cross-over use which shall be paid from one party to the other party in
connection therewith. Within thirty (30) days of the date such report is
issued, the party directed by the Auditor to make such payment shall make such
payment to the other party. The expenses of the Auditor shall be borne equally
by the parties.
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ARTICLE III.
JJM's MARKETING OBLIGATIONS AS DISTRIBUTOR
Section 3.1. Purchase of Products; Minimum Effort. JJM shall purchase
Products from Integra on the terms and conditions hereinafter set forth, and
shall use commercially reasonable efforts to maximize Net Sales of the
Products in the Territory taking into account the operating profit (margin)
objectives of JJM derived from the sales of such Products across the entire
line of Products over the Term, and shall, in any event, make the Minimum
Prepayments for each calendar year during the Term as set forth in Section 6.7
hereof.
Section 3.2. Certain Duties of JJM as Distributor.
(a) JJM shall, at its expense, be responsible for:
(i) all marketing decisions regarding the Products
including, but not limited to, labeling, packaging, advertising,
pricing, and professional education;
(ii) carrying finished inventory, invoicing,
processing orders and physical distribution; and
(iii) compliance with all Regulatory Approvals and
with all applicable statutes, laws, rules, regulations, ordinances
and decrees of Governmental Authorities from the time it receives the
Products from Integra, including but not limited to those relating to
(A) the labeling, finished packaging, advertising, import, export,
re-export, promotion, sale, distribution and use of Products in the
Territory, and (B) foreign exchange and health, safety and
environmental matters.
(b) Without limiting the obligations set forth in Section 3.2(a), in
promoting, marketing, distributing and selling the Products in the Territory,
JJM shall, at its expense:
(i) detail the Products and any Product Improvements
with equal prominence to the lesser of: (a) the greatest detailing
effort on behalf of a product in JJM's Wound Care Business in the
Territory or (b) [**]
(for purposes of this Agreement "detailing efforts" shall be measured
as a percentage of direct time spent promoting, marketing and selling
such products in the most recently completed four fiscal quarters);
provided that this clause
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(i) shall remain effective only if the Products and any Product
Improvements [**]; and
(ii) to the extent required by law, establish and maintain a system of
record keeping, with the diligent support and assistance of Integra, including a
register of lot numbers and individual Product numbers and customer names and
addresses for all Products sold by JJM in order to assist Integra with
traceability in the event of a Product recall and require any customer that is
not the end user of Products, to maintain a similar register, including names
and addresses of its end users.
(c) Except as permitted pursuant to Section 2.3 hereof (and upon the
terms and subject to the conditions thereof), JJM and its Affiliates shall
not, directly or indirectly, solicit orders for Products from any prospective
purchaser having a principal place of business located outside the Territory.
Section 3.3. Marketing Plan. As soon as practicable, and in no event
later than sixty (60) days, after the date hereof, JJM shall prepare a
transition marketing plan for the calendar year ended December 31, 1999 and
submit it to Integra for its review and comment. For each calendar year
thereafter, JJM shall prepare a marketing plan and submit it to the Joint
Steering Committee for review and comment not later than December 1 of the
calendar year prior to the calendar year to which such plan relates. The Joint
Steering Committee shall review the Forecasts (as defined in Section 4.1(a)
below) on a quarterly basis.
ARTICLE IV.
SUPPLY OF PRODUCTS
Section 4.1. Orders.
(a) Orders shall be submitted to Integra by JJM on a monthly basis on
JJM's regular purchase order forms; provided, however, that any term or
condition on such purchase order form which is inconsistent with the terms of
this Agreement shall be null and void. Prior to the first day of each Calendar
Quarter, JJM shall prepare in good faith and deliver to Integra a rolling
twenty-four month forecast of each type and size of Product to be purchased by
JJM (a "Forecast"); provided, however, that a new Forecast shall be prepared
within 10 days of receiving a positive recommendation from an advisory panel
convened by the FDA to consider any application for an expanded indication for
any Product. JJM shall be committed to purchase (i) the aggregate dollar
amount of Products forecast to be purchased during the first three months of
each such Forecast and (ii) at least eighty
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percent (80%) of the amount of Products to be purchased during the fourth, fifth
and sixth month of such Forecast. The balance of such Forecasts shall be
non-binding. Without the prior consent of Integra, no such Forecast shall call
for Integra to supply in any twelve month period a number of Products the Net
Sales of which would exceed the greater of (x) two times the Minimum Net Sales
for such period or (y) four times the Net Sales of the preceding six month
period. Integra shall maintain or place in service sufficient production
capacity to meet the Forecasts, with available excess capacity to meet periodic
fluctuations in purchase orders relating to the fourth, fifth and sixth months
of the Forecast of at least 125% of the amount Forecast. All Products ordered
pursuant to this Section 4.1 shall be delivered by Integra within sixty (60)
days of receipt of the purchase orders.
(b) JJM may supplement the Forecast from time to time by delivering
additional purchase orders, which Integra shall fill on a timely basis to the
extent such orders in respect of the fourth, fifth and sixth months of the
then current Forecast are 125% or less of the previously forecasted amounts,
and shall use all reasonable efforts to fill in a timely basis to the extent
such orders exceed 125% of the forecast amounts.
(c) Upon JJM's request, Integra shall reasonably cooperate in the
implementation of integrated demand planning and deployment, at JJM's expense;
provided that nothing in such implementation shall derogate in any manner any
other provisions of this Agreement.
Section 4.2. Supply Difficulties; Supply Default.
(a) If Integra fills less than [**] of any monthly order from JJM,
JJM shall have the right to convene a meeting of the Joint Steering Committee
to discuss with Integra the reasons for the shortfall. If Integra fills less
than [**] orders, Integra shall provide to JJM within ten (10) days after the
end of such second consecutive month a Management Action Plan ("MAP") setting
forth in detail a time and responsibility schedule for resolving the supply
difficulty. JJM shall have 10 days to provide written endorsement or required
changes to the MAP. Integra shall thereafter diligently carry out the agreed
upon MAP to resolve any such supply difficulties.
(b) If Integra fills (x) [**] of orders from JJM
[**] out of any twelve month period or (y) [**] of orders from JJM for any
[**] period, which orders are consistent with the provisions of Section 4.1
and do
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not exceed forecasted amounts by more than 125% (a "Supply Default"),
JJM shall provide Integra with written notice of such default. Following such
notification, the Joint Steering Committee shall promptly meet to discuss the
Supply Default. If the Joint Steering Committee is unable to agree upon a MAP
or other mechanism to resolve such Supply Default within forty-five (45) days
of such notice, and if the Supply Default has not been cured and is continuing
(a "Supply Default, Not Cured"), then
(i) [**]; or
(ii) [**]
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During the period of any such contract manufacturing arrangement or during the
pendency of a Supply Default, Not Cured, Integra shall use all commercially
reasonable efforts, to remedy, as quickly as possible, any issues that may have
caused the Supply Default and to develop, as quickly as possible, the capacity
sufficient to meet forecasted requirements of JJM going forward, and JJM shall
use reasonable efforts to help Integra to achieve such objectives.
(c) During the pendency of a Supply Default, Not Cured: (i) JJM shall
pay a reasonable royalty rate to Integra in consideration for such license,
which rate shall in no event exceed [**] % of Net Sales of Products in the
Territory; and (ii) Integra shall provide JJM or its designee with access to
any technology and know-how necessary or useful for JJM or its designee to
produce Products or arrange an alternative supplier of Products in a
reasonable time frame and provide advice and consultation in connection
therewith.
[**]
(d) Integra and JJM shall each bear 50% of the out-of-pocket costs
incurred by both parties in transferring the manufacturing of the Products
from Integra to JJM (or other third party) and back to Integra pursuant to
Section 4.2(b)(ii). Integra shall reimburse JJM for the amounts it owes
pursuant to this Section 4.2(d): (x) during the License Period by reducing the
royalty rate specified in Section 4.2(c) and (y) after the License Period by
reducing the Supply Price of the Products, in each case by 50% until such
amounts are repaid in full.
(e) A Supply Default or a Supply Default, Not Cured shall not provide
JJM with a right to terminate this Agreement under Section 29.2(e)(i) hereof.
Moreover, if JJM elects to accept the license contemplated by Section
4.2(b)(ii), the failure by Integra to deliver all or any portion of the
Products ordered by JJM during the License Period shall not provide JJM with a
right to terminate this Agreement under Section 29.2(e)(i) hereof. Only if JJM
elects not to accept such license, shall a Supply Default, Not Cured provide
JJM with a right to terminate this Agreement under Section 29.2(e)(i) hereof.
(f) Following the occurrence of (i) a Force Majeure event, (ii) an
Integra Change of Control or (iii) the tenth anniversary of the Effective
Date, the thresholds in clauses (x) and (y) of Section 4.2(b) shall be
replaced by the following single testing criterion: "less than [**] of orders
from JJM for [**] consecutive months".
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(g) During the pendency of a Supply Default, or if a JJM backorder
results from Integra's failure to supply Products to JJM consistent with the
then prevailing Forecasts and the requirements of Sections 4.1(a) and 4.1(b),
Integra shall not (i) commence production of any Integra Dental/Endodermal
Products or (ii) ship Products to any other distributor in the Existing
Distributor Countries or Japan until JJM's backorders are filled.
Section 4.3. Expansion of Production Capacity.
(a) To assist Integra in expanding its production capacity, both in
terms of capital improvements and working capital for larger volumes of
business, JJM shall make the following non-refundable payments to Integra:
(i) $5,000,000 by wire transfer in immediately
available funds to the account designated by Integra within 30 days
after the completion of the first twelve month period (calculated on
a rolling monthly basis) in which Net Sales exceed $ [**] ;
(ii) $5,000,000 by wire transfer in immediately
available funds to the account designated by Integra within 30 days
after the completion of the first twelve month period (calculated on
a rolling monthly basis) in which Net Sales exceed $ [**] ;
(iii) $5,000,000 by wire transfer in immediately
available funds to the account designated by Integra within 30 days
after the completion of the first twelve month period (calculated on
a rolling monthly basis) in which Net Sales exceed $ [**] ;and
(iv) $10,000,000 following the completion of the
first twelve month period (calculated on a rolling monthly basis) in
which Net Sales exceed $ [**] ; to be paid, at JJM's election, either
(a) within 30 days after the completion of such first twelve month
period or (b) in the manner specified in Section 6.2(a) hereof.
(b) To ensure Integra has sufficient capacity and capability to
supply Products as set out by the Forecast and to facilitate and coordinate
the sharing of resources and expertise between JJM and Integra, Integra will
submit a Manufacturing Status Report and Plan ("Manufacturing Plan") at the
following intervals: (i) within thirty (30) days of receipt of each Forecast
and (ii) within thirty (30) days of receipt of the first Forecast which
exceeds $ [**] million in Net Sales. The Manufacturing Plan shall include, but
not be limited to (i) yield trend, current programs to improve, plans to
improve, target
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yield, and factors limiting or contributing to the yield; (ii)
estimated capacity (taking the then current yield and trend into account),
plans to increase capacity and associated costs and potential for downtime to
make changes to facilities; and (iii) quality systems.
Section 4.4. Shipping and Delivery.
(a) Products shall be delivered, and title and risk of loss or damage
to the Products shall pass to JJM upon delivery, ExWorks (as defined in
Incoterms 1990) Integra's place of manufacture or distribution in Plainsboro,
New Jersey or other warehouse location as may reasonably be determined by
Integra.
(b) At JJM's expense, Integra shall ship the Products to designated
warehouses of JJM located in the United States (or outside the United States)
as may reasonably be specified by JJM. JJM shall, at its expense, ship the
Products from such warehouse to any other locations in the Territory including
warehouses of JJM or any of its Affiliates not located in the United States or
to JJM's customers. The sale and shipment of Products to JJM shall be subject
to receipt of all applicable licenses and permits and compliance with all
applicable statutes, rules, regulations and decrees of the Territory and
agencies thereof in effect currently or at any time hereafter.
(c) Until December 31, 2001, Integra shall, at JJM's expense, ship
Products directly to JJM customers at JJM's request for all orders up to
$[**] million in Net Sales in any calendar year. JJM shall reimburse Integra
for any shipping costs, costs of packaging materials, labor costs, plus
overhead not to exceed 30% of such labor costs, in each case attributable to
the shipment of Products to JJM customers.
(d) JJM shall be permitted to return, and Integra shall accept for
full invoice credit, all Products which Integra acknowledges do not meet the
applicable specifications for the Product as set forth on Schedule 4.4(d)
hereto at the time of delivery, provided that, in the case of Products
returned because of defects or damage that could have been detected by visual
inspection of the labeling or packaging of the Product, such returns are
reported to Integra within 15 days following delivery of the Products by
Integra in accordance with Section 4.4(a), and when possible returned Products
shall be still in original factory packaging. JJM shall only return Products
pursuant to a Returned Goods Authorization issued by Integra. Integra's
obligations under this Section 4.4(d) shall not extend to any Products that
are abused, misused, or tampered with outside its facilities or control.
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Section 4.5. Certain Duties of Integra.
(a) In order to assist JJM in promoting and selling the Products,
Integra shall, at its expense:
(i) review all marketing and labeling information
(including package inserts) and education material for compliance
with Regulatory Approvals and other applicable law or regulation;
(ii) update JJM with information available to Integra
which is necessary or useful for JJM to market the Products
effectively;
(iii) provide JJM with prompt updates on all
regulatory issues known to Integra that are reasonably likely to
affect the sale and marketing of the Products by JJM;
(iv) provide JJM with such information in Integra's
possession and control as may be required by JJM to obtain import
permits from the appropriate Governmental Authorities to distribute
the Products in the Territory;
(v) promptly refer to JJM all orders and inquiries
for the Products in the Territory received by Integra;
(vi) notify JJM in advance of any manufacturing
process changes with respect to the Products, comply with design
control standard operating procedures with respect to such changes,
and obtain consent of JJM prior to implementing product specification
changes or material changes, which consent shall not be unreasonably
withheld;
(vii) provide JJM, prior to each shipment of the
Products, with a certificate stating that the Products included in
that shipment meet all applicable specifications;
(viii) maintain Product order fulfillment, packaging
and shipping capacity to meet its obligations hereunder; and
(ix) provide JJM with prompt notice if any delays or
shortfalls in deliveries seem imminent.
Section 4.6. Sampling. To achieve the objectives of this Agreement,
both parties recognize that, to the extent allowable by law, it may be
necessary to distribute a nominal quantity of the Product as samples to health
care personnel and the trade on an ongoing basis (a "Sampling Program"). The
development of any Sampling Program shall be solely JJM's responsibility. JJM
shall keep Integra informed of meaningful changes to the Sampling Program.
Integra shall provide JJM with a reasonable quantity of Products (as agreed to
by the Joint Steering Committee, which in
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no event shall exceed 5% of the aggregate units of a particular size and type of
Product purchased by JJM hereunder) for use in the Sampling Program at a cost to
JJM equal to 50% of the then applicable Supply Price (as defined and adjusted in
Article VI below), but in no event at a price less than $ [**] for a [**] dermal
template, $ [**] for a [**] dermal template, or $ [**] for an [**] dermal
template.
Section 4.7. Supply for [**] and [**] Trials.
(a) Integra shall supply, at no cost to JJM, all reasonable
quantities of Products for use in connection with the [**] Trials as
contemplated by Article XIV hereof and for quality control and regulatory
testing in connection therewith; provided, however, that JJM shall pay to
Integra 50% of the revenue earned by JJM for any such Products for which JJM
receives any payment from a third party.
(b) Integra shall supply to JJM, at Integra's actual cost, all
reasonable quantities of Products or prototype Products for use in connection
with any pre-clinical or scientific studies conducted, provided that such
studies are accepted by the Joint Steering Committee.
Section 4.8. Regulatory and Quality Audits; Integra Obligations.
JJM shall have the right to conduct a regulatory and quality control audit of
Integra's facilities and quality systems relating to the Products or Product
Improvements at intervals no more frequent than semi-annually. At JJM's
election it may engage a third party consultant to conduct such audit. JJM
shall cover any fees and expenses for such consultant. Integra will provide
access to requested documentation and its employees to assist in all such
audits. The audit report shall be provided by JJM to Integra promptly after it
shall have been delivered to JJM management. As to all critical observations
of such report that Integra does not dispute, Integra shall provide written
responses to JJM in the form of a MAP within 10 days. In the event Integra
disputes any observations contained in such report, Integra shall have the
right, at its expense, to engage its own third party consultant to conduct an
additional audit. Integra shall promptly deliver to JJM the results of such
third party audit. As to all critical observations upon which the JJM audit
and the third party audit are in agreement, Integra shall promptly provide
written responses to JJM in the form of a MAP (or if a prior MAP has already
been delivered with respect to some of the observations in the original JJM
report, a amended and
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supplemented MAP). As to any critical observations that are disputed between the
JJM report and the third party audit that cannot be resolved by discussion
within the Joint Steering Committee, the Joint Steering Committee shall select
an additional independent consultant to whom both sets of observations shall be
delivered who shall, after having conducted its own audit or such other
procedures as it deems appropriate, resolve the disputed items. As to any
critical observations resulting from such dispute resolution process, Integra
shall promptly provide a MAP or amended and supplemented MAP. JJM shall have 10
days from the delivery to it of a MAP or amended and supplemented MAP to provide
written endorsement or required changes to such MAP. Integra shall diligently
complete the agreed upon MAP and permit close-out visits by JJM or such third
party consultants to confirm implementation of the MAP. The MAP for the first
calendar year of the term of this agreement is set forth in Schedule 4.8.
ARTICLE V.
INITIAL PAYMENTS; TRADEMARK LICENSE
Section 5.1. Initial Payments. In consideration for the exclusive use
of Integra's trademarks and regulatory filings related to the Products
(including PMA P900033 and all supplements and amendments thereto related to the
Integra(Trademark) Dermal Regeneration Template(Trademark)) in the Field and the
Territory and other rights granted to JJM under this Agreement, JJM shall make
the following payments to Integra upon the terms and subject to the conditions
set forth below:
(a) $5,280,000 by wire transfer in immediately available funds to
the account designated by Integra on the Effective Date;
(b) [**] by wire transfer in immediately available funds to the
account designated by Integra within five (5) Business Days of receipt of
notice from Integra that it has [**] ;
(c) $ [**] by wire transfer in immediately available funds to the
account designated by Integra within five (5) Business Days of receipt of
notice from Integra that it has [**]; and
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(d) $ [**] by wire transfer in immediately available funds to the
account designated by Integra, within five (5) Business Days of receipt of
notice from Integra that it has [**];
provided, that as to Sections 5.1(b), (c) or (d), if the applicable [**] for
the [**] to which such clause relates shall have been assigned to JJM pursuant
to the provisions of Section 2.2 of this Agreement, then the payments called
for by such clause shall be made upon expiration of such assigned distribution
agreement, in accordance with the term of such distribution agreement as of
the date hereof and without regard to any extension to which JJM may
subsequently agree.
Section 5.2. Limited License to Integra's Trademarks.
(a) Upon the terms and subject to the conditions of this Agreement
Integra hereby grants JJM an exclusive in Direct Countries and a co-exclusive
(with Integra and its distributors) in Existing Distributor Countries,
royalty-free, nontransferable license in the Field to reproduce the Licensed
Trademark within the Territory during the Term with the standards employed by
Integra for the protection of such Licensed Trademark. Such license is granted
solely for the purpose of assisting JJM in promoting the sale and use of the
Products in the Territory under this Agreement.
(b) JJM's use of the limited license granted in Section 5.2(a), and
any goodwill arising therefrom, shall inure to the sole benefit of Integra and
shall not give rise to any compensation to JJM in the event of the expiration
or termination of this Agreement.
ARTICLE VI.
PRODUCT SUPPLY PRICE; MINIMUM PREPAYMENTS AND ADJUSTMENTS
Section 6.1. Supply Price.
(a) JJM shall pay Integra a supply price for each Product unit (the
"Supply Price") equal to the greater of:
(i) $ [**] for a 4x5 dermal template, $ [**] for a
4x10 dermal template, or $ [**] for an 8x10 dermal template (the
"Minimum Supply Price Per Unit", which Minimum Supply Price Per Unit
shall be adjusted upward annually beginning in the calendar year 2001
by an amount corresponding to the
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change between January 1, 2000 and the start of each such calendar year
in the Producer Price Index, provided, that it shall not exceed $ [**]
for a 4x5 dermal template, $ [**] for a 4x10 dermal template, or $ [**]
for an 8x10 dermal template. In 2008 and thereafter, the parties shall
mutually agree on any increase in such Minimum Supply Price Per Unit; or
(ii) the applicable percentage set forth below of the
selling price for such Product actually charged by JJM based upon the
Net Sales of Products in the Territory during the given calendar
year, subject to adjustment as set forth in Section 6.2 below:
The Supply Price as a Percentage
of Net Sales shall be:
----------------------------------
For
If Net Sales For For Calendar
during the year Calendar Calendar Years
are Years Years 2008 and
(in $,000): 1999-2001 2002-2007 thereafter
- --------------- ---------- --------- -----------
Less than [**] [**] % [**] % [**]%
[**] - [**] [**] % [**] % [**] %
[**] - [**] [**] % [**] % [**] %
[**] - [**] [**] % [**] % [**] %
Over [**] [**] % [**] % [**] %
(b) The Supply Price will be calculated on a tiered discount basis in
each calendar year without any carry-over to the next calendar year. For
example, in the calendar years 1999 through 2001, if Net Sales of Products in
the Territory for a given year were $ [**] , the aggregate Supply Price would
equal $ [**] (the sum of (x) $ [**] (i.e) [**] % for first $ [**] of such Net
Sales), (y) $ [**] (i.e. [**] % for the second $ [**] of such Net Sales) and
(z) [**] % for the last $ [**] of such Net Sales)).
(c) Notwithstanding Section 6.1(a) hereof, following the completion
of the first twelve month period (calculated on a rolling monthly basis) in
which Net Sales of Products in the Territory exceed $ [**] and the receipt by
Integra of
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JJM's $ [**] payment pursuant to Section 4.3(a) hereof, the Supply
Price shall be equal to the greater of:
(i) the Minimum Supply Price Per Unit, as adjusted
pursuant to Section 6.1(a)(i); or
(ii) the applicable percentage set forth below of the
selling price for such Product actually charged by JJM based upon
the Net Sales of Products in the Territory during the given
calendar year, subject to adjustment as set forth in Section 6.2 below:
The Supply Price as a Percentage of
Net Sales shall be:
--------------------------------------
If Net Sales
during the year For Calendar Years
are For Calendar Years 2008 and
(in $,000): 1999-2007 and thereafter
- ---------------- --------------------------------------
Less than [**] [**] % [**] %
Over [**] [**] % [**] %
(d) JJM shall promptly notify Integra when the amount of Net Sales of
Products in the Territory exceeds one of the threshold levels set forth in
Section 6.1(a) or (c) resulting in a downward adjustment to the Supply Price.
Section 6.2. Supply Price Adjustments.
(a) If following the completion of the first twelve month period
(calculated on a rolling monthly basis) in which Net Sales of Products in the
Territory exceed $ [**] , JJM elects not to make the requisite $ [**] payment
owing pursuant to Section 4.3(d) hereof within 30 days after the completion of
such first twelve month period, the percentage of Net Sales of Products in the
Territory used to calculate the Supply Price (as set forth in Section 6.1
hereof) shall be increased by [**] ([**]) percentage points until the
aggregate amount paid to Integra as a result of such increase of [**] ([**])
percentage points in the Supply Price equals the requisite [**] at which point
the Supply Price shall revert back to the percentage of Net Sales of Products
in the Territory set forth in Section 6.1 hereof.
(b) If the actual increase in the cost to manufacture (in dollars)
any Product Improvements (the "Incremental Costs") is not greater than the
corresponding increase in Supply Price as calculated in Section 6.1, the
method of calculating the Supply Price shall not be changed upon the
development of any Product
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Improvements pursuant to the collaboration of parties hereunder. If the
Incremental Cost is greater than the corresponding increase in Supply Price, the
parties shall negotiate in good faith a new method of calculating the Supply
Price to result in an increased (but in no event a decreased) Supply Price
solely to reflect any demonstrated material increase in Integra's production
costs (taking into account both increases and decreases in manufacturing costs,
including the costs of raw materials and the costs of any royalties to third
parties on Net Sales payable in respect of any Product Improvements, deriving
from the change) that result from Product Improvements.
Section 6.3. Invoicing/Payment.
(a) Prior to the first day of each calendar year during the Term, the
parties shall agree upon an estimate of Net Sales of Products in the Territory
to be achieved by JJM for such calendar year (the "Net Sales Estimate").
Integra shall invoice the Products for each shipment at a Supply Price
calculated based on the Net Sales Estimate and the tiering concept described
in Section 6.1(b). Each such invoice shall also reflect amounts credited to
JJM based on its Minimum Prepayments pursuant to Section 6.7 hereof and shall
indicate (i) the Minimum Prepayment Amount which remains to be credited
against future invoices and (ii) the amount of Excess Prepayments, if any. JJM
shall pay Integra for each shipment of Products at the invoiced price within
thirty (30) days from the receipt of such shipment.
(b) The prices for the Products as specified in Section 6.1 are
ExWorks Integra's place of manufacture or distribution in Plainsboro, New
Jersey or other warehouse locations. Invoices shall not be dated prior to the
date of delivery of the Products ExWorks Integra's place of manufacture or
distribution in New Jersey or other warehouse location. All shipments of
Products shall be billed to JJM at the price in effect for each Product at the
time of acceptance by Integra of JJM's order for such Products. JJM shall
alone bear any costs of shipment of the Products to its warehouse as well as
the amount of any and all domestic, foreign, state, or local sales, use, value
added, or other taxes (other than income or franchise taxes of Integra),
custom duties, tariffs, levies, fees, or other charges which may be required
to pay or collect on the sale, delivery, or transportation of the Products. If
any such shipment cost, tax, duty, tariff, levy, fee, or charge shall be made
or imposed on Integra, JJM shall reimburse Integra therefor.
(c) Acceptance and endorsement by Integra of any instrument for less
than the full amount that Integra claims to be due and payable to it under a
purchase order or hereunder shall not be deemed to be an admission of payment
in full, and any conditions to the contrary that are noted on such instrument
shall not be binding on Integra.
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Section 6.4. Quarterly Adjustment. Within thirty (30) days after the
end of each Calendar Quarter during the Term, JJM shall prepare and deliver to
Integra a certificate with supporting data in reasonable detail (the "Net
Sales Certificate"), setting forth (i) the Net Sales of Products in the
Territory during the preceding Calendar Quarter -- in the aggregate and broken
down by each type and size of Product and country within the Territory, (ii)
the Estimated Net Sales which were used to calculate the Supply Price for such
Calendar Quarter; (iii) the number of Products sold during such Calendar
Quarter -- in the aggregate and broken down by each type and size of Product
and country, (iv) the price actually paid based on the Estimated Net Sales for
such Calendar Quarter -- in the aggregate and broken down by each type and
size of Product and country, (v) the Supply Price owing pursuant to this
Agreement based on the Net Sales for each Product sold in the Territory during
such Calendar Quarter -- in the aggregate and broken down by each type and
size of Product and country and (vi) the amount of any "true-up" payment due
to either JJM or Integra resulting from the difference between the Supply
Price paid and the Supply Price owing. If JJM is obligated to make any
payments to Integra pursuant to this Section 6.4, it shall do so
simultaneously with the delivery of the Net Sales Certificate. If Integra is
obligated to refund any amounts to JJM pursuant to this Section 6.4, it shall
do so by crediting such amounts against the next succeeding invoices issued to
JJM until fully applied.
Section 6.5. Accounting. All amounts payable hereunder shall be
payable in United States Dollars; provided, however, that if any payment on
account of Net Sales by JJM or its Affiliates is received in a foreign
currency, such amount shall be converted monthly to United States funds at the
rate set monthly by JJM's international finance department from Reuters wire
service (providing international spot exchange rates) on or about the 25th day
of the each month (unless such date falls on a Saturday, Sunday or holiday, in
which case the date shall be the closest business day thereto). To the extent
required, JJM shall estimate Net Sales in foreign countries based upon the
deductions from the corresponding gross sales. JJM shall use its reasonable
diligent efforts to minimize discrepancies between such estimated Net Sales
and corresponding actual Net Sales, and, bi-annually, or upon the request of
Integra, JJM shall reconcile estimated Net Sales in foreign countries with
actual Net Sales and promptly make any additional payment (or request
reimbursement or credit) from Integra. JJM shall notify Integra on a monthly
basis of the exchange rates used by JJM for the preceding month in calculating
Net Sales. Upon written notice to Integra, JJM may elect a different
recognized independent wire service providing international spot exchange
rates.
Section 6.6. Records. During the term of this Agreement, JJM shall
keep, and shall cause its Affiliates to keep, complete and accurate records of
Net Sales of Products in the Territory in sufficient detail to enable Integra
to determine payments owed to
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it under this Agreement for a period of three (3) years after such payments are
due. JJM shall permit a certified public accountant, acceptable to JJM and
appointed by Integra and at Integra's expense, to examine its books, ledgers and
records covering Net Sales of Products in the Territory during regular business
hours for the purpose of verifying, and only to the extent necessary to verify,
the payments due pursuant to the provisions of this Agreement, but in no event
more than once per calendar year. The accountant shall maintain all information
received during such examination in confidence, and shall report to Integra only
with respect to the accuracy of any report. Any report not examined within three
(3) years of its having been made shall be deemed true and accurate. In the
event the records examined reveal that JJM has paid less than ninety-five
percent (95%) of the amount due Integra, JJM shall pay the reasonable costs of
the audit and shall pay the additional amount due plus accrued interest at the
average prime rate in effect for the period covered by the audit as set by
Citibank, N.A.
Section 6.7. Annual Minimum Prepayments.
(a) Each calendar year during the Term, JJM shall make non-refundable
minimum prepayments to Integra equal to the product of (x) the Minimum Net
Sales (defined below) and (y) the applicable Supply Price as a percentage of
Net Sales calculated in accordance with this Article VI for the Products (such
prepayments, the "Minimum Prepayments"). Integra shall apply the Minimum
Prepayments as an advance against actual payments due on Net Sales. If in any
calendar year, the Minimum Prepayments actually paid by JJM for such calendar
year exceeds the actual payments due on Net Sales (such excess amount referred
to herein as "Excess Prepayments"), the Excess Prepayments shall be carried
over as an advance on actual payments due on Net Sales from JJM for the
subsequent calendar year, provided that in no event shall such Excess
Prepayments (i) be applied as a deduction against any future Minimum
Prepayment due pursuant to this Agreement, or (ii) be refunded by Integra.
(b) "Minimum Net Sales" means, for each of the periods specified
below, the aggregate Net Sales of Products in the Territory set forth opposite
such period, subject to adjustments as provided in Section 6.8 hereof:
Calendar Year Minimum Net Sales ($, 000)
------------- --------------------------
1999 [**]
2000 [**]
2001 [**]
2002 [**]
2003 and thereafter [**]
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(c) JJM shall make the Minimum Prepayments to Integra no later than
the following dates by wire transfer in immediately available funds to an
account designated by Integra:
(i) for the calendar year 1999, the entire Minimum
Prepayment shall be made on the Effective Date,
(ii) for the calendar year 2000, the entire Minimum
Prepayment shall be made prior to December 31, 1999, and
(iii) for the calendar year 2001 and each calendar
year thereafter during the Term, the Minimum Prepayments shall be
made in equal quarterly installments payable on or prior to the first
day of each Calendar Quarter by wire transfer in immediately
available U.S. dollars to a U.S. bank account specified by Integra.
(d) JJM's obligation hereunder to make Minimum Prepayments shall
cease upon the completion of the first twelve month period (calculated on a
rolling monthly basis) in which Net Sales of Products in the Territory exceed
$ [**] and the receipt by Integra of JJM's $ [**] payment pursuant to Section
4.3 [**] hereof.
(e) For purposes of this Agreement, the purchase of a Product shall
be deemed to occur during the calendar year in which the Product is scheduled
for delivery pursuant to a firm purchase order received and accepted by
Integra.
Section 6.8. Adjustments.
(a) General Principles of Adjustments.
(i) Upon the occurrence of any of the events
specified in Sections 6.8(b) and (c) which trigger an adjustment to
Minimum Net Sales (such an event, an "Adjustment Event"), Integra
shall promptly notify JJM and the adjustment shall take effect on the
first day of the calendar month following the date of the Adjustment
Event. Notice of the Adjustment Event shall specify any corresponding
adjustment to the Minimum Prepayments.
(ii) In no event shall the cumulative reduction in
Minimum Net Sales for any calendar year made pursuant to Sections
6.8(b) and (c) hereof (without including any upward adjustment
pursuant to Section 6.8(d)) exceed [**] ([**]%) of Minimum Net Sales
set forth in Section 6.2 above.
(iii) "PMAF" (Per Month Adjustment Factor) means the
quotient Z/12, where Z is the integer equal to the number of
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months remaining in the calendar year in which the Adjustment Event
occurred, not including the month in which the Adjustment Event occurred.
(iv) From and after the last date on the calendar
month in which an Adjustment Event no longer continues, the Reduction
Factors applied pursuant to Sections 6.8(b) and 6.8(c) below shall no
longer be applied.
(b) Failure to Terminate Other Distributors. Commencing January 1,
2000, if Integra continues to maintain distribution agreements other than this
Agreement for the Products in the Existing Distributor Countries, Minimum Net
Sales shall be reduced by multiplying (x) the amount of Minimum Net Sales set
forth in Section 6.7(b) and (y) (100-X)/100 where X equals the "Reduction
Factor" set forth in the following chart for the respective countries:
Country Reduction Factor
------- ----------------
[**] [**] x PMAF
[**] [**] x PMAF
[**] [**] x PMAF
[**] [**] x PMAF
[**] [**] x PMAF
[**] [**] x PMAF
[**] [**] x PMAF
[**]
For those countries as to which existing distribution agreements are
assignable, and as to which JJM elects to have the applicable distribution
agreement assigned to it,[**].
(c) Failure to Achieve Certain U.S. [**] Wound Indications.
Commencing January 1, 2001, if the Products have not received Regulatory
Approval from the FDA for the indications set forth in the chart below,
Minimum Net Sales shall be reduced
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by multiplying (x) the amount of Minimum Net Sales set forth in Section 6.7(b)
and (y) (100-X)/100 where X equals the "Reduction Factor" set forth in the
following chart for the respective indications:
Indication Reduction Factor
----------- ----------------
[**]
[**] [**] x PMAF
[**] x PMAF
For the avoidance of doubt, permission by the FDA to distribute articles
describing the use of the Products for [**] Wound Indications shall not
be deemed as obtaining Regulatory Approval for [**] Wound Indications
for the purpose of the calculations set forth above.
(d) Receipt of Certain [**] Wound Labeling. Commencing twelve months
from date (the " [**] Wound Approval Date") on which the Products receive
Regulatory Approval from the FDA for a [**] Wound indication [**] Minimum
Net Sales set forth in Section 6.7(b) shall be increased by an amount equal to
[**] Wound Net Sales. For the avoidance of doubt, permission by the FDA to
distribute articles describing the use of the Products for [**] Wound
indications shall not be deemed as obtaining Regulatory Approval for [**]
Labeling. For purposes of this Agreement, the following terms have the
following meanings:
" [**] Wound Net Sales" means the product equal to (x) [**]
Wound Market Size and (y) the Applicable Percentage of Market Size.
"Comparable Competitive Products" means Competitive Products
which have [**] Wound Labeling, assuming that on the [**] Wound Approval Date
no more than two other Competitive Products have both (i) [**] Wound Labeling
and (ii) net sales per annum in excess of $10 million (excluding the
Products).
"Applicable Percentage of Market Size" means the percentage
set forth in the chart below which is a factor of (x) the number of years
since the [**] Wound Approval Date and (y) whether or not the
[**] Wound Labeling of the Products is, on the [**] Wound Approval Date,
inferior, comparable or superior to the [**] Wound Labeling of the
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Comparable Competitive Products:
NET SALES FOR NET SALES POST
TWO YEARS TWO YEARS
AFTER [**] AFTER [**]
CLAIMS OF [**] WOUND APPROVAL WOUND APPROVAL
WOUND LABELING DATE TO EXCEED DATE TO EXCEED
- -------------- -------------- --------------
Inferior [**] % [**] %
Comparable [**] % [**] %
Superior [**] % [**] %
For purposes of this definition, the inferiority, comparability and
superiority of the [**] Wound Labeling of a Product versus that of a
Comparable Competitive Product will be determined with reference to, among
other factors, the products' respective approved indications, package inserts,
allowed label claims, supporting peer-reviewed published clinical research
regarding efficacy relative to competing products and treatment modalities. In
the event there are no competing products with net sales per annum in excess
of $10 million, then the Product shall be deemed to be Comparable.
" [**] Wound Market Size" means the amount expressed in U.S.
dollars of aggregate sales of Comparable Competitive Products sold to treat
the indications covered by [**] Wound Labeling in either the United States or
the European Union, respectively, for the twelve month period prior to the
[**] Wound Approval Date, as adjusted by multiplying such market size by the
ratio of (x) the average price of the Products to be sold in the United States
or the European Union, respectively, to (y) the average price of the
Comparable Competitive Products then being sold in the United States or the
European Union, respectively. Such adjustments shall take into account (i)
actual materials purchased for a procedure, (ii) the actual price per
procedure and (iii) the number of procedures to reach clinical endpoint as
established by actual clinical usage data.
In the absence of agreement between the parties regarding
clinical usage data, the relevant Comparable Competitive Products and their
average prices, the inferiority, comparability or superiority of the [**]
Wound Labeling of any Comparable Competitive Products, the net sales per annum
of any Comparable Competitive Products or any other matter necessary to
determine the [**] Wound Market Size, prior to taking action in accordance
with Section 28.2 or 28.3 hereof, the parties will try to resolve such
disagreements first in the Joint Steering Committee, then in the Executive
Committee and then by engaging a mutually acceptable consulting firm to
resolve such
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dispute. The Joint Steering Committee, Executive Committee and any such
consulting firm may each refer to the published data of the Competitive Persons
(in reports filed with the Securities and Exchange Commission or press
releases), data published by securities analysts at nationally recognized
investment banks or HPIS or IMS data. Prior to obtaining Regulatory Approval,
the two companies, through the Joint Steering Committee and the Executive
Committee shall agree on the data source and/or model to be used to track
Competitive Sales for [**] Wound use. In the event incremental costs are
incurred to obtain such data or model, the parties shall split such costs
50%/50%.
ARTICLE VII.
COMPLAINTS/RECALLS OF PRODUCTS
Section 7.1. Complaints. To the extent that it has knowledge thereof,
each party shall promptly (and in any event within three Business Days) notify
the other in writing of (i) any third party complaint, whether written or
oral, and (ii) any defect in, or condition of, the Products or any other fact
or circumstance which may result in a violation or alleged violation of any
applicable statutes, laws, rules, regulations, ordinances and decrees of
Governmental Authorities of any country in the Territory, including those
referenced in Section 3.2(a)(iii) hereof. Integra and JJM shall share with
each other all data on Complaints respecting the Products, including
Complaints or information regarding performance or allegations or reports of
any effects on a patient from use of such Products, as soon as such data is
available. In connection with any such Complaints, JJM shall secure for
Integra the lot number of the Product in question and the name of the health
care professional, patient, and institution where the Complaint occurred. Each
party shall cooperate with the other party to the extent reasonably necessary
to resolve outstanding complaints, and Integra shall have primary
responsibility to file all Medical Device Reports ("MDRs") required to be
filed with the FDA. Either party may file an MDR, provided that, if permitted
by the circumstances, it has conferred with the other party before doing so
(and the parties shall use all reasonable diligent efforts to so confer), but
the responsibility to follow up with the FDA regarding such MDR shall be
Integra's alone. At such time as Integra develops or revises its procedures
for filing MDRs in accordance with the MAP, JJM shall have the right to
approve such revisions (such approval not to be unreasonably withheld).
Section 7.2. Recall.
(a) In the event that either party has reason to believe that one or
more lots of Products should be recalled or withdrawn
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from distribution or that an advisory letter should be issued regarding
reliability or defects in the Products, such party shall immediately notify the
other party in writing. If permitted by the circumstances, the parties, through
the Joint Steering Committee, will confer before initiating any recall (and the
parties shall use all reasonable diligent efforts to do so), but either party
may initiate a recall of Products in any country in the Territory or issue any
such advisory letter and report such letter to appropriate Governmental
Authorities without the consent of the other party. JJM shall maintain adequate
sales and service records to enable it to conduct any Product recall and shall
take all actions to assist in promptly executing any Product recall as directed
by Integra. If the recall is required because of a modification of the
registrations, permits or licenses for the Products or a failure of a Product to
conform to its specifications as provided to the health authorities in any
specific country in connection with the registration of the Product, Integra
shall reimburse JJM for the costs and expenses of such recall, and, at JJM's
option, Integra shall replace recalled Products or credit or refund the purchase
price of recalled Products. If the recall is required because of a negligent act
or omission of JJM in handling, storage or distribution of the Product, then
such recall shall be conducted by JJM at its sole cost and expense and JJM shall
not be entitled to any such credits, replacements or refunds from Integra. If
such recall is required because of a joint act or omission, JJM shall conduct
the recall and the parties shall negotiate in good faith an appropriate
allocation of the costs and expense of such recall.
(b) In the event that a recall of the Products precludes Integra from
shipping products for a one-month period, then all Minimum Prepayments and
Minimum Net Sales requirements shall be suspended until such time as Integra
recommences the shipment of Products. In the event that a recall of the
Products is initiated because the Products caused manifest and publicized harm
to patients, then all Minimum Prepayments and Minimum Net Sales requirements
shall be suspended for a period of three (3) months from the date such recall
commences.
ARTICLE VIII.
TRADEMARK/TRADE DRESS OF PRODUCTS
Section 8.1. General.
(a) Except as expressly provided in this Agreement, neither party
shall use any trademarks, service marks or trade names which are confusingly
similar to or which constitute an imitation of the other party's trademarks,
service marks or trade names used in connection with the sale of the Products,
nor shall either party assert any rights therein.
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(b) JJM shall provide Integra, at Integra's request, with copies of
all advertising and promotional materials used for the Products. At Integra's
request, JJM shall be obligated to remove Licensed Trademark from its
packaging and promotional materials. Any incremental costs required to
implement such request will be shared equally between the two parties.
(c) Nothing contained herein (including, without limitation, in
Section 29.3(v)) shall be interpreted as to grant Integra any rights in any
trademarks, trade dress, copyrights or other intellectual property rights
owned by JJM or its Affiliates.
Section 8.2. Use of Trademarks.
(a) The trademarks INTEGRA(Trademark) Dermal Regeneration
Template(Trademark) or INTEGRA(Trademark) Regeneration Template(Trademark) shall
appear on all packaging, promotional material developed particularly for the
Products (including professional advertising but excluding mere listings of
products and consumer advertising), and package inserts. The words "Manufactured
by Integra LifeSciences Corporation" shall appear on the outside of the box, the
container and the package insert. In order to protect the goodwill in the
Licensed Trademark, JJM shall submit to Integra, for its written approval,
specimens of labels, advertising, and other materials bearing the Licensed
Trademark. Integra shall communicate its approval or disapproval of JJM's use of
the Licensed Trademark within five (5) Business Days following receipt of such
specimens. Failure of Integra to respond within such five (5) Business Day
period shall constitute approval of such use. Integra's approval of JJM's use of
the Licensed Trademark shall not be unreasonably withheld.
(b) Integra or its distribution partners shall not be permitted to
use "Integra" as part of the brand, trademark or product name for (i) any
Other Wound Care Product, (ii) any product that would have been an Other Wound
Care Product but for the fact that it is intended to facilitate the repair
and/or regeneration of endodermis or dental or gingival tissues or (iii) any
product made with GAG incorporated into a collagen matrix. Nothing herein
shall be construed to limit Integra's right to use the "Integra" trademark in
its corporate name or to limit the use of the phrase "Manufactured by Integra
LifeSciences Corporation" (or derivatives thereof or similar phrases with
respect to Affiliates of Integra) on any Product or product.
(c) JJM shall not remove, conceal, alter or deface any of Integra's
trademarks, service marks or trade names on the Products and shall not display
Integra's trademarks, service marks or trade names on any Products not
purchased, or manufactured under the license granted under certain
circumstances following a Supply Default, Not Cured pursuant to Section
4.2(b)(ii), from Integra. JJM may add additional
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trademarks or brand names to the Products in its sole discretion at any time.
Section 8.3. Promotional Materials. At JJM's request, Integra shall
provide to JJM original copies of any promotional and physician training
materials (the "Promotional Materials") currently in use by Integra, including
any photos used in the Promotional Materials. Integra shall provide to JJM any
original or master copies of such photos, slides, videos required for
replication. Furthermore, Integra shall diligently pursue obtaining written
relinquishment from patients for use of photos, video, audio, etc. in existing
Promotional Materials.
ARTICLE IX.
PRODUCT WARRANTY
Section 9.1. Product Warranty. Integra warrants that any Products
supplied to JJM under this Agreement will, at the time of delivery, (i) meet
the Product Specifications incorporated in Schedule 4.4(d), (ii) be free from
defects in material, workmanship and design, (iii) comply in all material
respects with all applicable statutes, laws, ordinances and regulations of the
country of manufacture and of the country in which it will be distributed and
(iv) conform in all material respects to the release specifications of the
applicable United States or foreign Regulatory Approvals. Integra further
warrants that it shall maintain the manufacturing facilities used to
manufacture the Products in compliance in all material respects with GMP/ISO
requirements and with the reasonable Corporate Quality Assurance Guidelines of
JJM set forth in Schedule 9.1 hereto.
SECTION 9.2. Disclaimer of Warranties. INTEGRA MAKES NO WARRANTIES
OTHER THAN THOSE STATED IN THIS AGREEMENT. INTEGRA DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY IMPLIED WARRANTY
ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OF TRADE OR
OTHERWISE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ARTICLE X, THE LIABILITY
OF INTEGRA FOR A BREACH OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN
THIS ARTICLE IX SHALL BE LIMITED TO THE REPLACEMENT OF THE SPECIFIC SHIPMENTS
OF PRODUCTS AS TO WHICH A CLAIM IS MADE, AND INTEGRA SHALL NOT BE LIABLE FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF PROFIT, OR LOSS OF USE.
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ARTICLE X.
INDEMNIFICATION
Section 10.1. Indemnity.
(a) Integra shall indemnify and hold harmless JJM and its Affiliates
against and from and shall compensate and reimburse JJM for costs and expenses
and claims and governmental proceedings and fines, and costs and expenses
reasonably incurred in defending against such claims (including expenses
related to product recalls and reasonable attorneys' fees and disbursements of
counsel) (collectively, "Damages") incurred by JJM and its Affiliates, which
Damages arise out of, or are based on any claim related to (i) defects in
materials, workmanship, or design of any Product sold to JJM hereunder, (ii)
promotional material distributed by Integra prior to the date hereof, (iii) a
breach by Integra of its express warranty set forth in Section 9.1 hereof,
(iv) a breach by Integra of its express warranty regarding no infringement of
third party rights set forth in Section 23.4 below, (v) willful, reckless or
negligent acts of Integra or its Affiliates or their respective employees,
directors, consultants, sublicensees, agents or subcontractors or (vi) acts or
omissions of Integra in breach of this Agreement, provided that Integra shall
have no indemnification obligation regarding and shall not be liable for
Damages which arise out of, or are based on, any claim related to JJM's use,
marketing, distribution or sale of the Products for unauthorized indications
or in any other manner in violation of the Regulatory Approval and applicable
laws of the country in the Territory in which such acts occur. The indemnity
rights conferred by this paragraph do not apply to Damages to the extent that
such Damages result from willful, reckless or negligent acts of JJM or its
Affiliates or their respective employees, directors, consultants,
sublicensees, agents or subcontractors or acts or omissions of JJM in breach
of this Agreement.
(b) JJM shall indemnify Integra and hold Integra harmless against and
from and shall compensate and reimburse it for, any Damages arising out of, or
based on, any claim related to (i) a breach by JJM of its negative covenant set
forth in Section 3.2(c) hereof, (ii) JJM's use, marketing, distribution or sale
of the Products in violation of any applicable statutes, laws, rules,
regulations, ordinances and decrees of Governmental Authorities of any country
in the Territory, including those referenced in Section 3.2(a)(iii) hereof,
willful, reckless or negligent acts of JJM or its Affiliates or their respective
employees, directors, consultants, sublicensees, agents or subcontractors or
(iii) acts or omissions of JJM in breach of this Agreement. The indemnity
rights conferred by this paragraph do not apply to Damages to the extent that
such Damages result from willful, reckless or negligent acts of Integra or its
Affiliates or their respective employees, directors, consultants,
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sublicensees, agents or subcontractors or acts or omissions of
Integra in breach of this Agreement.
Section 10.2. Notice and Procedures. An indemnified party (the
"Indemnified Party") shall give notice to the indemnifying party
("Indemnifying Party") of any Damages for which such Indemnified Party seeks
indemnification, stating the amount claimed, if known, and method of
computation thereof. Such notice shall be delivered promptly and in time
reasonably to permit the Indemnifying Party to assume without prejudice or
adverse effect the defense of any third party claim that could give rise to
Damages. The obligations and liabilities of an Indemnifying Party under this
Article X with respect to Damages arising from claims of any third party
("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: the Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim if it gives prompt
notice of its intention to do so to the Indemnified Party; provided, however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the reasonable judgment of the Indemnified
Party for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel at the expense of the Indemnifying Party. The Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make available
to the Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or control relating thereto as is reasonably required by the
Indemnifying Party. In the event that the Indemnified Party is conducting the
defense against any such Third Party Claim, the Indemnifying Party shall
similarly cooperate with the Indemnified Party. No such Third Party Claim may
be settled by the Indemnifying Party without the written consent of the
Indemnified Party unless such settlement includes a complete and unconditional
release of the Indemnified Party.
Section 10.3. Insurance.
(a) Integra will maintain (i) product liability insurance with
respect to the Products sold hereunder with minimum annual limits of [**] per
occurrence and [**] in the aggregate and (ii) property insurance in an amount
reasonably expected to be sufficient to replace its facility and obtain all
necessary machinery and equipment. Such insurance shall (i) name JJM and
Integra as insured parties thereunder as their interests may appear, (ii)
provide that there shall be no recourse against JJM for payment of premiums or
other amounts with respect thereto and (iii) provide that at least thirty (30)
days prior notice of cancellation or lapse shall be given to JJM by the
insurer. The additional insured status afforded to JJM under Integra's
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insurance shall not extend coverage beyond the indemnification provisions of
this Agreement. Integra shall, if so requested by JJM, furnish a certificate
of insurance evidencing the insurance required hereunder.
(b) JJM will maintain commercial general liability insurance
providing coverage for liability arising from JJM's activities under this
Agreement. JJM shall maintain the liability insurance required hereunder with
minimal annual limits of [**] per occurrence and [**] in the aggregate. Such
insurance shall provide that at least thirty (30) days prior notice of
cancellation or lapse shall be given to Integra by the insurer. JJM shall, if so
requested by Integra, furnish a certificate of insurance evidencing the
insurance required hereunder.
ARTICLE XI.
RESEARCH & DEVELOPMENT PROGRAM
Section 11.1. Product Improvement Research. Subject to the terms and
conditions of this Agreement, Integra shall conduct an ongoing program of
research and development, including clinical testing, directed to improving
existing Products, expanding the approved indications for the Products within
the Field and developing future Products with improved performance and
efficacy. Such research and development efforts shall be carried out under the
direction of the Joint Steering Committee and pursuant to Annual Plans
developed and agreed upon as contemplated by Section 11.3 below.
Section 11.2. JJM Collaboration. Subject to the terms and conditions
of this Agreement, JJM shall provide assistance, consultation and advice to
Integra in the conduct and assessment of such research and development
efforts. In addition, as contemplated by the Annual Plans, JJM shall
collaborate with Integra and undertake certain aspects of the development and
clinical testing programs.
Section 11.3. Annual Plan. The Annual Plan for the period between the
Effective Date and December 31, 1999 shall be prepared by Integra and
distributed for review to the Joint Steering Committee within sixty (60) days
of the Effective Date. For each calendar year thereafter, Integra shall
prepare a draft of the Annual Plan for submission to, and approval by, the
Joint Steering Committee not later than September 1 of the calendar year prior
to the calendar year to which such plan relates. Once approved by the Joint
Steering Committee, the Annual Plan for each calendar year shall be appended
to and made part of this Agreement. The members of the Joint Steering
Committee shall seek in good faith to resolve any disagreements with respect
to any Annual Plan. In connection with the approval of each Annual Plan, the
Joint Steering Committee shall annually agree upon the
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number of individuals from Integra's research and development staff that will
be dedicated to the performance of research under this Agreement.
ARTICLE XII.
RESEARCH FUNDING
Section 12.1. Funding Through 2004. JJM shall contribute to Integra's
research, development and clinical programs by making periodic payments to
Integra to be utilized to fund such programs, including (subject to the
approval of the Joint Steering Committee) in conjunction with grants (such as
NIH, NIST) received by Integra (the "Research Payments"). JJM shall pay to
Integra [**] million as Research Payments in each of calendar years 2000
through 2004. Such Research Payments shall, in each case, be made by JJM in
four equal installments of [**] ($[**]) payable on or prior to the first day
of each Calendar Quarter by wire transfer in immediately available U.S.
dollars to a U.S. bank account specified by Integra.
Section 12.2. Funding After 2004. Commencing January 1, 2005 and each
calendar year of the Initial Period (as defined herein) thereafter, JJM shall
pay to Integra as an aggregate annual Research Payment an amount equal to [**]
of Net Sales for the previous calendar year. There shall be no maximum amount
to the aggregate Research Payments made by JJM to Integra in any calendar year
commencing January 1, 2005. Such Research Payments shall, in each case, be
made by JJM in four equal quarterly installments payable on or prior to the
first day of each Calendar Quarter by wire transfer in immediately available
U.S. dollars to a U.S. bank account specified by Integra.
Section 12.3. Funding for Extension Period. For each of the first
five calendar years of the Extension Period (as defined in Article XXIX, JJM
shall make Research Payments to Integra in amounts equal to the percentage of
Net Sales of the Products in the Territory for the previous calendar year
specified in the following table, which percentage shall decrease each year by
0.5 percentage points until it is zero as follows:
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Research Payments
(as % of Net Sales for the
Year of Extension Period previous calendar year)
- ----------------------- -----------------------
1 [**] %
2 [**] %
3 [**] %
4 [**] %
5 [**] %
6, and thereafter 0.0%
There shall be no maximum amount to the aggregate Research Payments made by
JJM to Integra in any calendar year during the Extension Period. Such Research
Payments shall, in each case, be made by JJM in four equal quarterly
installments payable on or prior to the first day of each Calendar Quarter by
wire transfer in immediately available U.S. dollars to a U.S. bank account
specified by Integra.
Section 12.4. Utilization and Allocation of Research Payments. In
connection with the approval of each year's Annual Plan, the parties, through
their representatives on the Joint Steering Committee, shall agree on the
allocation of Research Payments to research, development and clinical uses
within the Annual Plan. In any calendar year, at least $ [**] of the Research
Payments for such year shall be allocated in the Annual Plan by the Joint
Steering Committee to the salaries of Integra's research and development
personnel in support of the research program contemplated herein unless
otherwise mutually agreed by the parties. Commencing with the calendar year
beginning January 1, 2005, the parties intend that approximately 20% of
Research Payments shall be utilized for research, development and clinical
programs in the Field conducted by JJM, with the remainder of such amounts to
be conducted by Integra. Integra shall not apply any of the Research Payments
to research or development outside the Field unless it shall have received
express written approval for such expenditure from JJM. [**]
At the conclusion of each calendar year during the Term, Integra shall provide
JJM with a certificate duly executed by its chief executive officer certifying
that the Research Payments were used substantially in accordance with the
Annual Plan or as otherwise directed by the Joint Steering Committee.
Section 12.5. Additional Technology Acquisition Funding. In the event
JJM and Integra agree to seek to acquire or in-license third party
technologies useful in the Field, the cost of which is beyond the scope of the
Research Payments, given other
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allocated uses within the Annual Plan, the parties shall negotiate in good faith
a mechanism for acquiring such technologies and reimbursing the party that pays
for the in-license or acquisition of such technologies. Notwithstanding the
foregoing, under no circumstances shall either party be able to compel the other
party to expend for such acquisition or in-licensing funds in excess of the
Research Payments, nor shall one party be able to block the other party from
acquiring such Technology (subject to the provisions of Section 2.3).
Section 12.6. Utilization of Animal Testing Facility. Upon the
agreement of the Joint Steering Committee, Integra may request that JJM
provide services and resources, if available, at the Johnson & Johnson Wound
Healing TRC ("TRC") located in Skillman, New Jersey in connection with the
research, development and clinical program, provided that the rate which
Integra shall pay for such services shall not exceed the average rate charged
by TRC to JJM. Integra shall make payments to JJM to offset the corresponding
inter-company cross-charge.
Section 12.7. Development of [**] Product. The parties may
mutually agree, through the Joint Steering Committee, to conduct a separate
research, development and clinical program for a [**] Product.
[**]
Until the parties agree to conduct such a program, neither party
shall be obligated to allocate or spend any resources on such program. If the
Joint Steering Committee recommends that the parties conduct such a program,
and the cost of such program exceeds the available Research Funding, the
parties will determine how to jointly fund it.
Section 12.8. Reports and Exchange of Information.
(a) Reports. Each party shall communicate to the other the status of
its work pursuant to each Annual Plan, its findings and all results in a
manner and at such intervals as the Joint Steering Committee shall reasonably
determine, but no less frequently than a written report every Calendar
Quarter. Each such quarterly report shall summarize the progress and results
during the previous quarter in implementing the Annual Plan and achieving the
goals and shall provide such other related information as the Joint Steering
Committee shall reasonably request.
(b) Access to Facilities. Each party shall permit personnel of the
other party to visit the facilities that are utilized in connection with the
research and development contemplated by the Annual Plan, at mutually agreed
upon times,
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during normal business hours, to observe the activities being conducted under
the Annual Plan.
(c) Books and Records. Each party shall keep and maintain detailed
and accurate books and records, consistent with its current accounting
procedures, with regard to its expenditures under the Annual Plan. Each party
shall be entitled to review and audit such books and records of the other from
time to time (but not more frequently than twice per calendar year) during
normal business hours upon reasonable notice to verify the application of
Research Payments in accordance with the Annual Plan. All information received
by a party (or its representatives) during such an audit shall be considered
Confidential Information.
ARTICLE XIII.
CLINICAL AND REGULATORY EVENT PAYMENTS
Section 13.1. Clinical and Regulatory Event Payments. Upon the first
occurrence of each of the events set forth below, Integra shall promptly
notify JJM in writing of the achievement of such event, along with any related
documentation reasonably requested by JJM (a "C&R Notice"). Within thirty (30)
days following the delivery of any C&R Notice, in further consideration for
the exclusive use of the PMA P900033 and all amendments and supplements
thereto relating to the Products in the Field and the Territory, JJM shall pay
directly to Integra in addition to the Research Payments contemplated by
Article XII, the corresponding C&R Event Payment set forth below (a "C&R Event
Payment"). Until Manufacturing Yield exceeds [**]% for three consecutive lots
of [**] size Product, JJM shall withhold 50% of C&R Event Payments of $1
million or more, payment of such withheld amount to be subsequently paid out
in full upon notification of achieving such Manufacturing Yield. C&R Event
Payments shall be paid directly to Integra by wire transfer in immediately
available U.S. dollars to a U.S. bank account specified by Integra.
C&R Event Payment C&R Event
(i) $0.25 million: Upon publication of part of or the
entire " [**] study" with data
equivalent to or better than the pivotal
study data (minimum of one-hundred
patients) in a U.S. peer-reviewed
journal [**].
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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In no event shall such publication
be made prior to completion of the [**]
study.
(ii) $0.75 million: Upon the filing of the FDA [**]
Burn Study satisfying the original
conditions of PMA approval [**]
(iii) $0.50 million: [**]
(iv) $0.50 million: [**]
provided, that if this
shall be the first PMA supplement
approval granted since the
Effective Date, and JJM shall not
then have previously paid the C&R
Event Payment set forth under
(iii) above, then JJM shall make
such payment at such time.
(v) $0.50 million: Upon receipt of PMA supplement approval
from the FDA for [**]
indication; provided,
that if this shall be the first PMA
supplement approval granted since the
Effective Date, and JJM shall not then
have previously paid the C&R Event
Payment set forth under (iii)
above, then JJM shall make such
payment at such time.
(vi) $0.50 million: Upon publication [**]
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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of a [**] study
[**] including those patients used
in obtaining the [**] and/or
those patients used in applying for
the PMA supplement for [**]
indication; such payment not to be
paid until and unless the PMA
supplement is approved.
(vii) $5.00 million: Upon receipt of first FDA approval for
[**] indication [**]
For the
avoidance of doubt, permission
from the FDA to distribute a
peer-reviewed article describing
the use of the Product for
[**] is not sufficient.
(viii) $2.00 million: Upon CE mark approval (whether such
mark is held in Integra's name or
in JJM's name) and publication of a
prospective clinical study for [**]
allowing sale to that indication
with CE mark (whether such mark is
held in Integra's name or in JJM's
name) in Europe, including as an
extension of Integra's (or JJM's
if the mark is held in its name)
current design dossier, and
receipt of a Regulatory Approval
for such indication in at least
[**]
(if required,
including any required product
registration).
(ix) $3.00 million: Upon receipt of subsequent FDA
approval for any one additional [**]
indication [**]
; to be paid
simultaneously with the payment
set forth under (vii) above if the
first and second [**] indications
receive approval simultaneously.
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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[**] In the event that the Joint Steering Committee decides to
adopt a different [**] that no longer contemplates the achievement
of one or more events set forth above (an "Abandoned Event"), the Joint
Steering Committee shall reallocate the C&R Event Payment for such Abandoned
Event to another existing event or a new event, in either case in favor of the
existing event or new event that is closest in scope and expected timing to the
Abandoned Event.
Section 13.2. C&R Event Payments Upon Termination. From and after the
Termination Date, JJM shall no longer be obligated to make any C&R Event
Payment, except with respect to any C&R Event Payment as to which a C&R Event
(as described in Section 13.1) has occurred prior to the Termination Date.
ARTICLE XIV.
CLINICAL RESEARCH
Section 14.1. Responsibilities of the Parties. Except for any
clinical research studies ongoing as of the Effective Date, JJM shall design,
manage, coordinate, implement, monitor and administer the [**] Wound
Trials, [**] Wound trials and any other clinical research studies with its
clinical research group or any third party JJM elects as its agent (such as a
clinical research organization). JJM shall bear (i) all third party clinical
trial costs for the [**] Wound Trials and, except as set forth in the next
sentence, any such [**] Wound trials required to support the regulatory
submissions for product registrations in the United States and Europe and (ii)
its internal personnel costs in connection with such trials. Integra
shall bear its internal personnel costs in connection with such trials and
100% of the prospective per patient fee for the [**] Wound trials up to a
maximum of $500,000 per year, and Integra shall have the right to utilize
Research Payments (described in Article XII above) to defray any of its
non-personnel costs associated with the [**] Wound Trials or such
[**] Wound trials (excluding the production of Products as contemplated
by Section 4.7 hereof).
In a manner comparable to Section 11.3, JJM shall prepare an annual
plan for such clinical trials for review and approval by the Steering
Committee. JJM shall use reasonable commercial efforts (i) to initiate such
trials within three (3) months after agreement between the parties regarding
the clinical protocols and selection of sites, as contemplated by Section 14.2
and (ii) to complete such trials within two (2) years, subject to the
requirements of the relevant regulatory authorities and reasonable prudent
medical and commercial practices. JJM shall
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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be responsible for preparing the necessary IDE and PMA filings related to the
trials with the FDA and any other regulatory submissions in the Territory, and
shall use reasonable commercial efforts to make the necessary filings required
for initial Regulatory Approval within six (6) months of completion of such
trials. At its sole discretion, JJM may also support clinical advocacy programs
in connection with [**] Wound and [**] Wound indications. Integra
shall provide any documentation, information, or advice required by JJM to
support the [**] Wound Trials or any such [** ] Wound trials.
Notwithstanding the foregoing, Integra shall have responsibility for completing
the Post-Approval Burn study. Integra will diligently and expeditiously
complete the study in accordance with the Post-Approval Burn study protocol and
objectives, perform all monitoring and administration of the study, cover all
costs associated with the study including, without limitation, investigator fees
and CRO fees. Prior to filing any reports or submissions with respect to the
study, Integra shall present draft copies to JJM and seek consultation from JJM
to prepare the final study report and any associated submission documents. At
JJM's sole discretion, it may offer to assist Integra to compile the study.
The obligations and responsibilities of JJM under this Section 14.1
shall be performed by JJM hereunder at the request of Integra, and shall
remain subject to the supervision and control of the Joint Steering Committee.
In the event of any disagreement or dispute between JJM and Integra arising
under this Section 14.1, which the Joint Steering Committee is unable to
resolve, then such disagreement or dispute shall be resolved by the chief
executive officer of Integra, after and based upon consultation and discussion
with the Executive Committee member designees of JJM.
Section 14.2. Clinical Protocol; Selection of Sites. JJM shall follow
a mutually agreeable clinical protocol and selection of sites, and shall
consult with Integra and provide Integra with an opportunity to amend (subject
to JJM's approval) such protocol or selection of sites for the [**] Wound
Trials and any [**] Wound trials (such approval not to be unreasonably
withheld or delay trial initiation). If Integra seeks to amend the protocol or
selection of sites, and JJM disagrees with Integra's amendment; then, the
parties shall assemble an ad-hoc panel of four (4) relevant external experts
with no financial ties to either party. As a process, each of the parties
shall recommend three (3) people for the ad-hoc committee and each party shall
have the right to disqualify one of the other's proposed members. The
committee's recommendation shall be binding on the parties. To the extent that
to do so would in no way prejudice or jeopardize the [**] Wound
Trials or any such [**]
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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Wound trials, a representative of Integra's Medical Department and its
Regulatory Department shall have reasonable access to information developed
during such trials and shall participate in appropriate reviews during the
establishment of the trial program and review of results.
Section 14.3. Japan Studies. To the extent allowable, Integra shall
provide clinical protocols for its Japan Studies, in order for JJM to review
and advise on any consequences of such Studies on the Products in the
Territory or the PMA.
ARTICLE XV.
REGULATORY APPROVALS
Section 15.1. General Responsibilities. Integra shall be responsible
for obtaining all regulatory approvals for the Products and Product
Improvements. Unless otherwise agreed by Integra and JJM, all product
registrations and applications for approval shall be filed in Integra's name
and Integra shall own all rights under such approvals and registrations.
Except as otherwise provided in Section 15.2 and 15.3 below, any regulatory
costs associated with such filings shall be borne by Integra. Prior to any
submission to any regulatory authority or strategic discussions with the FDA,
Integra shall consult with, and provide a final draft copy of the proposed
regulatory submission to JJM, which shall, within twenty (20) days of receipt
of the draft, provide any written comments to Integra. Integra shall consider
in good faith and consult with JJM regarding any such comments, but Integra
shall have final decision making authority with respect to all such regulatory
filings. Integra shall, to the extent permitted by the FDA, permit JJM to
participate in FDA meetings and phone calls surrounding regulatory approvals.
Integra shall make appropriate arrangements to permit JJM representatives to
participate in all meetings between Integra and the FDA or comparable foreign
regulatory authority relating to the Regulatory Approvals for the Products or
Product Improvements. In all such meetings, Integra shall defer to JJM and
permit JJM to take the lead in making presentations relating to the [**]
Wound Trials or any [**] Wound trials and in seeking regulatory guidance or
concurrence with the procedures to be followed or the scope of approvals to be
sought. Integra and JJM shall jointly approve any material compromises and
changes from the initial submission documents, decisions not to file a PMA
supplement, and the content of the PMA annual report. Upon the expiration or
termination of this Agreement, or at such earlier time as Integra shall request
in its sole discretion, JJM shall promptly transfer to Integra or Integra's
designee any and all ownership rights in product registrations,
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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applications for approval and Regulatory Approvals which the parties had agreed
to file in JJM's name.
Section 15.2. Responsibilities in Specific Countries. With respect to
jurisdictions within the Territory other than the United States or the
European Union, JJM shall cooperate with Integra, in preparing product
registrations, applications for approval and all other filings required under
applicable laws to obtain all regulatory approvals for the Products and
Product Improvements, including, without limitation, translating all such
filings. All regulatory filing fees, translation costs and local consultant
costs related to such regulatory filings shall be borne by JJM; in addition,
at JJM's expense, JJM shall make its employees reasonably available to assist
Integra in making such filings and obtaining such regulatory approvals. JJM
shall only ask Integra to seek Regulatory Approvals in jurisdictions in which
it reasonably determines that there is a commercial benefit to doing so;
provided, that in so doing, Integra shall not be obligated to incur fully
loaded costs per annum in excess of $75,000, and provided further, that
Integra may use the Research Payments to pay for such costs.
Section 15.3. JJM Regulatory Participation. Prior to the next
submission of a PMA supplement pursuant to the Annual Plan, Integra shall file
a PMA supplement with the FDA whereby Integra appoints JJM as the submission
correspondent with the FDA on all PMA matters with respect to such submission,
and with respect to each subsequent submission in accordance with the
direction of the Joint Steering Committee. To the extent reasonable and
practical, JJM will consult with Integra on all oral communications, shall
submit in advance to Integra drafts of all submissions and written
correspondence to the FDA, and shall provide copies of all actual
correspondence within 5 Business Days of sending or receiving any such
correspondence. In the event JJM's performance as the submission correspondent
is not exceeding the standard as established by Integra, or such performance
is not consistent with the regulatory strategy agreed upon by the parties,
then Integra shall have the right to notify JJM of its dissatisfaction, which
notice shall list the performance deficiencies and cite the relevant
standards. Upon receipt of such notice, the Joint Steering Committee shall
review the deficiencies and recommend an action plan. JJM shall then have 60
days to address such deficiencies in accordance with the recommended action
plan. If JJM is unable to address the deficiencies, then at Integra's sole
discretion, Integra can change the submission correspondent back to itself,
but not without the chief executive officer of Integra first consulting and
discussing its decision with the Executive Committee member designees of JJM.
In the event JJM is no longer designated the submission correspondent, JJM's
regulatory participation shall be in accordance with the provisions of
Sections 15.1 and 15.2:
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ARTICLE XVI.
JOINT STEERING COMMITTEE
Section 16.1. Appointment of Members. Promptly after the date hereof,
the parties shall form a committee (the "Joint Steering Committee") to
coordinate their efforts and activities under this Agreement. The Committee
shall be composed of four designees of JJM and four designees of Integra. The
designees of Integra and JJM shall include a representative from each of the
following divisions of Integra: (i) Regulatory/Clinical, (ii) Research/Product
Development, (iii) Marketing/General Management (iv) Operations/Other. Members
of the Executive Committee shall be permitted to attend meetings of the
Steering Committee from time to time at their discretion as ex officio
members. Each of JJM and Integra shall designate one of their designees on the
Committee to act as co-chairman.
Section 16.2. Role of Committee. The Joint Steering Committee shall
be responsible for (1) monitoring all aspects of the collaboration between the
parties, and (2) discussing issues and advising each party prior to making
certain decisions including: (i) regulatory strategy and review of progress of
regulatory filings, (ii) review of the Manufacturing Plan, (iii) establishing
Annual Plans, (iv) prioritizing research and development and clinical trials,
(v) consideration of external in-licensing opportunities, (vi) consideration
of opportunities to use technologies of JJM or its Affiliates, (vii)
intellectual property strategy, and (viii) publications and other public
disclosures such as posters and presentations at scientific and industry
meetings. The Joint Steering Committee shall also review product pricing,
manufacturing, and other business issues. More generally, the Joint Steering
Committee shall serve as a forum in which each of the parties will in good
faith seek to resolve issues or disagreements under, or regarding the
interpretation of, this Agreement.
Section 16.3. Designation of Members. Each party shall designate its
members on the Committee and shall promptly advise the other parties if it
substitutes any of its members; provided that notice as to the substitution or
replacement of either party's co-chairman shall be given in writing. If one or
more members of the Committee are unable to attend any meeting, the party that
appointed such non-attending member may designate a substitute to participate
in replacement of the absent member. Other non-members may attend as deemed
necessary or appropriate.
Section 16.4. Meetings. The Joint Steering Committee shall meet at
such times as mutually agreed and at such places as it may select, but in any
event shall meet at least quarterly. The first meeting of the Joint Steering
Committee shall occur within forty-five (45) days of the Effective Date. No
meeting of the Joint Steering Committee shall, for purposes of this Agreement,
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be validly constituted unless at least two members representing each party shall
be in attendance (a quorum of the Committee), and no action shall be taken or
deemed validly taken by the Committee unless such action shall have been
approved by unanimous vote (each party collectively having one vote) of the
members of the Committee participating at a meeting at which a quorum is
present. All actions validly taken by the Committee shall be duly recorded in
minutes of the Committee prepared by a member of the Committee selected for that
purpose at any given meeting, shall be furnished to each party by its respective
co-chairman, and shall be retained by each party (after corrections, if any, are
made) as part of its records of actions taken with respect to this Agreement.
Unless otherwise determined by all parties, the meetings shall take place at the
offices of JJM's Parent in New Brunswick, New Jersey. At JJM's request, one
meeting a year will take place at JJM's headquarters in Arlington, Texas. All
reasonable costs of participation by each member in the activities of the
Committee shall be borne by the party appointing such member.
Section 16.5. Disputes. In the absence of a unanimous decision on any
matter introduced before the Joint Steering Committee for a vote, either
co-chairman may refer such matter to the Executive Committee for resolution.
In addition, in the event the Joint Steering Committee is unable to obtain a
vote required to approve, or take other action on, any matter referred to it,
or is otherwise engaged in a deadlock on any matter, then the matter may be
approved or settled in accordance with Article XXVIII.
ARTICLE XVII.
EXECUTIVE COMMITTEE
Section 17.1. Executive Committee. Integra and JJM shall also form an
executive committee (the "Executive Committee") whose role shall be to oversee
the Joint Steering Committee and the collaboration between the parties
contemplated by this Agreement. The Executive Committee shall consist of
Integra's President and Chief Executive Officer and JJM's Group Company
Chairman, plus as many as two additional members from each party. The
Executive Committee shall meet at the request of either party, but in any
event shall meet no less than two times per calendar year. One member of the
Executive Committee from each party shall attend meetings of the Joint
Steering Committee but shall have no authority to vote on matters that come
before the Joint Steering Committee. Any decision of the Executive Committee
must be unanimous.
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ARTICLE XVIII.
PERSONNEL; CONSULTANTS
Section 18.1. Liaison Officers. Integra and JJM shall each designate
one of its Joint Steering Committee members as its principal liaison officer,
who shall function as the principal person responsible for the resolution of
day-to-day issues which may arise under this Agreement and who shall also
function as the principal point of contact with representatives of the other
party. To the extent that the respective principal liaison officers must meet
face-to-face, such meetings shall occur in New Jersey.
Section 18.2. Salespeople. Integra shall make available for transfer
to JJM, at JJM's expense, Integra's five U.S. salespeople and three European
salespeople (collectively, the "Salespeople") to support JJM's marketing and
distribution efforts pursuant to this Agreement. On or about the date hereof,
JJM will make employment offers, to such of the Salespeople as it so desires.
Upon written acceptance of such employment offer, but not before the Effective
Date, JJM shall be responsible for paying all expenses associated with such
Salespeople (which shall accrue from and after the later of the Effective Date
and the commencement of employment with JJM) including, without limitation,
base salary, benefits, travel expenses, commissions and bonuses, all in
accordance with the employment offer. Integra and JJM shall cooperate, to the
extent necessary, in effecting the transition of the Salespeople from Integra
to JJM, provided that such transition shall be completed prior to the
Effective Date. Integra shall use its best efforts to transfer Salespeople to
JJM. If any of the Salespeople does not accept the offer of employment with
JJM, Integra may retain such Salesperson and utilize his or her services in
any aspect of Integra's business at Integra's discretion other than the
marketing, promotion, distribution or sale of the Products in the Territory,
provided that Integra shall cause any such employee to be available for up to
50% of his or her time for six months to support the transition of the
business to JJM. Such activities shall include, but not be limited to sales
training, professional education, development of sales aids, and customer
calls. JJM shall pay all out of pocket expenses (not including salary and
benefits) incurred by these employees and any other employee that Integra
uses, at the express and specific request of JJM, to assist in the transition
of the promotion, marketing, distribution and sales of the Products to JJM,
including Integra's Medical Director and Reimbursement Director. For the
avoidance of doubt, Integra shall cause the Medical Director and Reimbursement
Director to be available for 50% of their time for the twelve months following
the Effective Date.
Section 18.3. Assignment and Assumption of Consultant and Other
Contracts. To the extent permitted by their terms, Integra
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shall assign to JJM and JJM shall assume the contracts set forth in Schedule
18.3 hereto (the "Assumed Contracts") as of the Effective Date. To the extent
that such assignment and assumption cannot be done prior to the Effective Date,
JJM and Integra shall cooperate and use their reasonable commercial efforts for
Integra to assign and JJM to assume the Assumed Contracts as promptly as
practicable following the Effective Date and JJM shall reimburse Integra for any
expenses incurred in connection with the Assumed Contracts from the Effective
Date until the Assumed Contracts are either assumed by JJM or terminated;
provided that Integra shall not pay any termination fee, liquidated damages or
similar penalty in connection therewith, without the prior written consent of
JJM.
ARTICLE XIX.
NON-SOLICITATION
Section 19.1. Non-Solicitation. JJM covenants and agrees that during
the term of this Agreement and for a period of one year thereafter, JJM will
not, and will use all reasonable efforts to ensure that its Affiliates do not
solicit, endeavor to entice away or otherwise directly interfere with the
relationship of Integra with, any of the individuals listed on Schedule 19.1
hereto, the "Restricted Employees"), except to the extent that such offer of
employment is specifically provided for under this Agreement, or the employee
has responded to a general advertisement of employment.
ARTICLE XX.
STANDSTILL
Section 20.1. Standstill. By its countersignature of this Agreement,
JJM's Parent covenants and agrees on behalf of itself and its Affiliates that
for a period ending upon the later of seven (7) years from the date hereof or
two (2) years following the termination of this Agreement: (i) such entities
shall not acquire "beneficial ownership" (as defined under Section 13(d) of
the Securities Exchange Act of 1934) of any securities of Integra's Parent
without the prior consent of Integra's Parent's Board of Directors, and (ii)
such entities shall refrain from forming or participating in a "group" (as
defined under Section 13(d) of the Securities Exchange Act of 1934) for the
purpose of influencing the direction or management of Integra's Parent. JJM's
Parent shall be released from the foregoing restrictions if: (a) any Person
(other than (i) existing stockholders of Integra's Parent, (ii) JJM's Parent
or one of its Affiliates or (iii) a Person acting on behalf of a "group" which
includes JJM's Parent or one of its Affiliates) shall acquire 15% or more of
the then outstanding shares of Common Stock of Integra's Parent in any
transaction other than the issuance to
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such Person of newly issued shares as approved by the Board of Directors of
Integra's Parent or (b) any person (other than JJM's Parent or one of its
Affiliates or a Person acting on behalf of a "group" which includes JJM's Parent
or one of its Affiliates) shall commence a tender offer seeking to acquire 50%
or more of the then outstanding shares of Common Stock of Integra's Parent.
Section 20.2. Shareholder Rights Plan. Integra's Parent shall not
implement a shareholder rights plan with a feature that would discriminate
specifically against JJM or its Affiliates, as distinct from any other adverse
party. Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent Integra's Parent from implementing a shareholder rights plan in
response to a proposal or offer from JJM or its Affiliates.
ARTICLE XXI.
INTELLECTUAL PROPERTY
Section 21.1. Ownership of Inventions. Title to all Inventions
related to any Product existing as of the date of this Agreement, will be
retained by the current holder. Integra shall own title to all Inventions made
solely by employees of Integra during the term of this Agreement. Title to all
Inventions made solely by JJM employees during the term of this Agreement
shall be owned by JJM. Title to all Inventions made jointly by employees of
Integra, on the one hand, and employees of JJM, on the other hand
("Jointly-Owned Inventions"), shall be jointly owned by Integra and JJM. Each
of the parties shall have the right to use such Jointly Owned Inventions for
use not only with the Products, but also in any other areas within or outside
the Field. Any Inventions of either party hereto arising from research
conducted by such party during the term of this Agreement and funded by
Research Payments shall be deemed to be a "Funded Invention." Each of Integra
and JJM shall receive a royalty free non-exclusive license to each such Funded
Invention for use in the Field and neither party may sublicense such rights to a
third party without the prior written consent of the other party. Each party
shall notify the other upon filing a patent application with respect to any
Funded Invention, except to the extent that such notification would impair the
validity of such application.
Section 21.2. Out-licensing of Funded Inventions. In the event that
Integra desires to out-license Funded Inventions outside of the Field, [**]
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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Section 21.3. Product Improvements to Distributors. Integra shall
have the right to sell any Product Improvements developed pursuant to this
Agreement to (i) its distributor in Japan, without any further conditions, and
(ii) its other distributors, provided that Integra is (x) obligated pursuant
to its agreements with such distributors to include Product Improvements and
[**]. To the extent that any Product Improvements which arose from research
or clinical development which was funded pursuant to this Agreement are sold
by Integra to its distributor in Japan, Integra shall pay a reasonable royalty
rate on such Product Improvements to JJM, which rate shall be agreed upon by
JJM and Integra.
ARTICLE XXII.
PATENT/FILING/MAINTENANCE
Section 22.1. Prosecution. JJM and Integra shall select those
countries where they wish to have patent applications filed or patents
maintained on the Patents and other patentable Inventions (whether held solely
by Integra or jointly by Integra and JJM). Upon such selection, Integra shall,
represented by patent counsel of its choice, reasonably acceptable to JJM,
take all necessary steps to file, prosecute and maintain the requested patent
protection on such Patents and other Inventions. Integra shall be the client
of any counsel engaged for such purpose. Either party shall have the right
upon thirty (30) days prior written notice to the other party, at its sole
cost and expense, to file and prosecute a patent application or maintain a
patent covering all or a part of any such jointly-held Invention in any
country which such other party does not select under the first sentence of
this Section, unless upon receipt of such notice and before the end of the
notice period, such other party selects such country. In all events concerning
patent prosecution of the application under this Article, JJM and Integra
agree to cooperate with each other.
Section 22.2. Costs. All patent attorney fees and all patent
registration, patent filing, patent translation and patent maintenance fees,
costs and expenses with respect to (a) the Patents and the Inventions solely
owned by Integra shall be borne by Integra and (b) the Inventions jointly
owned by Integra and JJM shall be shared equally by Integra and JJM, in each
of those countries or patent offices selected by the parties pursuant to
Section 22.1.
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[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
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ARTICLE XXIII.
REPRESENTATIONS AND WARRANTIES OF INTEGRA
Integra represents and warrants to JJM as follows:
Section 23.1. Organization, Standing, Etc. Integra is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, and has all necessary power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and to carry on
its business as it has been and is currently conducted. Integra is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable,
except where the failure to be so licensed, qualified or in good standing
would not have a material adverse effect on Integra and its subsidiaries taken
as a whole.
Section 23.2. Authorization, Noncontravention. Integra has all
necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Integra, the performance by
Integra of its obligations hereunder and the consummation by Integra of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of Integra, and do not contravene or constitute a default
(or an event which with notice or lapse of time or both will constitute a
default) under (i) any provision of applicable law or regulation, (ii) the
Certificate of Incorporation or the Bylaws of Integra or (iii) any material
agreement, judgment, injunction, order, decree or other instrument binding
upon Integra, or result in the creation or imposition of any Encumbrance on
any asset of Integra.
Section 23.3. Binding Effect. This Agreement has been duly
authorized, executed and delivered by Integra and (assuming due execution and
delivery by each of the other parties thereto) constitutes a legal, valid and
binding obligation of Integra enforceable against Integra in accordance with
its terms.
Section 23.4. No Infringement of Third Party Rights. To the best of
its knowledge, the manufacture, use and sale of Products do not infringe the
rights of any third party.
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ARTICLE XXIV.
REPRESENTATIONS AND WARRANTIES OF JJM
JJM represents and warrants to Integra as follows:
Section 24.1. Organization, Standing, Etc. JJM is a division of a
corporation duly organized, validly existing and in good standing under the
laws of New Jersey, and has all necessary power and authority to own, operate
or lease the properties and assets now owned, operated or leased by it and to
carry on its business as it has been and is currently conducted. Ethicon, Inc.
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable,
except where the failure to be so licensed, qualified or in good standing
would not have a material adverse effect on Ethicon, Inc. and its subsidiaries
taken as a whole.
Section 24.2. Authorization, Noncontravention. JJM has all necessary
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by JJM, the performance by JJM of its
obligations hereunder and the consummation by JJM of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of JJM, and do not contravene or constitute a default (or an event which
with notice or lapse of time or both will constitute a default) under (i) any
provision of applicable law or regulation, (ii) the Certificate of
Incorporation or the Bylaws of Ethicon, Inc. or (iii) any material agreement,
judgment, injunction, order, decree or other instrument binding upon JJM or
Ethicon, Inc., or result in the creation or imposition of any Encumbrance on
any asset of JJM or Ethicon, Inc.
Section 24.3. Binding Effect. This Agreement has been duly
authorized, executed and delivered by JJM and (assuming due execution and
delivery by each of the other parties thereto) constitutes a legal, valid and
binding obligation of JJM enforceable against JJM in accordance with its
terms.
ARTICLE XXV.
PATENT INFRINGEMENT
Section 25.1. Third Party Infringement.
Section 25.1.1. Enforcement by Integra. If either party becomes aware
that any of the Patents are being or have been infringed by any third party,
such party shall promptly notify
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the other party hereto in writing describing the facts relating thereto in
reasonable detail. Integra shall have the initial right, but not the obligation,
to institute, prosecute and control any action, suit or proceeding (an "Action")
with respect to such infringement, including any declaratory judgment action, at
its expense, using counsel of its choice. JJM shall cooperate with Integra and
provide such non-monetary assistance as Integra may reasonably request in
connection with any such Action. Any recovery of damages by Integra for any such
suit shall be applied (i) first in satisfaction of any costs incurred by Integra
and JJM relating to the Action (including attorneys' and expert fees), (ii)
second to Integra in the amount of any damages awarded for out-of-pocket costs
and expenses incurred by Integra and (iii) the balance remaining from any
recovery shall be divided as follows: (a) Integra shall recover seventy-five
percent (75%), and (b) all the remaining damages shall be recovered by JJM.
Section 25.1.2. Joint Enforcement. In the event that Integra
institutes an Action relating to the Field pursuant to Section 25.1.1 above,
JJM shall have the right to intervene in such Action and Integra shall not
oppose such intervention, provided that (i) JJM notifies the court of its
intention to intervene within one hundred twenty (120) days of the
commencement of such Action, and (ii) JJM shares equally with Integra the
total costs incurred by Integra (including, without limitation, attorneys' and
expert fees) of conducting such Action. The parties shall cooperate and
provide each other such assistance as either may reasonably request in
connection with any such Action, provided, Integra shall retain the control of
the conduct and settlement of any such Action. Any recovery of damages for any
such suit shall be applied first in satisfaction of any out-of-pocket costs
and expenses incurred by the parties relating to the Action (including,
without limitation, attorneys' and expert fees), and the balance shall be
equally divided by the parties.
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Section 25.1.3. Enforcement by JJM. In the event that Integra fails
to initiate or defend any Action involving the Patents in the Field within one
hundred eighty (180) days of receiving notice of any alleged infringement, JJM
may, at its option, initiate and control such an Action, and Integra shall
cooperate with JJM and provide such non-monetary assistance as JJM may
reasonably request in connection with any such Action. Any recovery of damages
by JJM for any such suit shall be applied: (i) first in satisfaction of any
costs incurred by JJM or Integra relating to the Action (including attorneys'
and expert fees), (ii) second to JJM in the amount of any damages awarded for
out-of-pocket costs and expenses incurred by JJM, and (iii) the balance
remaining from any recovery shall be divided as follows: (a) Integra shall
recover twenty-five percent (25%) and (b) all remaining amounts shall be
retained by JJM.
Section 25.2. Costs. The costs of litigation referred to in this
Article XXV shall include but not be limited to any royalty payments which
either party is required to make as a result of such litigation and such
out-of-pocket expenses as court costs and court fees, reasonable travel
expenses, reasonable charges for the professional services of outside counsel
and experts, and shall exclude only the time that JJM's or Integra's regular
employees devote to such litigation.
Section 25.3. Assistance. Integra agrees, in the event that JJM
chooses to prosecute an action for infringement of a Patent under Section
25.1.3 herein but cannot do so in its own name, to sign and give to JJM,
within thirty (30) days after request by JJM, all necessary documents in order
for JJM to prosecute such infringement in the name of Integra. Integra also
agrees to cooperate with JJM, at JJM expense for out-of-pocket costs, in the
prosecution of such infringement.
ARTICLE XXVI.
CONFIDENTIALITY, DISCLOSURE AND PUBLICATION
Section 26.1. Confidentiality. During the term of this Agreement and
thereafter, each party shall maintain in confidence all Confidential
Information disclosed by the other party or which such party knows is or
contains Confidential Information, and shall not use such Confidential
Information for any purpose except as permitted by this Agreement or disclose
the same to anyone other than those of its Affiliates, employees,
sublicensees, consultants, agents or subcontractors as are necessary in
connection with such party's activities as contemplated in this Agreement.
Each party shall obtain a written or oral agreement from any employees,
sublicensees, consultants, agents and-subcontractors, prior to disclosure, to
hold in confidence and not make use of such Confidential Information for any
purpose other than those permitted by this Agreement. Each party shall be
responsible for any breach of
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this Section 26.1 by any of its employees, sublicensees, consultants, agents or
subcontractors. Nothing herein contained shall be deemed to limit the
obligations of either of the parties hereto (or any of their Affiliates) with
respect to any confidentiality agreements executed by each of the parties (or by
any one or more of their Affiliates) prior to the date hereof.
Section 26.2. Exceptions. The obligation of confidentiality contained
in this Agreement shall not apply to the extent that (a) any receiving party
(the "Recipient") is required to disclose information by order or regulation
of a governmental agency or a court of competent jurisdiction, provided that
the Recipient shall not make any such disclosure (other than a filing of
information or materials with the U. S. Securities and Exchange Commission
made with a request for confidential treatment for portions of such material
for which such treatment may reasonably be expected to be granted or a similar
filing of information or materials with the National Association of Securities
Dealers, in either case, subject to Section 27.3) without first notifying the
other party and allowing the other party a reasonable opportunity to seek
injunctive relief from (or protective order with respect to) the obligation to
make such disclosure or (b) the Recipient can demonstrate that (i) the
disclosed information was at the time of such disclosure to the Recipient
already in (or thereafter enters) the public domain other than as a result of
actions of the Recipient, its Affiliates, employees, consultants,
sublicensees, agents or subcontractors in violation hereof, (ii) the disclosed
information was rightfully known by the Recipient or its Affiliates (as shown
by its written records) prior to the date of disclosure to the Recipient or
was independently developed by the Recipient or its Affiliates (as shown by
its written records) subsequent to the date of disclosure and without access
to any related disclosed information, or (iii) the disclosed information was
received by the Recipient or its Affiliates on an unrestricted basis from a
source unrelated to any party to this Agreement and not reasonably believed to
be under a duty of confidentiality to the other party or (c) disclosure is
made to a government regulatory agency as part of such agency's product
license approval process.
Section 26.3. Publications. Prior to public disclosure or submission
for publication of a manuscript describing the result of any aspect of the
research or other scientific or clinical activity or collaboration between
Integra and JJM contemplated by this Agreement, the party disclosing or
submitting such a manuscript ("Disclosing Party") shall send the other party
("Responding Party") a copy of the manuscript to be submitted and shall allow
the Responding Party not less than thirty (30) calendar days in which to
determine whether the manuscript contains subject matter for which patent
protection should be sought prior to publication of such manuscript for the
purpose of protecting an invention of commercial value to the Responding
Party, or whether the manuscript contains confidential
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Information belonging to the Responding Party. After the expiration of such
thirty (30) calendar day period, if the Responding Party has not objected, the
Disclosing Party may submit such manuscript for publication and publish or
otherwise disclose to the public such research results. If the Responding Party
believes the subject matter of the manuscript contains Confidential Information
or a patentable invention of commercial value to the Responding Party, then
prior to the expiration of such thirty (30) calendar day period, the Responding
Party shall notify the Disclosing Party in writing of its determination. Upon
receipt of such written notice from the Responding party, the Disclosing Party
shall delay public disclosure of such information or submission of the
manuscript for an additional period of sixty (60) calendar days to permit
preparation and filing of a patent application on the disclosed subject matter.
The Disclosing Party shall thereafter be free to publish or disclose such
information, except that the Disclosing Party may not disclose any Confidential
Information of the Responding Party in violation of Section 26.1 without the
prior written consent of the Responding Party. Determination of authorship for
any paper or inventorship of any patent shall be in accordance with accepted
scientific or legal practice, respectively. Should any questions on authorship
arise, this will be determined by good faith consultation between the parties.
In the event that Integra wishes to disclose information that is not deemed as
strictly confidential or patentable, but JJM believes to be potentially harmful
to its commercial efforts, regulatory approvals, clinical studies under this
Agreement, or such disclosure would put it at a competitive disadvantage, then
such information shall not be released.
ARTICLE XXVII.
PUBLIC STATEMENT AND PRESS RELEASES
Section 27.1. Public Statements and Press Releases. The parties
hereto covenant and agree that, except as provided for herein below, each will
not from and after the date hereof make, issue or release any public
announcement, press release, statement or acknowledgment of the existence of,
or reveal publicly the terms, conditions and status of, the transactions
contemplated by this Agreement, without the prior written consent of the other
party as to the content and time of release of and the media in which such
statement or announcement is to be made; provided, however, that (i) either
party may at any time and in any media repeat verbatim any announcements,
statements, acknowledgments or revelations which were previously approved by
the other party, including without limitation those contained in the
transaction press release described in Section 27.2 below and (ii) in the case
of announcements, statements, acknowledgments or revelations which either
party is required by law to make, issue or release, the making, issuing or
releasing of any such announcement, statement, acknowledgment or revelation by
the
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party so required to do so by law shall not constitute a breach of this
Agreement if such party shall have given, to the extent reasonably possible, not
less than two (2) Business Days prior notice to the other party, and shall have
attempted, to the extent reasonably possible, to clear such announcement,
statement, acknowledgment or revelation with the other party. No party shall use
the name of the other party or any of its Affiliates for advertising or
promotional purposes without the prior written consent of such other party.
Section 27.2. Transaction Press Release. Promptly following the
signing of this Agreement, Integra and JJM's Parent shall issue the joint
press release which shall be approved by each party prior to release and which
shall include a statement by James T. Lenehan endorsing the collaboration.
Section 27.3. SEC Filing. Prior to filing with the SEC, Integra will
provide JJM with a redacted version of this Agreement which it intends to
file, will give due consideration to any reasonable comments thereto provided
promptly by JJM and will use reasonable efforts to ensure the confidential
treatment by the SEC of those sections specified by JJM.
ARTICLE XXVIII.
DISPUTE RESOLUTION
Section 28.1. Executive Resolution. In the event of any dispute or
deadlock arising from the Joint Steering Committee, or any other dispute
arising under this Agreement, such matter shall be referred to the Executive
Committee for resolution, prior to any further action being taken to resolve
such dispute in accordance with the terms of this Article Twenty Eight. In
addition, any strategic issues in connection with the collaboration of the
parties may be referred by the Executive Committee to be decided at this
level. The determination of the Executive Committee on any matter, as provided
in this Section, shall be made as promptly as practicable, but in any event no
later than twenty (20) Business Days following the referral of such matter to
the Executive Committee; provided, however, that all parties shall provide to
the Executive Committee all supporting information, data and documentation as
may be available with respect to any such matter in the time limit specified.
In the event the Executive Committee is unable to resolve any matter presented
to it within applicable time limits, then any of the parties to this Agreement
may refer the matter for outside dispute resolution in accordance with the
terms of the remaining provisions of this Article Twenty Eight.
Section 28.2. Mediation. Any dispute, controversy or claim arising
out of or related to this Agreement, or the breach, termination or validity
hereof, including any claim of inducement by fraud or otherwise, shall, before
submission to litigation
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pursuant to Section 28.3 hereof, first be mediated through non-binding mediation
in accordance with the Model Procedures for the Mediation of Business Disputes
promulgated by the Center for Public Resources ("CPR") and in effect as of the
date of this Agreement. The mediation shall be conducted in New Jersey. The
mediator shall be an attorney who has at least 20 years of experience as a
lawyer or judge and who shall be appointed from the list of neutrals maintained
by CPR. The parties shall promptly confer in an effort to select a mediator by
mutual agreement. In the absence of such an agreement, the mediator shall be
selected from a list generated by CPR with each party having the right to
exercise two peremptory challenges within forty-eight (48) hours of receiving
the CPR list. The mediator shall confer with the parties to design procedures to
conclude the mediation within no more than forty-five (45) days after initiation
including limited discovery between the parties at the discretion of the
mediator. The parties agree to toll all applicable statutes of limitation during
the mediation process and not to use the period or pendency of the mediation to
disadvantage the other procedurally or otherwise. All discussions and
proceedings in preparation for or during the mediation shall be deemed
Confidential Information hereunder and not distributed to any third party or
used for any other purpose whatsoever. Either side may pursue provisional relief
from any court, such as attachment, preliminary injunction, replevin, etc., to
avoid irreparable harm even though mediation has not been commenced or
completed.
Section 28.3. Court Resolution of Claims. Any dispute, claim or
controversy, arising from or related to this Agreement, or the breach,
termination or validity thereof, including any claims asserting inducement of
this Agreement by fraud or otherwise, will be submitted for resolution to the
U. S. District Court for the District of New Jersey. Each party hereby
consents to the jurisdiction of the above courts with respect to any such
matter. EACH PARTY HERETO WAIVES ITS RIGHTS TO TRIAL OF ANY ISSUE BY JURY.
EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE, EXEMPLARY, SPECIAL OR
CONSEQUENTIAL DAMAGES FROM THE OTHER.
ARTICLE XXIX.
TERM AND TERMINATION
Section 29.1. Term. The initial term of this Agreement (the "Initial
Period") shall commence on the date hereof and shall expire on the ten (10)
year anniversary of the date hereof unless sooner terminated as herein
provided. JJM, at its sole option, may extend this Agreement for successive
ten (10) year periods following the Initial Period (the "Extension Periods"),
provided that during such Extension Periods, the Minimum Supply Price Per Unit
shall be adjusted annually up or down in accordance with the percentage change
in the Producer Price Index in the manner set forth in Section 6.1(a)(i)
hereof. This
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Agreement shall be automatically extended, unless JJM shall notify Integra in
writing of its election to allow this Agreement to expire not less than one year
prior to the end of the Initial Period or any such Extension Period. For
purposes of this Agreement, the "Term" shall refer to the Initial Period and any
Extension Periods thereof in accordance with this Section.
Section 29.2. Termination. Notwithstanding Section 29.1 hereof, this
Agreement may be terminated as follows:
(a) By JJM, at any time for any reason, by giving Integra one year's
prior written notice thereof. Any termination pursuant to this Section 29.2(a)
shall take effect on the one-year anniversary of the date on which Integra
receives such notice.
(b) By Integra, if JJM breaches its obligations to make the Minimum
Prepayments pursuant to this Agreement, provided that JJM may cure any such
breach within thirty (30) calendar days after receipt of written notice from
Integra of such breach by making the Minimum Prepayments then due to Integra
plus interest calculated at a rate per annum equal to 2.0% over the rate of
interest publicly announced by Citibank N.A. (or its successor) from time to
time in New York, New York as its "base" or "prime" rate, provided, however,
that if JJM breaches its obligations to make the Minimum Prepayments pursuant
to this Agreement more than three times in any rolling two year period, it
shall no longer maintain this right to cure. Any termination pursuant to this
Section 29.2(b) shall take effect thirty (30) calendar days after receipt by
JJM of written notice from Integra of the breach.
(c) (i) By JJM in accordance with Section 2.3(e)(ii) hereof. Any
termination pursuant to this Section 29.2(c)(i) shall take effect upon the
receipt by Integra of written notice from JJM of its intent to terminate this
Agreement in accordance with Section 2.3(e)(ii) hereof.
(ii) By Integra in accordance with Section 2.3(e)(iii)
hereof. Any termination pursuant to this Section 29.2(c)(ii) shall
take effect upon the receipt by JJM of written notice from Integra of
its intent to terminate this Agreement in accordance with Section
2.3(e)(iii) hereof.
(d) By Integra, upon notice given to JJM at any time within ninety
(90) days following the consummation of a JJM Change of Control (as defined
below) of JJM if (i) the Person or Persons acquiring control of JJM's Wound
Care Business, or their respective Affiliates, had Net Sales of Competitive
Products during the twelve month period ending immediately prior to the
effective date of the JJM Change of Control equal to or greater than 50% of
Net Sales of the Products during the comparable period, or (ii) following such
JJM Change of Control such Person or Persons could not or would not be able to
fulfill JJM's
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obligations under this Agreement. Any termination pursuant to this Section
29.2(d) shall take effect upon JJM's receipt of the requisite notice.
For purposes of this Agreement, "JJM Change of Control" shall mean
(i) the sale of all or substantially all of the assets of JJM's Wound Care
Business to any Person other than an Affiliate of JJM controlled by JJM's
Parent, (ii) the merger or consolidation of JJM's Wound Care Business with or
into any other Person in which JJM's Parent does not retain a majority of the
voting power of the corporation or entity surviving the merger of
consolidation or (iii) the acquisition by any Person (other than an Affiliate
of JJM controlled by JJM's Parent) of shares of Common Stock of Ethicon, Inc.
or its successor or the corporate entity in which JJM is spun-off representing
a majority of the issued and outstanding shares of Common Stock then
outstanding (unless JJM's Wound Care Business is transferred to a different
Affiliate of JJM prior to such acquisition, in which case this clause (iii)
shall relate to the acquisition of shares of such Affiliate), provided that a
spin-off of JJM to the stockholders of JJM's Parent shall not constitute a JJM
Change of Control. JJM shall give prompt notice to Integra upon any such JJM
Change of Control and shall furnish the data necessary for Integra to
determine if such JJM Change of Control triggers the provisions contained in
Section 29.2(d) above.
(e) By either party, upon the occurrence and at any time during the
continuance of any of the following events:
(i) the failure by the other party in any material
respect to perform or fulfill, at the time and in the manner provided
herein, any material covenant, agreement, obligation or condition
required to be performed or fulfilled by such party, which failure
shall not be cured within sixty (60) calendar days after receipt of
written notice from the other party specifying such failure, or in
the case of payments due (other than JJM's failure to pay to Integra
the Minimum Prepayments pursuant to this Agreement) hereof, which
breach shall be governed solely by Section 29.2(b) above), within
thirty (30) calendar days after receipt of such notice; or
(ii) the insolvency, dissolution or liquidation of
the other party, the making by the other party of a general
assignment for the benefit of its creditors, the filing by or against
the other party of a petition in bankruptcy, or the appointment of a
receiver for a substantial part of the assets of the other party.
Any termination pursuant to Section 29.2(e)(i) hereof shall take
effect immediately upon the conclusion of the cure period provided for in such
Section. Any termination pursuant to Section 29.2(e)(ii) hereof shall take
effect immediately upon the
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receipt of written notice from the non-defaulting party of the breach.
Section 29.3. Effect of Termination or Expiration.
(a) Upon the expiration or termination of this Agreement:
(i) JJM shall return to Integra all Confidential
Information pertaining to Products or this Agreement, including
without limitation all information relating to existing and potential
customers of the Products;
(ii) neither Integra nor JJM shall, in any way,
interfere with the transfer of any personnel who were located on the
site of the other party during the Term back to the party with which
such individual is employed;
(iii) to the extent permitted under applicable law,
JJM shall diligently and expediently take the necessary steps to
transfer all product registrations and applications for approval that
were filed with respect to the Products and Product Improvements in
JJM's name (including, without limitation, any CE marks) and all
other permits, licenses, approvals, consents and clearances of
Governmental Authorities related to the Products (collectively, the
"Registrations and Permits") to Integra or its designated Affiliate
in a commercially reasonable time frame. To the extent that such
transfers are not permitted under applicable law, JJM shall use
reasonable and practical efforts to cooperate with Integra in its
efforts to resubmit such Registrations and Permits in Integra's or
Integra's designee's name and shall provide any existing data and
documentation requested by Integra to achieve the same;
(iv) the responsibilities of the Joint Steering
Committee shall be limited to planning and coordinating the orderly
transitions of the Excisional Wound Trials and the Chronic Wound
Trials from JJM to Integra, and JJM shall promptly transfer to
Integra any data produced in connection with the Excisional Wound
Trials and the Chronic Wound Trials, which data shall be the property
of Integra and may be utilized by Integra in the submission of its
regulatory filings;
(v) the license to reproduce the Licensed Trademark
granted by Integra to JJM pursuant to Section 5.2 hereof shall
terminate automatically upon the later of (A) the date which is six
months from the Termination Date or (B) the date on which JJM
completes its distribution of any Products purchased pursuant to this
Agreement; JJM shall not use any other trademark developed by it
expressly for use with the Products for a period of three years
beginning on the date on which the license to reproduce the Licensed
Trademark terminates in accordance with this Section 29.3(a)(v)
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(provided that this Section 29.3(a)(v) shall not apply to any
trademarks used by JJM generally in JJM's Wound Care Business);
(vi) any rights and interests to the Funded
Inventions (other than Jointly-Owned Inventions) in the Field shall
automatically revert to Integra, including the royalty free
non-exclusive license granted to JJM pursuant to Section 21.1 hereof,
any rights of JJM pursuant to sublicenses granted to third parties
and any additional licenses or rights of first refusal previously
obtained by JJM;
(vii) JJM shall retain any rights and interests
pursuant to the terms of any licenses to the Funded Technology
outside the Field, including any royalties due pursuant to Section
21.2 hereof and any other payments due to it;
(viii) any Jointly-Owned Inventions shall remain
jointly owned by Integra and JJM;
(ix) JJM shall not be entitled to recover any prior
payments or funding made to Integra pursuant to this Agreement;
(x) JJM shall cease to be obligated to pay any
ongoing costs of the R&D Funding or Chronic Wound Trials or
Excisional Wound Trials, other than such costs incurred prior to the
Termination Date; and
(xi) JJM shall continue to provide, at Integra's
expense, any services it was providing at the time of termination in
connection with the Excisional Wound Trial and/or Chronic Wound
Trials until the earlier of (x) the date which is six months from the
Termination Date or (y) an orderly transition to Integra or to a
third party vendor for such trials was completed.
(b) JJM SHALL BE ENTITLED TO NO COMPENSATION OR OTHER PAYMENT FROM
INTEGRA AS A RESULT OF THE EXPIRATION OF THIS AGREEMENT OR DUE TO THE EARLY
TERMINATION HEREOF IN ACCORDANCE WITH THE TERMS HEREOF; PROVIDED THAT NOTHING
IN THIS SECTION 29.3(b) SHALL PREVENT JJM FROM PURSUING CLAIMS FOR WRONGFUL
TERMINATION OR, IN THE EVENT THAT JJM TERMINATES THIS AGREEMENT PURSUANT TO
SECTION 29.2(e), FOR DAMAGES.
(c) Sections 5.2, 8.1(a), 8.1(c), 13.2, 20.1, 21.1, 21.3, 29.3 and
29.4 and Articles VII, IX, X, XI, XXV, XXVI, XXVIII and XXXI of this Agreement
shall survive the termination of this Agreement, to the extent applicable,
notwithstanding any breach by Integra or JJM of their respective obligations
hereunder or thereunder.
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(d) Termination of this Agreement shall be in addition to any other
remedy available to the terminating party at law or equity.
Section 29.4. Additional Effects of Termination Pursuant to Sections
29.2(a), 29.2(b) or 29.2(c). In addition to the effects of termination
specified in Section 29.3, in the event of the termination of this Agreement
pursuant to Sections 29.2(a), 29.2(b) or 29.2(c):
(i) JJM shall pay to Integra the Minimum Prepayments
(or those Minimum Prepayments which would be payable to Integra were
it not for the provisions of Section 6.7(d)) for the twelve (12)
month period beginning on the date on which JJM provides its notice
of termination to Integra, pro-rated for actual calendar months,
provided, however, that the following Sections of the Agreement shall
survive for the duration of such period contemplated in Section
29.3(a)(v) above: Sections 4.1, 4.4, 4.5 and 4.8 and Article VI, each
to the extent applicable;
(ii) any of JJM's outstanding prepaid purchases of
Products (including any outstanding Minimum Prepayments) may be used
by JJM as credit to continue to purchase Products at the applicable
Supply Price and to sell Products in the Territory on a non-exclusive
basis until the earlier of (x) the second anniversary of the
Termination Date or (y) the time at which such credits have been
exhausted; and
(iii) JJM shall pay up to $3,000,000 of Integra's
reasonable out-of-pocket expenses incurred in connection with the
transferring or restoring to Integra of any functions provided by JJM
pursuant to this Agreement including, without limitation, (1)
severance costs, (2) out-of-pocket expenses incurred in connection
with the rehiring of the equivalent number of sales, marketing and/or
distribution personnel for the Products as Integra transfers to JJM
on the Effective Date and (3) expenses incurred in connection with
the transfer of Regulatory Approvals and other product registrations,
licenses and applications for approval and legal expenses. Integra
shall not solicit any employees of JJM or its Affiliates regarding
the rehiring contemplated in this Section 29.4(iii) until the later
of (x) the date on which JJM has sold or otherwise disposed of all of
the Products or (y) six months from the Termination Date.
ARTICLE XXX.
FORCE MAJEURE
Section 30.1. Force Majeure. Neither Integra nor JJM shall be liable
for, or be considered to be in breach of or default
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under this Agreement (including Section 4.2 hereof) on account of, any delay or
failure to perform as required by this Agreement when, and to the extent that,
its performance is delayed or prevented by any cause which is reasonably beyond
the party's control, including, but not limited to, acts of God or of the public
enemy, fire, storm, explosion, earthquake, riots, wars or similar hostilities,
civil commotion, strikes and labor disputes, interruption of supply, inability
to obtain power, raw materials or freight or transportation services, or
voluntary or involuntary compliance with any law or governmental order put into
effect after the date hereof (each a "Force Majeure Event"). Such
non-performance will be excused for the earlier of three (3) months or as long
as the Force Majeure Event shall be continuing; provided, that the party excused
from performance under this Section 30.1 promptly gives notice to the other
party advising of the Force Majeure Event and the steps it will take to remedy
the same and exercises all reasonable efforts to eliminate the Force Majeure
Event and to resume performance of its affected obligations as soon as
practicable.
ARTICLE XXXI.
GENERAL PROVISIONS
Section 31.1. Relationship of the Parties. In the performance of this
Agreement and with respect to all matters relating hereto, JJM's relationship
to Integra will be that of an independent contractor only. Except as may be
otherwise stated in this Agreement, (i) this Agreement does not create any
agency, joint venture, or partnership relationship between Integra and JJM,
(ii) this Agreement does not grant, and neither party hereto or thereto shall
have, any right or authority, express or implied, to incur, create or assume
any liability or obligation, enter into any agreement, make any representation
or warranty, file any document with any Governmental Authority, or serve or
accept any legal process on behalf of the other party, or to settle any claim
by or against the other party hereto, or to bind or otherwise render the other
party liable in any way in the Territory or anywhere else in the world,
without the prior express written consent of the other party, (iii) each party
hereto shall be responsible for the selection, training and supervision of,
and the payment of compensation and benefits to, its employees who assist it
in the performance of its obligations hereunder and in no event shall either
party have any obligation to, or authority over, such employees of the other
party and (iv) each party shall be solely responsible for all costs and
expenses incurred by it in connection with this Agreement and its performance
of its obligations thereunder.
Section 31.2. Limitation of Liability. IN NO EVENT WILL EITHER PARTY
BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF ITS PERFORMANCE OR NONPERFORMANCE OF THIS
AGREEMENT.
-71-
<PAGE>
Section 31.3. Assignment. Except as expressly contemplated in Section
29.2(d), neither party shall assign this Agreement, in whole or in part,
directly, by operation of law, or otherwise, except with the prior written
consent of the other party which may be withheld in the discretion of such
other party; provided that JJM shall be permitted to assign this Agreement to
one of its Affiliates without Integra's prior written consent. No such
assignment by JJM, with or without Integra's consent, will relieve JJM of the
JJM's responsibilities under this Agreement.
Section 31.4. Entire Agreement; Amendments. This Agreement and the
Exhibits and Schedules thereto contain the entire agreement and supersede any
and all prior oral and written agreements and understandings between the
parties with regard to the subject matter hereof and thereof. This Agreement
may not be waived, amended or rescinded except by a writing signed by the
party to be charged thereby. Neither course of performance, nor course of
dealing, nor usage of trade, shall be used to qualify, explain, supplement, or
otherwise modify any of the provisions of this Agreement.
Section 31.5. Successors and Assigns; No Third-Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of the
parties thereto and their respective successors and permitted assigns. Nothing
herein, express or implied, is intended or shall confer upon any other person
or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
Section 31.6. Specific Performance. The parties to this Agreement
agree that irreparable damage would occur in the event any material provision
of this Agreement was not performed in accordance with the terms thereof and
that the parties shall be entitled to specific performance of the material
terms hereof, in addition to any other remedy at law or equity.
Section 31.7. Nonwaiver. The failure of either party to insist upon
or enforce strict performance of any of the provisions of this Agreement or to
exercise any rights or remedies under this Agreement will not be construed as
a waiver or relinquishment to any extent of such party's right to assert or
rely upon any such provisions, rights or remedies in that or any other
instance; rather, the same will be and remain in full force and effect.
Section 31.8. Governing Law. This Agreement will be governed by
and interpreted in accordance with the laws of the State of New Jersey without
regard to conflicts of law provisions thereof.
Section 31.9. Severability. If any term or provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other provisions of this Agreement shall
nevertheless remain in full force and effect.
-72-
<PAGE>
Upon such determination that any term or provision of this Agreement is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in order that the transactions contemplated
hereby, including limitations on liability, may be consummated as originally
contemplated to the greatest extent possible.
Section 31.10. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt) by delivery
in person, by facsimile, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given
in accordance with this Section 31.10):
If to Integra:
Integra LifeSciences Corporation
105 Morgan Lane
Plainsboro, NJ 08536
Facsimile (609) 275-1082
Attention: President
with a copy to
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Facsimile (212) 728-8111
Attention: Peter H. Jakes
If to JJM:
Johnson & Johnson Medical(Trademark), a division of Ethicon, Inc.
2500 East Arbrook Blvd.
Arlington, Texas 76014-3130
Facsimile (817) 472-9534
Attention: President
with a copy to
Johnson & Johnson Law Department
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
Facsimile (732) 524-2788
Attention: Michael Ullmann
Any party may change its address for notices by giving notice to the other
party as heretofore provided.
Section 31.11. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in
-73-
<PAGE>
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
Section 31.12. U.S. Accounts. All payments to Integra hereunder or in
connection herewith shall be in U.S. Dollars and paid to a U.S. bank account.
Section 31.13. Rights Upon Insolvency. Any license which may be
granted under Section 4.2(b)(ii) of this Agreement by Integra to JJM shall be,
for all purposes of Section 365(n) of Title 11 of the U.S. Code ("Title 11"),
a license of rights to intellectual property as defined in Title 11. If a case
is commenced by or against Integra under Title 11, then, unless and until this
Agreement is rejected as provided in Title 11, Integra (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 trustee) shall perform all of the obligations
provided in this Agreement to be performed by Integra.
-74-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTEGRA LIFESCIENCES CORPORATION
By: /s/ Stuart M. Essig
-------------------
Name:Stuart M. Essig
Title:President and CEO
JOHNSON & JOHNSON MEDICAL(Trademark), A DIVISION OF ETHICON, INC.
By: /s/ Jan H. Egberts
------------------
Name:Jan H. Egberts
Title:Vice President - Worldwide
ACCEPTED AND AGREED
FOR PURPOSES OF SECTION 20.1
JOHNSON & JOHNSON
By: /s/ Russ Deyo
-------------
Name:Russ Deyo
Title:Vice President
-75-
<PAGE>
EXHIBIT A
INTEGRA PATENTS
1. U.S. Patent No. 4,060,081
2. U.S. Patent No. 4,252,759
3. U.S. Patent No. 4,280,954
4. U.S. Patent No. 4,350,629
5. U.S. Patent No. 4,418,691
6. U.S. Patent No. 4,448,718
7. U.S. Patent No. 4,458,678
8. U.S. Patent No. 4,505,266
9. U.S. Patent No. 4,522,753
10. U.S. Patent No. 4,787,900
11. U.S. Patent No. 4,902,289
12. U.S. Patent No. 4,947,840
13. U.S. Patent No. 4,955,893
<PAGE>
SCHEDULE 1.1(n)
EXISTING DISTRIBUTOR COUNTRIES
Do
the terms of the
agreement prohibit
or otherwise
restrict
Is the agreement assignment by
Country signed? Integra?
- ------- ---------------- --------
1. [**] (**) (**)
2. (**) (**) (**)
3. (**) (**) (**)
4. (**) (**) (**)
5. (**) (**) (**)
6. (**) (**) (**)
7. (**) (**) (**)
8. (**) (**) (**)
9. (**) (**) (**)
10.(**) (**) (**)
11.(**) (**) (**)
12.(**) (**) (**)
13.(**) (**) (**)
14.(**) (**) (**)
15.(**) (**) (**)
16.(**) (**) (**)
17.(**) (**) (**)
18.(**) (**) (**)
19.(**) (**) (**)
20.(**) (**) (**)
21.(**) (**) (**)
22.(**) (**) (**)
23.(**) (**) (**)
24.(**) (**) (**)
25.(**) (**) (**)
26.(**) (**) (**)
27.(**) (**) (**)
28.(**) (**) (**)
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 1.1(y)
LICENSED TRADEMARK
INTEGRA(Trademark) Dermal Regeneration Template(Trademark)
<PAGE>
SCHEDULE 4.4(d)
PRODUCT SPECIFICATIONS
See attached.
[**]
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 4.8
INITIAL MAP
Integra agrees to diligently execute the MAP contained in this Schedule 4.8.
It may, at its discretion, request assistance from JJM and JJM, to the extent
reasonable and practical, will provide such assistance. In the event Integra
is more than fifteen (15) days delinquent on any item contained in the MAP,
(i) the Joint Steering Committee shall meet to discuss such delinquency and
(ii) JJM may require Integra to hire a consultant, at Integra's expense, to
assist in Integra's execution of the MAP. The Joint Steering Committee shall
make the final determination as to whether or not any item contained in the
MAP has been completed.
MAP is attached hereto.
[**]
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 9.1
CORPORATE QUALITY ASSURANCE GUIDELINES OF JJM
See attached.
[**]
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 18.3
ASSUMED CONTRACTS
1. Consultant Agreement dated the 15th of March, 1996 between Integra
LifeSciences Corporation and John F. Burke, M.D.
2. Research Support Agreement dated the 26th of January, 1999 between [**]
and Integra LifeSciences I Ltd.
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 19.1
RESTRICTED EMPLOYEES
Name Location Function
- ---- -------- --------
[**] NJ Scientist
(**) NJ MD
(**) CA Scientist
(**) NJ Reimbursement
(**) NJ Scientist
(**) NJ Customer Service
(**) NJ Clinical Affairs
(**) NJ Manufacturing
(**) CA Scientist
(**) CA Scientist
(**) NJ Manufacturing
(**) NJ Corporate Marketing
(**) NJ Corporate QA/QC
(**) NJ Regulatory
(**) NJ Manufacturing
(**) NJ COO
(**) NJ Manufacturing
(**) NJ Scientist
(**) NJ Manufacturing
(**) NJ Regulatory
(**) NJ Corporate Sales
(**) CA Scientist
(**) CA Asia/Pacific
(**) NJ Manufacturing
(**) NJ Corporate QA/QC
(**) CA Scientist
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
INDEX OF DEFINED TERMS
Abandoned Event..........................................................45
Action...................................................................57
Adjustment Event.........................................................30
Affiliate.................................................................1
Annual Plan...............................................................2
Applicable Percentage of Market Size.....................................32
Assumed Contracts........................................................52
Auditor..................................................................14
Business Day..............................................................2
C&R Event Payment........................................................43
C&R Notice...............................................................43
Calendar Quarter..........................................................2
[**] Wound Approval Date............................................31
(**) Wound Labeling.................................................32
(**) Wound Market Size..............................................32
(**) Wound Net Sales................................................32
(**) Wound Trials....................................................2
(**) Wounds..........................................................2
Combination...............................................................5
Comparable Competitive Products..........................................32
Competitive Products......................................................2
Competitive Transaction...................................................2
Complaint.................................................................3
Confidential Information..................................................2
Control...................................................................1
(**) ................................................................8
CPR......................................................................62
Damages..................................................................37
Direct Countries..........................................................8
Disclosing Party.........................................................60
Early Stage Technology...................................................10
Effective Date............................................................3
Encumbrance...............................................................3
Excess Prepayments.......................................................29
(**) Wounds..........................................................3
Executive Committee......................................................51
Existing Distributor Countries............................................3
Extension Periods........................................................63
Extraordinary Transaction................................................11
(**) ...............................................................31
FDA.......................................................................3
Field.....................................................................3
Force Majeure Event......................................................68
Forecast.................................................................16
Funded Invention.........................................................54
Governmental Authority....................................................3
Incremental Costs........................................................26
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
Indemnified Party........................................................38
Indemnifying Party.......................................................38
Initial Period...........................................................63
Integra Change of Control.................................................4
Integra Dental/Endodermis Product.........................................4
Integra's Parent..........................................................4
Invention.................................................................4
JJM Change of Control....................................................64
JJM's Parent..............................................................4
JJM's Wound Care Business.................................................4
Joint Steering Committee..............................................4, 49
Jointly-Owned Inventions.................................................54
Licensed Competitive Technology..........................................11
Licensed Trademark........................................................4
Manufacturing Plan.......................................................19
Manufacturing Yield.......................................................4
MAP......................................................................17
MDRs.....................................................................34
Minimum Net Sales........................................................29
Minimum Prepayments......................................................29
Minimum Supply Price Per Unit............................................24
NDA Drug..................................................................6
Net Sales.................................................................5
Net Sales Certificate....................................................27
Net Sales Estimate.......................................................26
[**] Product......................................................42
(**) .............................................................31
Other Wound Care Product..................................................5
Patent....................................................................5
Person....................................................................6
PMA.......................................................................6
PMAF.....................................................................30
Producer Price Index......................................................6
Product Improvements......................................................6
Products..................................................................6
Promotional Materials....................................................36
Reasonable Termination Cost...............................................8
Recipient................................................................59
Reduction Factor.........................................................30
Registrations and Permits................................................65
Regulatory Approval.......................................................7
Research Payments.....................................................7, 40
Responding Party.........................................................60
Restricted Employees.....................................................53
Salespeople..............................................................51
Sampling Program.........................................................21
Supply Default...........................................................17
Supply Default, Not Cured................................................17
Supply Price.............................................................24
Technology................................................................7
- ----------------------
[**] Confidential Information omitted and filed separately with the Securities
and Exchange Commission.
<PAGE>
Term.....................................................................63
Termination Date..........................................................7
Territory.................................................................7
Third Party Claims.......................................................38
TRC......................................................................42
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