SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 10, 1998
Exogen, Inc.
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(Exact name of Registrant as specified in its Charter)
Delaware
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(State or other jurisdiction of incorporation)
000-26154 22-3208468
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(Commission File Number) (IRS Employer Identification Number)
10 Constitution Avenue, P.O. Box 6860, Piscataway, NJ 08855
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(Address of principal executive offices) (Zip Code)
(732) 981-0990
Registrant's telephone number, including area code:
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N/A
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(Former name or former address, if changed since last report)
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Item 7. Financial Statements and Exhibits
(c) Exhibits
10.22+ Master Agreement, dated August 10, 1998, between the Company
and Smith & Nephew, Inc.
10.23+ Common Stock Purchase Agreement, dated August 10, 1998,
between the Company and Smith & Nephew Holdings, Inc.
10.24+ United States Sales Representative Agreement, dated August 10,
1998, between the Company and Smith & Nephew, Inc.
10.25+ License Agreement, dated August 10, 1998, between the Company
and Smith & Nephew, Inc.
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+ The Company has applied for Confidential Treatment of portions of this exhibit
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
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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, hereto duly authorized.
EXOGEN, INC.
(Registrant)
/s/Patrick A. McBrayer
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Date: September 23, 1998 By:Patrick A. McBrayer
President and Chief Executive Officer
EXHIBIT 10.22
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT
FOR PORTIONS OF THIS EXHIBIT PURSUANT TO RULE 24B-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
EXOGEN, INC.
AND
SMITH & NEPHEW, INC.
MASTER AGREEMENT
August 10, 1998
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TABLE OF CONTENTS
PAGE
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SECTION 1. Purchase of Exogen Common Stock by S&N..................1
SECTION 2. United States Sales Representative Agreement............1
SECTION 3. Payment on Initial Payment Date.........................2
SECTION 4. License Agreement.......................................2
SECTION 5. United States Stocking Distribution Agreement...........2
SECTION 6. Global Stocking Distribution Agreement;
Option to Purchase Additional Shares of
Exogen Common Stock.....................................3
SECTION 7. Certain Rights of First Negotiation.....................6
SECTION 8. Certain Covenants of Exogen.............................7
SECTION 9. Certain Covenants of S&N...............................10
SECTION 10. Representations and Warranties of Exogen...............12
10.1 Power and Authority...........................12
10.2 Valid Issuance of Exogen Common Stock.........12
10.3 Consents......................................13
10.4 Compliance with Other Instruments.............13
10.5 ISO 9000 and CE Mark of Approval..............13
10.6 Millenium Compliance..........................13
SECTION 11. Representations and Warranties of S&N..................14
11.1 Power and Authority...........................14
11.2 Consents......................................14
11.3 Compliance with Other Instruments.............14
SECTION 12. Miscellaneous..........................................14
12.1 Survival of Warranties........................14
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12.2 Deductible....................................14
12.3 Claim Notice..................................15
12.4 Remedies......................................15
12.5 Successors and Assigns........................15
12.6 Governing Law.................................16
12.7 Counterparts..................................16
12.8 Titles and Subtitles..........................16
12.9 Notices.......................................16
12.10 Attorneys' Fees...............................16
12.11 Amendments and Waivers........................16
12.12 Severability..................................16
12.13 Entire Agreement..............................16
12.14 Press Releases and Announcements..............17
12.15 Arbitration...................................17
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SCHEDULES
SCHEDULE 5 Terms and Conditions of U.S. Stocking Distribution Agreement
SCHEDULE 6A Terms and Conditions of Global Stocking Distribution Agreement
SCHEDULE 6B Terms and Conditions of Individual Country Stocking Distribution
Agreement (Prior to Exercise of Global Distribution Option)
SCHEDULE 7 Terms and Conditions to Serve as the Basis for Good Faith
Negotiations
SCHEDULE 8 U.S. and Foreign Patents, Trademarks and Applications
SCHEDULE 9 Current International Arrangements
SCHEDULE 10 Required Consents
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EXHIBITS
EXHIBIT A Common Stock Purchase Agreement
EXHIBIT B U.S. Sales Representative Agreement
EXHIBIT C License Agreement
<PAGE>
MASTER AGREEMENT
Master Agreement ("Agreement") dated as of August 10, 1998
between Exogen, Inc., a Delaware corporation ("Exogen"), and Smith & Nephew,
Inc., a Delaware corporation ("S&N").
RECITALS
WHEREAS, Exogen manufactures and sells Sonic Accelerated
Fracture Health Systems ("SAFHS"); and
WHEREAS, S&N desires to acquire certain rights from and
interests in Exogen.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
SECTION 1. Purchase of Exogen Common Stock by S&N. On the date
hereof (the "Initial Closing Date"), Exogen will issue and sell to Smith &
Nephew Holdings, Inc., an affiliate of S&N, and Smith & Nephew Holdings, Inc.
will purchase from Exogen, 820,000 shares of Common Stock, par value $.0001 per
share, of Exogen ("Exogen Common Stock"). The price to be paid for each share of
Exogen Common Stock to be so purchased by S&N shall be $5.00, or an aggregate
purchase price of $4,100,000. In connection with such issuance, sale and
purchase, on the Initial Closing Date (i) Exogen and Smith & Nephew Holdings,
Inc. shall execute and deliver the Common Stock Purchase Agreement in the form
of Exhibit A to this Agreement (the "Purchase Agreement"), and the Registration
Rights Agreement in the form of Annex A to the Purchase Agreement (the "Initial
Registration Rights Agreement"), (ii) Exogen shall deliver or cause to be
delivered to Smith & Nephew Holdings, Inc. all certificates (other than the
Exogen Common Stock certificate (as required in the Purchase Agreement) and
other documents contemplated by the Purchase Agreement to be delivered by it,
(iii) to the extent possible, the Exogen Common Stock certificate required in
the Purchase Agreement; and (iv) Smith & Nephew Holdings, Inc. shall deliver to
Exogen the Purchase Price (as defined in the Purchase Agreement) in the manner
contemplated by the Purchase Agreement. If Exogen is not able to deliver the
Exogen Common Stock certificate on the Initial Closing Date, then Exogen shall
deliver such certificate to Smith & Nephew Holdings, Inc. no later than five (5)
business days following the Initial Closing Date.
SECTION 2. United States Sales Representative Agreement. On
the Initial Closing Date, Exogen and S&N shall execute and deliver the United
States Sales Representative Agreement in the form of Exhibit B to this Agreement
(the "U.S. Sales Representative Agreement").
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SECTION 3. Payment on Initial Payment Date. On the Initial
Closing Date, S&N shall deliver to Exogen $1,000,000 by wire transfer to
Exogen's bank account (designated at least one business day prior to the Initial
Closing Date).
SECTION 4. License Agreement. On the Initial Closing Date,
Exogen and S&N shall execute and deliver a License Agreement in the form of
Exhibit C to this Agreement (the "License Agreement").
SECTION 5. United States Stocking Distribution Agreement.
(a) Exogen and S&N will enter into a United States Stocking
Distribution Agreement having the terms and conditions set forth in Schedule 5
to this Agreement (the "U.S. Stocking Distribution Agreement") in accordance
with the following:
(i) If the Requisite Approval Date (as defined in Section
4(b) of the U.S. Sales Representative Agreement) occurs prior to or on
July 31, 2002, Exogen and S&N will enter into such agreement within 30
days following the Requisite Approval Date, provided that in no event
will the U.S. Stocking Distribution Agreement become effective prior to
August 1, 2000.
(ii) If S&N desires to enter into such agreement even
though the Requisite Approval Date has not occurred or has occurred
after July 31, 2002 and so notifies Exogen of such desire prior to the
termination or expiration of the U.S. Sales Representative Agreement,
Exogen and S&N will enter into such agreement within 30 days following
such notification, provided that in no event will the U.S. Stocking
Distribution Agreement become effective prior to August 1, 2000. Each
of Exogen and S&N shall negotiate in good faith the terms of the U.S.
Stocking Distribution Agreement and shall use diligent efforts to enter
into such agreement within the foregoing timetable.
(b) In consideration for the execution and delivery of the
U.S. Stocking Distribution Agreement, S&N shall pay to Exogen an aggregate of
[****], which shall be payable as follows: [****] concurrently with the
execution and delivery of the U.S. Stocking Distribution Agreement and [****] on
the first anniversary of such execution and delivery. Such payments shall be
made by wire transfer to an account designated by Exogen no later than two (2)
business days prior to the execution and delivery of the U.S. Stocking
Distribution Agreement.
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
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SECTION 6. Global Stocking Distribution Agreement; Option to
Purchase Additional Shares of Exogen Common Stock.
(a) S&N shall have the option (the "Global Distribution
Option"), exercisable by S&N by written notice given to Exogen at any
time during the period commencing on the Initial Closing Date and
ending on the [****] of the Initial Closing Date ("Global Option
Period"), to cause Exogen to enter into with S&N or one or more of its
Affiliates a Global Stocking Distribution Agreement having the terms
and conditions set forth in Schedule 6A to this Agreement (the "Global
Stocking Distribution Agreement"). Each of Exogen and S&N shall
negotiate in good faith the terms of the Global Stocking Distribution
Agreement and shall use diligent efforts to enter into the Global
Stocking Distribution Agreement as promptly as practicable after the
exercise of such option.
(i) Exogen represents and warrants that Schedule 9 sets
forth a complete and accurate list of all sales representative,
distribution and similar arrangements to which Exogen is a party with
respect to territories outside of the United States as of the date of
this Agreement ("Current International Arrangements"), together with a
description of: the territory covered by each current International
Arrangement; Exogen's rights to terminate each Current International
Arrangement; the expiration date of each Current International
Arrangement; and any extension or renewal rights. S&N's right to
commence distribution in any country outside the United States shall be
subject to and limited by the terms and conditions disclosed on
Schedule 9, and any extension, renewal or amendment to any Current
International Arrangement as is permitted pursuant to Section 6(e) of
this Agreement. Notwithstanding anything contained herein to the
contrary, Exogen shall use diligent efforts to terminate the Current
International Arrangements as soon as possible following S&N's exercise
of its Global Distribution Option.
(ii) For purposes of this Agreement:
"Affiliate" means (A) any entity directly
controlling, controlled by, or under common control with another entity, or (B)
any person or entity owning or controlling more than 50% of the outstanding
voting securities of an entity. "Control" means possession of the power to
direct or cause the direction of the management and policies of an entity,
whether through the ownership of a majority of the outstanding voting securities
or by contract or otherwise.
"Global Option Exercise Date" means the date, if
any, on which S&N provides the written notice referred to in Section 6(a).
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
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(b) Exogen hereby grants to S&N an option (the "Option") to
purchase from the Company additional shares of Exogen Common Stock for its own
account or its designee, subject to the following terms and conditions:
(i) The Option shall be exercisable by S&N beginning only
when and if S&N exercises the Global Distribution Option within the
time period specified in Section 6(a), and any time thereafter until
the second anniversary of the Global Option Exercise Date.
(ii) The Option may be exercised in whole or in part, but
may only be exercised one time. In order to exercise the Option, S&N
shall give to Exogen a written notice of S&N's election to exercise the
Option (the date of such notice being referred to herein as the "Option
Exercise Date") and S&N's designation of the date on which the purchase
by S&N of the shares of Exogen Common Stock shall be closed (the
"Option Closing Date"), which date shall be no earlier than three
business days following the Option Exercise Date and no later than (A)
the 45th day after the Option Exercise Date or (B) the third business
day after the expiration of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, whichever is
later. On the Option Closing Date, S&N shall pay to Exogen the
aggregate purchase price for the shares of Exogen Common Stock
purchased pursuant to exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Exogen, and
Exogen shall deliver to S&N a certificate representing the number of
shares of Exogen Common Stock so purchased by S&N, registered in the
name of S&N or its nominee.
(iii) The maximum number of shares of Exogen Common Stock
which can be purchased upon exercise of the Option is equal to the
difference between (A) the number of shares of Exogen Common Stock
equal to nineteen percent (19%) of the number of shares of Exogen
Common Stock issued and outstanding as of the Option Exercise Date
(after giving effect to the shares issuable upon exercise of the
Option), minus (B) the number of shares of Exogen Common Stock
purchased by S&N on the Initial Closing Date (adjusted to reflect any
stock dividends, stock splits or similar events).
(iv) The price to be paid for each share of Exogen Common
Stock to be purchased by S&N pursuant to exercise of the Option shall
be equal to the average of the last reported sale price per share of
Exogen Common Stock as reported on the Nasdaq National Market or such
other national securities exchange or securities quotation system on
which such shares are then traded or quoted, using the last reported
sale price for each of the 20 consecutive trading days ending on the
third trading day immediately preceding the Option Exercise Date.
(v) On the Option Closing Date or as soon thereafter as is
practicable, Exogen and S&N shall enter into a Registration Rights
Agreement having terms and
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conditions substantially similar to those contained in the Initial
Registration Rights Agreement and covering the shares of Common Stock
purchased upon exercise of the Option.
(c) If S&N exercises the Global Distribution Option, S&N shall
pay to Exogen by wire transfer an aggregate of [****], which shall be payable as
follows: [****] concurrently with the execution and delivery of the Global
Stocking Distribution Agreement and [****] on the first anniversary of such
execution and delivery. Exogen shall designate to S&N in writing the bank
account to which funds should be transferred no later two (2) business days
prior to the execution and delivery of the Global Distribution Agreement.
(d) If, during the period ending on the earlier of the Global
Option Exercise Date and the expiration of the Global Option Period, Exogen
desires to commence or continue the distribution or sale of Products (as defined
in the U.S. Sales Representative Agreement) in a country in which Exogen does
not then have a sales representative, distribution or other similar agreement in
effect (including by reason of the termination, expiration, renewal or extension
of a prior agreement in such country) or in which Exogen is not then selling
Products directly, Exogen shall so notify S&N. If S&N so elects within 10 days
following receipt of such notice, S&N shall have the exclusive right for a
period of 60 days after receipt of such notice to negotiate with Exogen with
respect to a stocking distribution agreement in such country with S&N (or an
Affiliate of S&N) having the terms and conditions set forth in Schedule 6B to
this Agreement (the "Individual Country Stocking Distribution Agreement").
Exogen and S&N shall negotiate in good faith the terms and conditions of any
such agreement, including the payment of an up front fee if Exogen has
previously engaged in distribution activities or expended funds to obtain
regulatory approval to distribute in that country. If the terms and conditions
of any such agreement require the payment by S&N of any fee, the fee paid by S&N
shall be credited against any amount that may become due pursuant to the first
sentence of Section 6(c). If Exogen and S&N do not reach agreement on the terms
of an agreement within the 60 day period referenced above, Exogen shall be free
to negotiate such an agreement with any other third party, provided that such an
agreement can be terminated by Exogen on no more than ninety (90) days' notice
(or such longer period as is required by applicable law).
(e) In the event that S&N elects under Section 6(d) to enter
into Individual Country Stocking Distribution Agreements and S&N has paid Exogen
at least [****] in up front fees (pursuant to Section 6(d)) for such agreements,
then S&N shall have the right at any time following the last payment to exercise
the Global Stocking Distribution Option without payment of the amounts required
under Section 6(c), and the provisions of Section 6(c) shall be of no further
force or effect.
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
5
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SECTION 7. Certain Rights of First Negotiation.
(a) If, at any time prior to August 1, 2008, Exogen desires to
enter into an agreement of any kind (including, without limitation, an agreement
for sale, development, manufacture, license or distribution) with a third party
with respect to, or in connection with, any ultrasound or mechanical stress
therapy (and any intellectual property rights relating thereto) for the
treatments and indications set forth in Section 1 of the U.S. Sales
Representative Agreement, the U.S. Stocking Distribution Agreement, Global
Stocking Distribution Agreement or Individual Country Stocking Distribution
Agreement or any new indication, including, without limitation, spine,
cartilage, wounds, osteoporosis or other muscular-skeletal tissues, Exogen shall
give S&N notice thereof. If S&N so elects within 10 days following receipt of
such notice, S&N shall have the right, on a non-exclusive basis, for a period of
45 days after receipt of such notice to negotiate with Exogen with respect to a
letter of intent for any such agreement. During such 45 day period, Exogen shall
not execute a letter of intent or definitive agreement with any other person or
entity. If a letter of intent is executed with S&N within such 45 day period,
such letter of intent shall be subject to and conditioned upon approval by the
board of directors of Smith & Nephew plc no later than 45 days from the
execution of the letter of intent ( the period from execution of a letter of
intent until approved by such board of directors to be referred to as the
"Approval Period"). During the Approval Period and for a period of 90 days
thereafter, if approved by the Smith & Nephew plc board of directors, Exogen
shall not initiate, encourage or participate in any discussions with respect to
such agreement or arrangement with any other person or entity. Exogen and S&N
shall negotiate in good faith the terms and conditions of any such letter of
intent and agreement. The parties acknowledge that the letter of intent and
agreement may include the terms and conditions set forth in Schedule 7 to this
Agreement.
(b) If, at any time during the effectiveness of any of the
U.S. Sales Representative Agreement, the U.S. Stocking Distribution Agreement or
the Global Stocking Distribution Agreement, Exogen desires to sell, transfer or
otherwise dispose of substantially all of the assets of Exogen or to effect a
merger, consolidation, recapitalization, issuance of shares of capital stock or
other transaction, as a result of which the stockholders of Exogen immediately
prior to such transaction own less than a majority of the voting securities of
the surviving entity after such transactions, Exogen shall give S&N notice
thereof. If S&N so elects within 10 days following receipt of such notice, S&N
shall have the right, on a non-exclusive basis, for a period of 45 days after
receipt of such notice to negotiate with Exogen with respect to a letter of
intent for any such transaction. During such 45 day period, Exogen shall not
execute a letter of intent or definitive agreement with any other person or
entity. If a letter of intent is executed with S&N within such 45 day period,
such letter of intent shall be subject to and conditioned upon approval by the
board of directors of Smith & Nephew plc during the Approval Period. During the
Approval Period and for a period of 90 days thereafter, if approved by the Smith
& Nephew plc board of directors, Exogen shall not initiate, encourage or
participate in any discussions with any other person or entity relating to such
transaction. Exogen and S&N shall negotiate in good faith with respect to any
such letter of intent and transaction.
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(c) Nothing set forth in Section 7(a) or (b) shall be deemed
to require Exogen or S&N to enter into an agreement with the other party with
respect to the types of transactions or agreements covered by these Sections.
SECTION 8. Certain Covenants of Exogen.
(a) Exogen shall use diligent efforts to obtain, as soon as
reasonably practicable, national reimbursement approval for the SAFHS 2000 and
3000 devices in each of France, Germany and Holland; provided, that failure to
obtain such approvals shall not constitute a default under this Agreement if
Exogen has otherwise complied with this Section 8(a).
(b) Exogen warrants and represents to S&N that, except as set
forth on Schedule 8, it is the sole and exclusive owner of the patents and
patent applications set forth in Schedule 8 and the inventions therein set
forth, the trademarks and trademark applications set forth in Schedule 8, and
the copyright in all software, directions for use, labeling and promotional
materials heretofore used in association with SAFHS devices (collectively,
"Intellectual Property"). Exogen will pay all maintenance fees for issued
patents prior to applicable due dates and renew all registered trademarks prior
to applicable renewal dates and prosecute all patent applications; provided,
however, that if Exogen elects not to maintain any patent, renew any trademark
or prosecute any patent application in any territory in which S&N has
distribution or sales representative rights, it shall give notice to S&N at
least 60 days prior to the due date for such maintenance fee or renewal, and S&N
may pay such amounts and take such actions as are required for such maintenance,
renewal or prosecute any patent application in any territory in which S&N has
distribution or sales representative rights and Exogen shall execute such
agreements, assignments or other documents as may be required in order to make
S&N a co-assignee or co-owner of any patent or trademark for which S&N has paid
a fee for so long as S&N continues to pay such fees. Exogen shall not, without
the prior written approval of S&N, which approval shall not be unreasonably
withheld, sell, transfer, convey, pledge or otherwise encumber the Intellectual
Property or any Intellectual Property developed in the future relating to
Products in any territory in which S&N has distribution or sales representative
rights; provided, however, that Exogen shall not be precluded from engaging in a
transaction covered by Section 7 in accordance with such Section or from
granting a security interest in substantially all of its assets in connection
with obtaining a loan or line of credit or similar financing from one or more
financial institutions, provided Exogen delivers an effective and legally
binding agreement from the secured party wherein the secured party agrees to
subordinate its claims and interests to that of S&N and not to disturb,
terminate or modify any rights S&N may have with respect to any security or
collateral if the secured party exercises its rights with respect to such
security or collateral.
(c) (i) Exogen shall indemnify S&N and its employees,
Affiliates, sales representatives and distributors from and against any
claim or suit for patent, trademark or copyright infringement arising
out of or connected with the sale and marketing of Products. Exogen
warrants and represents to S&N that it has received no notice of
patent, trademark or copyright infringement from any third party with
respect to
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Products. Exogen shall promptly notify S&N of any future suits, claims
or demands relating to the Intellectual Property.
(ii) Each party shall promptly notify the other party of
any lawsuit, demand, claim or other action or threat thereof in respect
of which indemnification may be sought under Section 8(c)(i). Exogen
shall have sole control over the defense and settlement of any such
action and S&N shall reasonably cooperate with Exogen in such defense
at Exogen's expense.
(d) If either party has evidence that a third party is
infringing the Intellectual Property, it will promptly notify the other
party.
(i) Exogen shall have the first right to enforce any
Intellectual Property rights against any infringement or alleged
infringement thereof, and shall notify S&N, within three (3) months of
receipt of the notice referred to above, whether it intends to
institute suit against any such infringer or alleged infringer. If
Exogen so elects, it shall have the right to control, settle and defend
such suit in a manner consistent with the terms and provisions of this
Section 8(d) and shall at all times keep S&N informed as to the status
thereof. S&N may elect to share equally in the Expenses (as defined in
Section 8(e)) of any such suit, by notice to Exogen within 30 days
following receipt of Exogen's notice of intent to institute suit.
(ii) If Exogen elects not to enforce any Intellectual
Property rights relating to an alleged infringement claim in a
territory in which S&N has distribution or sales representative rights,
S&N may, in its sole judgment, institute suit against any such
infringer or alleged infringer and control, settle and defend such suit
in a manner consistent with the terms and provisions of this Section
8(d). In such event, S&N shall at all times keep Exogen informed as to
the status thereof. Exogen may elect to share equally in the Expenses
of any such suit, by notice to S&N within 30 days following receipt of
S&N's notice of intent to institute suit. Notwithstanding the
foregoing, no settlement, consent judgment or other voluntarily final
disposition of any such suit may be entered into without the consent of
Exogen, which consent will not be unreasonable withheld.
(iii) In any suit covered by this Section 8(d), the party
not controlling the litigation (the "Participant Party") shall
reasonably cooperate in such litigation. Each party agrees that, if it
is the Participant Party, it may be named (if appropriate) as a party
in any suit brought by the other party under this Section 8(d);
provided that S&N shall not be made a party to a suit with respect to a
territory in which it does not have distribution or sales
representative rights. Each party agrees to make available relevant
records, papers, information, samples and specimens, as well as to have
its employees testify upon request.
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(iv) Any recovery of damages or costs in any infringement
suit under this Section 8(d), where such damages and costs relate to an
infringement claim in a territory in which S&N has distribution or
sales representative rights, shall be applied as follows:
(A) first, either (I) equally to each party until all
Expenses of the suit have been reimbursed (or repaid in such other proportion as
actually paid by the parties), if the parties had agreed to share the Expenses
equally or (II) to the party solely undertaking the Expenses of such suit until
all such Expenses have been reimbursed;
(B) if the Participant Party shared equally in the
Expenses, the balance of any recovery shall be shared equally between the
parties;
(C) if Exogen controlled the litigation and S&N did
not share equally in the Expenses, the balance of any recovery shall be divided
75% to Exogen and 25% to S&N; and
(D) if S&N controlled the litigation and Exogen did
not share equally in the Expenses, the balance of any recovery shall be divided
75% to S&N and 25% to Exogen.
Any damages or costs recovered in a suit, where such damages
and costs relate to an infringement claim in a territory in which S&N does not
have distribution or sales representative rights shall be for the sole benefit
of Exogen.
(e) Subject to Section 12.2, Exogen shall indemnify and hold
harmless S&N and its Affiliates from all Losses and Expenses (as defined in
Section 12.2) incurred by S&N and its Affiliates: (i) as required by this
Agreement or any agreement contemplated hereby; or (ii) in connection with or
arising out of: (A) any breach by Exogen of any of its covenants in this
Agreement or any Agreement contemplated herein; (B) any failure of Exogen to
perform any of its obligations in this Agreement or any agreement contemplated
herein; (C) any breach of any warranty or the inaccuracy of any representation
or warranty of any Exogen or its Affiliates contained or referred to in this
Agreement or any agreement contemplated hereby; (D) the violation of any law,
rule or regulation by Exogen or its Affiliates; or (E) any personal injury,
death or property damage arising out of or in connection with the manufacture,
use or sale of Products. Provided, however, Exogen shall not be so obligated to
indemnify S&N or its Affiliates to the extent that Losses were caused by or
resulted from the negligent act or omission or willful misconduct following the
date of this Agreement of S&N or its Affiliates, sales representatives or
distributors.
(f) During the term of the agreements to be executed pursuant
to this Agreement and for one year following the termination or expiration of
the last of such agreements, Exogen shall not solicit any employee of S&N or its
Affiliates. Notwithstanding the foregoing, Exogen shall not be in breach of this
covenant if Exogen (i) makes solicitation
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for employment by general advertisement in periodicals of broad distribution;
(ii) hires any such person if at the time such person responds to such
solicitation, such person has terminated his or her employment with S&N or its
Affiliate, voluntarily or involuntarily, and Exogen has not otherwise solicited
such person; or (iii) S&N is in default under any of the agreements executed
pursuant to this Agreement and such person provides a service reasonably
necessary for Exogen to satisfy the obligations of S&N or Exogen thereunder.
SECTION 9. Certain Covenants of S&N.
(a) Until the earlier of August 1, 2008 or termination of this
Master Agreement and all agreements contemplated hereby, and except as
specifically provided for in this Master Agreement, without the prior written
approval of Exogen's board of directors, S&N will not (i) acquire any Exogen
Common Stock (or securities exchangeable, convertible or exercisable therefor)
other than as contemplated herein and other than securities issued as dividends
on shares of Exogen Common Stock purchased by S&N pursuant to this Agreement,
(ii) commence a tender offer for more than 20% of the then outstanding shares of
Exogen Common Stock; or (iii) make any public announcement relating to (i)or
(ii) above; provided, that the foregoing shall not be applicable in the event
that any person or persons acting in concert not affiliated with S&N (as defined
in the regulations under the Securities Exchange Act of 1934) (A) acquires or
makes a tender offer for outstanding Common Stock of Exogen equal to or greater
than 20% of the outstanding shares of Exogen Common Stock (other than in an
underwritten public offering) or (B) indicates publicly its intention to effect
such a transaction.
(b) Subject to Section 12.2, S&N shall indemnify and hold
harmless Exogen and its Affiliates from all Losses and Expenses incurred by such
S&N and its Affiliates (i) as required by this Agreement or any agreement
contemplated hereby; or (ii) in connection with or arising out of: (A) any
breach by S&N or its Affiliates of any of their respective covenants in this
Agreement or any Agreement contemplated herein; (B) any failure of any S&N or
its Affiliates to perform any of their respective obligations in this Agreement
or any agreement contemplated herein; (C) any breach of any warranty or the
inaccuracy of any representation or warranty of any S&N or its Affiliates
contained or referred to in this Agreement or any agreement contemplated hereby;
(D) the violation of any law, rule or regulation by S&N or its Affiliates; or
(E) any personal injury, death or property damage arising out of or in
connection with repairs or alterations made to Products without the written
approval of Exogen, which approval shall not be unreasonably withheld. Provided,
however, S&N shall not be so obligated to indemnify Exogen or its Affiliates to
the extent that Losses caused by or resulting from the negligent act or
omissions of Exogen or its Affiliates.
(c) S&N shall comply and shall cause its employees,
Affiliates, sales representatives and distributors to comply with all U.S. and
foreign labeling and other regulatory requirements and restrictions applicable
to the marketing and sale of Products in the United States and in such other
countries in which S&N has exercised its option to distribute Products. All
Products shall be marked with Exogen's trademarks and all product labeling and
packaging that is not Exogen's standard labeling and packaging
10
<PAGE>
shall be subject to Exogen's consent, which shall not be unreasonably withheld.
(d) During the term of the agreements to be executed pursuant
to this Agreement and for one year following the termination or expiration of
the last of such agreements, S&N shall not solicit any employee of Exogen or its
Affiliates. Notwithstanding the foregoing, S&N shall not be in breach of this
covenant if S&N (i) makes solicitation for employment by general advertisement
in periodicals of broad distribution; or (ii) hires any such person if at the
time such person responds to such solicitation, such person has terminated his
or her employment with Exogen or its Affiliate, voluntarily or involuntarily,
and S&N has not otherwise solicited such person; or (iii) Exogen is in default
under any of the agreements executed pursuant to this Agreement and such person
provides a service reasonably necessary for S&N to satisfy the obligations of
S&N or Exogen thereunder.
(e) Except as set forth below, S&N shall not enter into or
assume any distribution or sales representative agreement with any other person
or entity pursuant to which S&N distributes or sells "Competing Products" (as
defined below) in the United States or in any other country as to which S&N has
distribution or sales representative rights. "Competing Products" shall mean
non-invasive low intensity ultrasonic or electrical products for the treatment
of bone fractures, osteotomies, arthrodeses (other than spine fusions) and
distractive osteogenesis. Notwithstanding anything contained herein to the
contrary, S&N shall be permitted to acquire, through merger, consolidation, or
asset acquisition an entity, assets or business which distributes or sells
Competing Products in the United States or such other country or countries if
such acquisition is part of an acquisition which includes products other than
the Competitive Products ("Competitive Acquisition"). S&N shall provide Exogen
with written notice of any Competitive Acquisition no later than the date on
which such Competitive Acquisition is consummated and the parties shall discuss
the impact of the Competitive Acquisition on this Agreement, if any, and any
amendment that could be made to this Agreement in order to accommodate the
Competitive Acquisition. No later than 30 days following receipt of such notice,
Exogen shall elect by written notice to S&N to either (i) continue this
Agreement without amendment; (ii) continue this Agreement with amendment in
accordance with the discussions referred to above; or (iii) terminate this
Agreement, in any of which cases, subject to any amendment under clause (ii),
S&N shall be permitted to sell and distribute the Competitive Products. If
Exogen elects the option set forth in clause (ii) above, then the parties shall
negotiate in good faith for a period of 30 days with respect to such amendment.
If Exogen elects the option set forth in clause (iii) above, then Exogen will
pay S&N [****] if Exogen makes such
- -------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
11
<PAGE>
election prior to the first anniversary of this Agreement; [****] if Exogen
makes such election prior to the second anniversary of this Agreement; [****] if
Exogen makes such election prior to the third anniversary of this Agreement;
[****] if Exogen makes such election prior to the fourth anniversary of this
Agreement; or [****] if Exogen makes such election anytime after the fourth
anniversary of this Agreement. Upon receipt of payment S&N shall, if requested
by Exogen, assign to Exogen all agreements relating to the Products with its
distributors. In addition, S&N will allow Exogen to offer employment to all
Transferred Employees (as defined in the U.S. Sales Representative Agreement)
who remain employed by S&N and shall cooperate with Exogen in the transfer of
any such individuals who accept re-employment with Exogen. Provided, however,
S&N shall not be liable or responsible if Transferred Employees do not wish to
be re-employed by Exogen or elect to remain employees of S&N. If Exogen elects
the option set forth in clause (ii) above and the parties are unable to agree
upon an amendment to this Agreement within the 30 day period, Exogen may elect
between the options set forth in clauses (i) and (iii). If Exogen fails to
provide notice of its election of the options set forth in this Section or in
the preceding sentence, then Exogen shall be deemed to have elected the option
contained in clause (i). Nothing contained herein shall limit or prohibit S&N
from acquiring or owning directly or indirectly not in excess of 10% of the
equity of an entity that is engaged in the manufacture, sale or distribution of
a Competitive Product.
SECTION 10. Representations and Warranties of Exogen.
In addition to the representations and warranties made on the
Initial Closing Date by Exogen in the Purchase Agreement and the U.S. Sales
Representative Agreement, Exogen represents and warrants to S&N as follows:
10.1 Power and Authority. Exogen has all requisite power and
authority to enter into and carry out the transactions contemplated by this
Agreement. All corporate action on the part of Exogen, its officers, directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of Exogen hereunder has been
taken, and this Agreement constitutes the valid and legally binding obligation
of Exogen, enforceable against Exogen in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
10.2 Valid Issuance of Exogen Common Stock. The Exogen Common
Stock being purchased by S&N pursuant to Section 1 or which may be purchased by
S&N upon
- -------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
12
<PAGE>
exercise of the Option, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, free and clear of any Encumbrances (as
defined in the Purchase Agreement), other than Encumbrances, if any, arising as
a result of actions taken by S&N, and not subject to preemptive or similar
rights of stockholders of Exogen or others.
10.3 Consents. Except as disclosed on Schedule 9 hereto and
for any notifications or filings as may be required under applicable federal or
state securities laws, if any, which shall be made on a timely basis, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any person (governmental or private) on
the part of Exogen or its Subsidiary (as defined in the Purchase Agreement) is
required in connection with the consummation of the transactions contemplated by
this Agreement.
10.4 Compliance with Other Instruments. The execution,
delivery and performance of this Agreement by Exogen and the consummation of the
transactions contemplated hereby will not (x) result in any violation of or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any provisions of its Second Amended and
Restated Certificate of Incorporation or Amended and Restated Bylaws, any
provisions of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound, or to the best knowledge of Exogen, of
any provision of domestic (federal, state or local) or foreign law, statute,
rule or regulation applicable to Exogen or the Subsidiary, or (y) result in the
creation of any lien, charge or Encumbrance upon any assets of Exogen or its
Subsidiary or the suspension, revocation, impairment, forfeiture, or nonrenewal
of any material permit, license, authorization, or approval applicable to Exogen
or its Subsidiary, their business or operations or any of their assets or
properties.
10.5 ISO 9000 and CE Mark of Approval. Exogen warrants and
represents to S&N that the SAFHS 2000 device complies with International
Standards Organization ("ISO") Certification 9003 and the Medical Device
Directive and received the CE Mark of Approval on March 24, 1998, and that such
certification and approval will be maintained in full force and effect at
Exogen's expense. Exogen shall use its diligent efforts to obtain and maintain
ISO 9000 certification and the CE Mark of Approval for the SAFHS 3000 device at
Exogen's expense.
10.6 Millenium Compliance. Exogen represents and warrants that
the Products will process dates correctly before, on and after January 1, 2000,
such that the features and performance of the Products will be unaffected by the
transition from the twentieth century to the twenty first century; provided,
however, that the Products are used in accordance with
13
<PAGE>
written instructions.
SECTION 11. Representations and Warranties of S&N.
In addition to the representations and warranties made on the
Initial Closing Date by S&N in the Purchase Agreement and the U.S. Sales
Representative Agreement, S&N represents and warrants to Exogen as follows:
11.1 Power and Authority. S&N has all requisite power and
authority to enter into and carry out the transactions contemplated by this
Agreement. All corporate action on the part of S&N, its officers, directors and
shareholder necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of S&N hereunder has been
taken, and this Agreement constitutes the valid and legally binding obligation
of S&N, enforceable against S&N in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
11.2 Consents. Except as disclosed on Schedule 9 hereto and
for any notifications or filings as may be required under applicable federal or
state securities laws, if any, which shall be made on a timely basis, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any person (governmental or private) on
the part of S&N is required in connection with the consummation of the
transactions contemplated by this Agreement.
11.3 Compliance with Other Instruments. The execution,
delivery and performance of this Agreement by S&N and the consummation of the
transactions contemplated hereby will not result in any violation of or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any provisions of its Certificate of
Incorporation or Bylaws, any provisions of any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound, or to
the best knowledge of S&N, of any provision of domestic (federal, state or
local) or foreign law, statute, rule or regulation applicable to S&N.
SECTION 12. Miscellaneous.
12.1 Survival of Warranties. The warranties, representations
and covenants of Exogen and S&N contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of S&N or Exogen.
12.2 Deductible. "Losses" means any and all losses, costs,
obligations, liabilities, settlement payments, awards, judgments, fines,
penalties, damages, expenses, deficiencies and other charges. "Expenses" means
any and all reasonable expenses incurred in
14
<PAGE>
connection with investigating, defending, or asserting any claim, action, suit
or proceeding incident to any matter indemnified against hereunder (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel. No payment
under Section 8(e) or 9(b) with respect to any Losses as a result of a breach of
a representation or warranty under this Agreement or any other agreement
contemplated hereby shall be payable until the time such Losses incurred by an
indemnitee shall aggregate more than $30,000 (the "Deductible"), and then only
to the extent that such Losses, in the aggregate for the indemnitee, exceed the
Deductible. For purposes of the preceding sentence, each of the representations
and warranties made by this Agreement and the agreement executed pursuant to
this Agreement shall be deemed to have been made without the inclusion of
limitations or qualifications as to materiality, such as the words "Material
Adverse Effect," "immaterial," "material" and "in all material respects" or
words of similar import.
12.3 Claim Notice. A party seeking indemnification under
Sections 8(e) and 9(b) shall, promptly upon becoming aware of the facts
indicating that a claim for indemnification may be warranted, give to the party
from whom indemnification is being sought a claim notice relating to such Loss
(a "Claim Notice"). Each Claim Notice shall specify the nature of the claim, the
applicable provisions of this Agreement or other instrument under which the
claim for indemnity arises, and, if possible, the amount or the estimated amount
thereof. No failure or delay in giving a Claim Notice (so long as the same is
given prior to expiration of the representation or warranty upon which the claim
is based) and no failure to include any specific information relating to the
claim (such as the amount or estimated amount thereof) or any reference to any
provision of this Agreement or other instrument under which the claim arises
shall affect the obligation of the party from whom indemnify is sought.
12.4 Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement or any agreement contemplated by this
Agreement shall have been breached by any party hereto, S&N, with respect to a
breach by Exogen, and Exogen, with respect to a breach by S&N, may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or, where appropriate, an action for specific performance of any such
covenant or agreement contained in such agreement.
12.5 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors, permitted assigns, heirs and
personal representatives of the parties, except that neither party may assign
its rights and obligations under this Agreement to any person without the prior
written consent of the other party or in accordance with Section 7 of this
Agreement. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
15
<PAGE>
12.6 Governing Law. This Agreement shall be governed and
construed under the laws of the State of Delaware without regard to the
principles of conflicts or choice of law.
12.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.9 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery or confirmation of facsimile
transmission (with a copy to be sent in accordance with this Section) to the
party to be notified or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof or
at such other address as such party may designate by ten (10) days' advance
written notice to the other party. In the case of notices to be sent to S&N, a
copy shall also be delivered to: Smith & Nephew, Inc., 1450 Brooks Road,
Memphis, Tennessee 38116, Attention General Counsel, Facsimile Number
901-396-7824. In the case of notices to be sent to Exogen, a copy shall also be
delivered to Brobeck, Phleger & Harrison, LLP, 1633 Broadway, 47th Floor, New
York, New York 10019, Attention Ellen B. Corenswet, Esquire.
12.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
12.11 Amendments and Waivers. No term of this Agreement may be
amended, discharged or terminated and the observance of any term of this
Agreement may not be waived (either generally or in a particular instance and
either retroactively or prospectively), without the prior written consent of the
parties. No waiver of any of the provisions of this Agreement shall be deemed to
or shall constitute a waiver of any other provision hereof (whether or not
similar). No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
12.12 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
12.13 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement between the parties and no
party shall be liable or bound to the
16
<PAGE>
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
12.14 Press Releases and Announcements. Each of the parties
hereto agrees that it will not issue any press release or announcement relating
to the subject matter of this Agreement without the prior written approval of
the other parties; provided, however, that any party may make any public
disclosure it believes in good faith is required by law, stock exchange rules or
regulation (in which case the disclosing party shall advise the other party,
provide it with a copy of the proposed disclosure prior to making the
disclosure, and use reasonable efforts to agree upon the text of such press
release, before issuing any such press release).
12.15 Arbitration. Any dispute concerning this Agreement and
any agreement contemplated hereunder (except the U.S. Sales Representative
Agreement) shall be submitted to a panel of three arbitrators. Each party shall
appoint one arbitrator and the two arbitrators shall appoint a third arbitrator.
The arbitration proceedings shall be conducted in accordance with the then
current Rules for Large, Complex Disputes of the American Arbitration
Association, or in accordance with such other rules or procedures as the
Arbitrator may specify. The arbitration shall take place in Wilmington,
Delaware. Each party will bear its own arbitration expenses plus one-half of the
arbitrators' fee. This arbitration shall be non-binding.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
---------------------------
Name: Patrick A. McBrayer
Title: President and Chief Executive Officer
Address: 10 Constitution Ave.
P.O. Box 6860
Piscataway, NJ 08855
Facsimile Number: 732-981-0648
SMITH & NEPHEW, INC.
By: /s/ Larry W. Papasan
------------------------
Name: Larry W. Papasan
Title: President
Orthopaedic Division
Address: 1450 Brooks Road
Memphis, TN 38116
Facsimile Number: 901-399-7824
[SIGNATURE PAGE TO MASTER AGREEMENT]
18
<PAGE>
SCHEDULE 5
TERMS AND CONDITIONS OF
U.S. STOCKING DISTRIBUTION AGREEMENT
General: S&N to have exclusive rights in the United States
for the sale, promotion and marketing of Products
(as defined in the U.S. Sales Representative
Agreement).
Term of Agreement: From execution and delivery until July 30, 2008,
unless terminated earlier pursuant to termination
rights. S&N to have the option to renew for
consecutive three-year terms on mutually
acceptable terms and conditions. If terms and
conditions of first renewal term not agreed to,
then the agreement shall be renewed for one five
year period on a non-exclusive basis with no
Minimum Number of Orders requirements (as defined
in the U.S. Sales Representative Agreement).
Termination rights: Material default by other party not cured within
60 days after notice.
Exogen's responsibilities: Manufacturing, shipment FOB New Jersey to S&N,
product training to S&N's sales personnel, product
warranty work at Exogen's expense, provision of up
to 100 demonstration units annually at standard
manufacturing cost plus 25%, maintenance of U.S.
regulatory approvals, CE mark, quality
registrations and U.S. intellectual property
rights in good standing.
S&N's Sales, marketing, promotion and distribution. S&N
responsibilities: to be responsible for [****]. S&N to provide
reasonable follow-up contact with physicians and
patients. Minimum Number of Units requirements to
be negotiated in good faith. S&N to pay for
Products within 30 days of shipment.
- -------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
i
<PAGE>
Transfer prices: Transfer prices to be established for first 4
years as set forth on the following chart based on
average selling price of [****] provided that
transfer prices to be renegotiated during such
4-year period in good faith if the average selling
prices increases or decreases by more than 15%.
See following table:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4
------ ------ ------ ------
<S> <C> <C> <C> <C>
Annual Sale Price [*****] [*****] [*****] [*****]
Manufacturing Cost [*****] [*****] [*****] [*****]
Transfer Price [*****] [*****] [*****] [*****]
</TABLE>
Other terms: Parties to explore in good faith bona fide
opportunities for joint manufacturing (provided
such opportunity does not result in material
adverse financial consequences to either party).
If parties agree to such an arrangement, parties
to share equally any manufacturing costs savings
that are achieved.
- -------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
ii
<PAGE>
SCHEDULE 6A
TERMS AND CONDITIONS OF
GLOBAL STOCKING DISTRIBUTION AGREEMENT
General: S&N to have exclusive distribution rights (subject
to the provisions of Section 6(a)(i) of this
Agreement) for the sale, promotion and marketing
of Products in all countries other than Japan and
with respect to China, Korea and Taiwan, subject
to Teijin Limited's distribution rights pursuant
to an undated one page letter from Exogen to
Teijin ("Letter Agreement").Upon written notice
from S&N of its intention to exercise its
distribution rights in one or more of China, Korea
and Taiwan (subject only to Teijin's rights under
the Letter Agreement, Exogen will notify Teijin
Limited and commence negotiations with respect to
such designated country or pursuant to the Letter
Agreement. If Teijin and Exogen do not enter into
an agreement covering the specified country or
countries within the specified time period, Exogen
shall so notify S&N and S&N shall be deemed to
have exercised its option with respect to these
countries.
Term of Agreement: From execution and delivery until July 30, 2008,
unless terminated earlier pursuant to termination
rights. S&N to have option to renew for
consecutive three-year terms on mutually
acceptable terms and conditions. If terms and
conditions of the first renewal term are not
agreed to, then the agreement shall be renewed for
one five years period on a non-exclusive basis
with no Minimum Number of Orders requirements.
Termination rights: Material default by other party not cured within
60 days after notice.
Exogen's Manufacturing, shipment FOB New Jersey to S&N,
responsibilities: product training to S&N's sales personnel, product
warranty work at Exogen's expense, provision of up
to 100 demonstration units annually at standard
manufacturing cost plus 25%, maintenance of
regulatory approvals, CE mark, quality
registrations and
iii
<PAGE>
intellectual property rights in good standing,
except as S&N may be responsible in accordance
with the next succeeding paragraph.
S&N's Sales, marketing, promotion and distribution.
responsibilities: Minimum Number of Units requirements to be
negotiated in good faith for the first two (2)
years of the term and shall be negotiated in good
faith at least six months prior to each year
thereafter. The Minimum Number of Units
requirement shall be determined based upon
relevant criteria on a country-by-country basis or
on a multiple country basis including: the number
of orthopaedic surgeons; the number of fractures;
population; reimbursement; regulatory approvals
and status; and S&N experience with trauma
products. Use diligent efforts to obtain and
maintain, at S&N's expense, import, regulatory and
reimbursement approvals in any country (other than
France, Germany and Holland) where S&N wishes to
commence distribution. S&N to pay for Products
within the time period to be negotiated in good
faith (principally based on the expected
reimbursement cycle) on a country by country basis
or on a multiple country basis, depending upon the
arrangement. S&N to be responsible for
pre-certifying, arranging shipping, invoicing and
making collections from patients and/or their
insurers. S&N to provide reasonable follow-up
contact with physicians and patients.
Transfer prices: To be negotiated in good faith on a
country-by-country basis or on a multiple country
basis, prices to be established for the first
three years based on an estimated average selling
price and manufacturing cost (taking into account
the projected market size, reimbursement levels,
competition and other relevant factors) and to be
renegotiated in good faith during such three-year
period if the average selling price increases or
decreases by more than 15%. All payments will be
made in U.S. Dollars.
Other terms: Parties to explore in good faith bona fide
opportunities for joint manufacturing (provided
such opportunity does not result in material
adverse financial consequences to either party).
If parties agree to such an arrangement, parties
to share equally any manufacturing costs savings
that are achieved.
iv
<PAGE>
SCHEDULE 6B
TERMS AND CONDITIONS OF
INDIVIDUAL COUNTRY STOCKING DISTRIBUTION AGREEMENT
(PRIOR TO EXERCISE OF GLOBAL DISTRIBUTION OPTION)
General: S&N to have exclusive distribution rights for the
sale, promotion and marketing of Products in the
country, subject to rights of Teijin Limited
described in Schedule 6A.
Term of Agreement: From execution and delivery until July 30, 2008,
unless terminated earlier pursuant to termination
rights. S&N to have option to renew for
consecutive three-year terms on mutually
acceptable terms and conditions. If terms and
conditions of the first renewal term are not
agreed to, then the agreement shall be renewed for
one five years period on a non-exclusive basis
with no Minimum Number of Orders requirements.
Termination rights: Material default by other party not cured within
60 days after notice.
Exogen's Manufacturing, shipment FOB New Jersey to S&N,
responsibilities: product training to S&N's sales personnel, product
warranty work at Exogen's expense, provision of up
to 100 demonstration units annually at standard
manufacturing cost plus 25%, maintenance of U.S.
regulatory approvals, CE mark, quality
registrations and intellectual property rights in
good standing, except as S&N may be responsible in
accordance with the next succeeding paragraph.
S&N's Sales, marketing, promotion and distribution.
responsibilities: Minimum Number of Units requirements to be
negotiated in good faith for the first two (2)
years of the term and shall be negotiated in good
faith at least six months prior to each year
thereafter. The Minimum Number of Units
requirement shall be determined based upon
relevant criteria on a country-by-country basis or
on a multiple country basis including: the number
of orthopaedic surgeons; the number of fractures;
population; reimbursement; regulatory approvals
and status; and S&N experience with trauma
products. Use diligent efforts to obtain and
maintain, at S&N's expense, import, regulatory and
reimbursement approvals in any country (other than
U.S., France, Germany and
v
<PAGE>
Holland) where S&N wishes to commence
distribution. S&N to pay for Products within the
time period to be negotiated in good faith on a
country-by-country basis or on a multiple country
basis, depending on the distribution arrangement.
S&N to be responsible for pre-certifying,
arranging shipping, invoicing and making
collections from patients and/or their insurers.
S&N to provide reasonable follow-up contact with
physicians and patients.
Transfer prices: To be negotiated in good faith; prices to be
established for the first three years based on an
estimated average selling price and manufacturing
cost (taking into account the projected market
size, reimbursement levels, competition and other
relevant factors) and to be renegotiated in good
faith if the average selling prices increase or
decrease by more than 15% during such three-year
period. All payments will be made in U.S. Dollars.
vi
<PAGE>
SCHEDULE 7
TERMS AND CONDITIONS TO SERVE AS THE
BASIS FOR GOOD FAITH NEGOTIATIONS
Any such agreement that involves the formation of a joint venture would
contemplate (i) administration of the joint venture by a board consisting of an
equal number of representatives of S&N and Exogen, (ii) contribution by Exogen
of such technology, infrastructure and licenses as shall be agreed upon, (iii)
contribution by S&N of such cash and regulatory support as shall be agreed upon,
and (iv) S&N to be exclusive distributor on a transfer price arrangement or on
the basis of sharing total profits/losses (after interest on distributorship
capital employed).
vii
<PAGE>
SCHEDULE 8
U.S. AND FOREIGN PATENTS,
TRADEMARKS AND APPLICATIONS
(L) indicates license
<TABLE>
<CAPTION>
PATENTS
Index No. Number Country Status Issued (Filing) Inventor(s) Description
- ------------------------------------------------------------------------------------------------------------------------
Ultrasound
<S> <C> <C> <C> <C> <C> <C>
1* 4530360 USA Issued 7/23/85 Duarte Method for Healing Bone
Fractures by Ultrasound
2 5003965 / USA Issued 4/2/91 Talish / Medical Device for Ultrasonic
8042 Lifshey Treatment of Living Tissue
and/or Cells
2A 1328485 / Canada Issued Talish / Medical Device for Ultrasonic
8042 Lifshey Treatment of Living Tissue
and/or Cells
3 5186162 / USA Issued 2/16/93 Talish / Ultrasonic Transducer Device
0089 Lifshey for Treatment of Living
Tissues and/or Cells
4 5211160 / USA Issued 5/18/93 Talish / Ultrasound Orthopaedic
0090 Lifshey Treatment Head and Body -
Mounting Means Therefor
5 5520612 / USA Issued 5/28/96 Winder / Acoustic System for Bone
4031 Talish / Ryaby Fracture Therapy
5A Kokai # Japan Published 12/17/96 Winder / Acoustic System for Bone
8-332209 Talish / Ryaby Fracture Therapy
601-11J
(Cross
Reference:
Section 28)
5B 080390 4031 Taiwan Issued 8/11/96 Winder / Acoustic System for Bone
Talish et al Fracture Therapy
6 5556372 / USA Issued 9/17/96 Talish / Apparatus for Ultrasonic Bone
601-8 Ryaby et al Treatment (SAFHS 2000(R))
</TABLE>
- -------------
* Patent Term Extension under 35 USC#156:Filed 12/5/94; Extension received
5/31/96; term extension --5 years to 11/12/2007.
vii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6B Pub. EPO Published 12/03/97 Talish / Apparatus for Ultrasonic Bone
#0-809-470 Ryaby et al Treatment (SAFHS 2000(R))
601-8 PCT/EPO
6F Kokai Japan Published 9/17/96 Talish / Acoustic System for Bone
#8-238284 Ryaby et al Fracture Therapy
601-8 Japan
7 5626554 / USA Issued 5/6/97 Ryaby / Gel Containment Structure
601-4 Talish /
McCabe
8 5755746 USA Issued 5/26/98 Talish / Locator Method & Apparatus
601-3FWC Lifshey
8B Pub. EPO Published 12/12/97 Talish / Locator Method & Apparatus
#0-810-844 Lifshey
601-3 PCT/EPO
8D PCT/US95-1 China Published 3/14/98 Talish / Locator Method & Apparatus
96742.I #CN-1175195A Lifshey
601-3
PCT/China
9 5762616 601-7 USA Issued 6/9/98 Talish Apparatus for Ultrasonic
Treatment of Sites
Corresponding to the Torso
9A PCT/US97 PCT Published 9/18/97 Talish Apparatus for Ultrasonic
WO97 / 33649 Treatment of Sites
601-7 PCT Corresponding to the Torso
11 D380440 601-9 USA Issued 7/1/97 Talish / Ultrasonic Transducer Housing
Ryaby / (Design Patent)
Urgovitch
11A Reg. # Japan Registered 8/29/97 Talish / Ultrasonic Transducer Housing
998899 601-9J Urgovitch / (Japanese Design Patent)
Scowen / Ryaby
12* 5730705 USA Issued 3/24/98 Talish / Ultrasonic Treatment for Bony
661905 601-13 Ryaby / Ingrowth
Tanzer / Bobyn
25A WO98 / 10729 PCT Published 3/19/98 Talish Cast Punch
601-19 PCT
</TABLE>
- ------------
*Co-owned between Exogen, Inc. and inventors.
ix
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
28 Kokai Japan Published (10/28/97) Winder / Acoustic System for Bone
#9-276352 Talish / Ryaby Fracture Therapy
601-47 PCT
Japan
(Cross-reference:
Section 5A)
Mechanical Strain
2 (L) 5273028 / USA Issued 12/28/93 McLeod / Rubin Non-Invasive Means for
3009 In-Vivo Bone Growth
Stimulation
2A (L) 183314 Mexico Issued 5/23/93 McLeod / Rubin Non-Invasive Means for
1450-002 In-Vivo Bone Growth
Stimulation
2C (L) 667113 Australia Issued 5/26/93 McLeod / Rubin Non-Invasive Means for
2030/3009 In-Vivo Bone Growth
Stimulation
3 (L) 5376065 3018 USA Issued 12/27/94 McLeod / Rubin Non-Invasive Method for
In-Vivo Bone Growth
Stimulation
4 (L) 5103806 2025A USA Issued 4/14/92 McLeod / Rubin Method for the Promotion of
Growth, Ingrowth & Healing of
Bone Tissue & Prevention of
Osteopenia by Mechanical
Loading of the Bone Tissue
5 (L) 5191880 2025B USA Issued 3/9/93 McLeod / Rubin Method for the Promotion of
Growth, Ingrowth & Healing of
Bone Tissue & Prevention of
Osteopenia by Mechanical
Loading of the Bone Tissue
Other
1 (L) 4993413/ USA Issued 2/19/91 McLeod / Electromagnetic: Method and
2032 Rubin Apparatus for Inducing a
Current and Voltage in Living
Tissue
2 4719907 USA Issued 1/19/88 Banko Orthopedic Pin Placement Guide
3.0-001
</TABLE>
x
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PATENT APPLICATIONS
Index No. Number Country Status Issued (Filing) Inventor(s) Description
Date
[****]
TRADEMARKS
Index No. Number Country Status Issued (Filing) Trademark
Date
1 650974 10.1-002 USA Registered 11/3/87 SAFHS(R)
1A 7-112401 / Japan Listed (10/31/95) SAFHS(R)
10.1-002J
1B 548993 / Canada Registered 4/10/92 SAFHS(R)
10.1-002C Mexico
2 74/530521 USA Registered 7/11/95 EXOGEN(R)
10.1-008
3 720034 / USA Registered 7/16/96 SAFHS 2000(R)
10.1-009
3A 7 / 111521 / Japan Listed (10/30/95) SAFHS 2000(R)
10.1-009J
TRADEMARK APPLICATIONS
Index No. Number Country Status Issued (Filing) Trademark
Date
2A 7-111520 / Japan Pending (10/30/95) EXOGEN(R)
10.1-011J
3A 7 / 111521 / Mexico Pending (10/30/95) SAFHS 2000(R)
10.1-009J Canada Pending
4 317,761 Exogen USA Pending (7/1/97) EXOGEN 2000(TM)
10.-007
</TABLE>
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
xi
<PAGE>
SCHEDULE 9
CURRENT INTERNATIONAL ARRANGEMENTS
Note on termination rights/notice periods
Rights to terminate and the notice periods for termination of sales
representative, distribution, marketing and consulting arrangements are subject
to applicable laws and regulations. This Schedule 9 summarizes the notice
periods Exogen believes are due under applicable local laws as they exist as of
the Initial Closing Date. The laws of many countries require that notice periods
be extended depending on the duration of the sales representative, distribution,
marketing or consulting arrangements. Thus the termination rights and notice
periods stated below may change due to the continued duration of such
arrangements and/or changes in applicable laws and regulations.
[****]
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
xii
<PAGE>
SCHEDULE 10
REQUIRED CONSENTS
None
xiii
EXHIBIT 10.23
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR
PORTIONS OF THIS EXHIBIT PURSUANT TO RULE 24B-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
EXOGEN, INC.
COMMON STOCK PURCHASE AGREEMENT
August 10, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock..........................................1
1.1. Sale and Issuance of Common Stock..........................1
1.2. Closing....................................................1
1.3. Actions at the Closing.....................................1
2. Representations and Warranties of the Company.......................2
2.1. Organization and Good Standing; Power and Authority;
Qualifications.............................................2
2.2. Authorization..............................................2
2.3. Capitalization.............................................3
2.4. Valid Issuance of Common Stock.............................3
2.5. Consents...................................................3
2.6. Litigation.................................................3
2.7. Compliance with Other Instruments..........................4
2.8. Financial Statements.......................................4
2.9. SEC Filings................................................4
2.10. Other Information..........................................5
2.11. Intellectual Property Rights...............................5
2.12. Title to Assets and Properties; Insurance..................6
2.13. Compliance with Laws; Permits..............................6
2.14. Offering Exemption.........................................7
2.15. Taxes......................................................7
3. Representations and Warranties of S&N...............................7
3.1. Authorization..............................................7
3.2. Purchase Entirely for Own Account..........................7
3.3. Disclosure of Information..................................8
3.4. Investment Experience......................................8
3.5. Accredited Investor........................................8
3.6. Restricted Securities......................................8
4. Use of Proceeds.....................................................8
5. Transfer Taxes......................................................8
6. Expenses............................................................9
7. Miscellaneous.......................................................9
7.1. Survival of Warranties.....................................9
7.2. Successors and Assigns.....................................9
7.3. Governing Law..............................................9
7.4. Counterparts...............................................9
7.5. Titles and Subtitles.......................................9
7.6. Notices....................................................9
i
<PAGE>
7.7. Finder's Fee..............................................10
7.8. Attorneys' Fees...........................................10
7.9. Amendments and Waivers....................................10
7.10. Severability..............................................10
7.11. Entire Agreement..........................................10
7.12. Press Releases and Announcements..........................10
ii
<PAGE>
SCHEDULES
Schedule 1.3(b)
Schedule 2.3
Schedule 2.5
Schedule 2.6
Schedule 2.11
Schedule 2.13
iii
<PAGE>
ANNEXES
ANNEX A - Registration Rights Agreement
ANNEX B - Secretary's Certificate
ANNEX C - Opinion of Brobeck, Phleger & Harrison LLP
iv
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 10th day of
August, 1998, by and between Exogen, Inc., a Delaware corporation (the
"Company"), and Smith & Nephew Holdings, Inc., a Delaware corporation ("S&N").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1. Sale and Issuance of Common Stock. Subject to the terms
and conditions of this Agreement, S&N agrees to purchase at the Closing and the
Company agrees to sell and issue to S&N at the Closing, 820,000 shares of the
Company's common stock, $.0001 par value per share ("Common Stock"), at a
purchase price per share of $5.00 (such transaction referred to as the
"Purchase" and the aggregate purchase price of $4,100,000 referred to as the
"Purchase Price").
1.2. Closing. The purchase and sale of the Common Stock shall
take place at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway,
47th floor, New York, New York 10019 at 10:00 a.m. New York Time, on the date
hereof, or at such time and place upon which the Company and S&N shall agree
(the "Closing"). To the extent possible, at the Closing, the Company shall
deliver to S&N a certificate or certificates representing the Common Stock which
S&N is purchasing, registered in the name of S&N or its nominee, against payment
of the Purchase Price by wire transfer to the Company's bank account (designated
at least one business day prior to the Closing) in the amount of the Purchase
Price. If the Company is not able to deliver the certificate representing the
Common Stock at Closing, then the Company shall deliver such certificate(s) to
S&N no later than five (5) business days following the Closing.
1.3. Actions at the Closing. Simultaneously with, or prior to,
the execution and delivery of this Agreement, the following actions shall occur:
(a) The Registration Rights Agreement (the "Registration
Rights Agreement"), by and between the Company and S&N, substantially in the
form of Annex A hereto, and all other schedules, certificates and other
documents being delivered pursuant to or in connection with this Agreement by
any party hereto at or prior to the Closing shall be duly executed and delivered
by the parties thereto.
(b) The Company shall deliver to S&N certificates of good
standing from the jurisdictions set forth on Schedule 1.3(b) under its name
dated as of a date no earlier than five days prior to the Closing.
(c) The Common Stock to be issued shall have been approved
for listing on The NASDAQ Stock Market, subject to official notice of issuance.
<PAGE>
(d) The Company shall deliver to S&N a certificate
executed by the secretary of the Company, substantially in the form of Annex B
hereto, certifying (i) a copy of its organizational documents (including the
Certificate of Incorporation and bylaws of the Company), (ii) resolutions
authorizing the transaction and (iii) incumbency matters.
(e) S&N shall receive from Brobeck, Phleger & Harrison
LLP, counsel for the Company, an opinion addressed to S&N, dated as of the
Closing, satisfactory in form and substance to S&N, which shall include the
opinions set forth in Annex C hereto.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the S&N and Smith & Nephew, Inc. that:
2.1. Organization and Good Standing; Power and Authority;
Qualifications. Each of the Company and its subsidiary, Exogen (Europe) GmbH, a
German corporation (the "Subsidiary") is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and (ii) has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as presently conducted and as proposed to be conducted.
The Company has all requisite power and authority to enter into and carry out
the transactions contemplated by this Agreement and the other documents being
delivered pursuant to or in connection with this Agreement to which it is a
party. Each of the Company and its Subsidiary is qualified to transact business
as a foreign corporation in, and is in good standing under the laws of, those
jurisdictions that constitute all of the jurisdictions wherein the character of
the property owned or leased or the nature of the activities conducted by it
makes such qualification necessary and where failure to so qualify would
individually or in the aggregate have a material adverse effect on the
properties, business, prospects, operations, earnings, assets, liabilities or
the condition (financial or otherwise) of the Company and its Subsidiary taken
as a whole, whether or not in the ordinary course of business (a "Material
Adverse Effect"). All of the outstanding shares of capital stock of each class
(other than director qualifying shares) of the Subsidiary have been validly
issued and fully paid and nonassessable, and are owned beneficially and of
record, by the Company, free and clear of Encumbrances.
2.2. Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the other documents
being delivered by the Company pursuant to or in connection with this Agreement
, the performance of all obligations of the Company hereunder and thereunder and
the authorization, issuance and delivery of the Common Stock being sold
hereunder has been taken, and this Agreement and the other documents delivered
by this Company pursuant to or in connection with this Agreement constitute
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Registration Rights Agreement may be
limited by applicable federal or state securities laws.
-2-
<PAGE>
2.3. Capitalization. The authorized capitalization of the
Company immediately following the Purchase will consist of: (a) 3,000,000 shares
of preferred stock of the Company (the "Preferred Stock"), par value $.0001 per
share, of which no shares are issued and outstanding; and (b) 27,000,000 shares
of Common Stock, par value $.0001 per share ("Common Stock"), of which
11,882,718 shares are issued and outstanding as of August 6, 1998, and all such
outstanding shares are validly issued, fully paid and nonassessable. No class of
capital stock ("Capital Stock") of the Company is entitled to preemptive rights.
As of August 6, 1998, there are no outstanding options, warrants, subscription
rights, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any class of Capital Stock of
the Company, or contracts by which the Company or its Subsidiary is or may
become bound to issue additional shares of its Capital Stock or options,
warrants or other rights to purchase or acquire any shares of its Capital Stock,
except as follows: (i) 1,350,000 shares of Common Stock have been reserved for
issuance pursuant to the Company's 1995 Stock Option/Stock Issuance Plan (of
which options to purchase 1,025,560 shares of Common Stock have been granted and
are outstanding), (ii) 350,000 shares of Common Stock have been reserved for
issuance pursuant to the Company's Employee Stock Purchase Plan (of which
164,811 shares of Common Stock have been purchased and are included in total
shares of Common Stock outstanding), and (iii) as set forth on Schedule 2.3
hereto, shares of Common Stock reserved for issuance pursuant to a certain
warrant to purchase Common Stock of the Company and certain warrant obligations.
The Company has not declared or paid any dividend or made any other distribution
of cash, stock or other property to its stockholders.
2.4. Valid Issuance of Common Stock. The Common Stock which is
being purchased by S&N hereunder, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, will be duly and
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, free and clear of any
Encumbrances, other than Encumbrances, if any, arising as a result of actions
taken by S&N, and not subject to preemptive or similar rights of stockholders of
the Company or others.
2.5. Consents. Except as disclosed on Schedule 2.5 hereto and
for any post-Closing notifications or filings as may be required under
applicable federal or state securities laws, if any, which shall be made on a
timely basis, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any person (governmental
or private) on the part of the Company or its Subsidiary is required in
connection with the consummation of the transactions contemplated by this
Agreement and the other documents delivered by the Company pursuant to or in
connection with this Agreement.
2.6. Litigation. Except as set forth in the SEC Documents (as
defined below), there is no civil, criminal or administrative action, suit,
claim, notice, hearing, inquiry, proceeding or investigation at law or in equity
by or before any court, arbitrator or similar panel, governmental
instrumentality or other agency now pending or, to the best knowledge of the
Company, threatened against the Company or its Subsidiary or any of their
respective directors or executive officers in their capacities as directors and
executive officers of the Company or the assets (including the Intellectual
Property) of the Company or its Subsidiary (a "Litigation"). Neither the Company
nor its Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is
-3-
<PAGE>
no action, suit, proceeding or investigation by the Company or its Subsidiary
currently pending or which either of the Company or its Subsidiary intends to
initiate.
2.7. Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Second Amended and Restated
Certificate of Incorporation or Amended and Restated Bylaws. Neither the Company
nor its Subsidiary is in violation or default of any provisions of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound, or to the best knowledge of the Company, of any provision
of domestic (federal, state or local) or foreign law, statute, rule or
regulation applicable to the Company or the Subsidiary except where such
violation or default would not, individually or in the aggregate, have a
Material Adverse Effect. The execution, delivery and performance of this
Agreement and the other documents delivered by the Company pursuant to or in
connection with this Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby will not (x) result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such agreement,
instrument, judgment, order, writ, decree or contract referred to in the
previous sentence (including any registration rights agreements), or (y) result
in the creation of any lien, charge or Encumbrance upon any assets of the
Company or its Subsidiary or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company or its Subsidiary, their business or operations or any
of their assets or properties.
2.8. Financial Statements. The financial statements (including
any related schedule and/or notes) included in the SEC Documents (the "Financial
Statements") are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated. The Financial Statements
fairly present the consolidated financial condition, operating results, changes
in shareholders' equity and cash flows of the Company as of the dates, and for
the periods, indicated therein. Except as set forth in the SEC Documents, the
Company has no liabilities or obligations, contingent or otherwise, except (i)
liabilities and obligations in the respective amounts reflected or reserved
against in the Company's balance sheet (the "Balance Sheet") as of March 31,
1998 included in the SEC Documents or (ii) liabilities and obligations (matured
or unmatured, fixed or contingent) incurred since March 31, 1998 in the ordinary
course of business consistent (in amount and kind) with past practice (none of
which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) which individually or in the aggregate do
not have a Material Adverse Effect. Since March 31, 1998, the Company and its
Subsidiary have operated their business only in the ordinary course and there
has not been individually or in the aggregate any change that would have a
Material Adverse Effect (a "Material Adverse Change") other than changes
disclosed in the SEC Documents. Except as set forth in the SEC Documents, the
Company has never had, nor does it presently have, any subsidiaries, nor has it
owned, nor does it presently own, whether directly or indirectly owned, any
capital stock or other proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other entity.
2.9. SEC Filings. The Company has filed all proxy statements,
reports and other documents required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") from and after July 20,
1995 (the "SEC Documents"), and the
-4-
<PAGE>
Company has delivered to the Investor copies of all SEC Documents so filed from
and after October 1, 1997. Each SEC Document was in compliance in all materials
respects with the requirements of its respective report form and, as of its
filing date, no such SEC Document filed by the Company with the Securities and
Exchange Commission ("SEC") contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
2.10. Other Information. The Company has delivered to S&N
copies of all press releases, reports to stockholders and other documents
released to the public since October 1, 1997.
2.11. Intellectual Property Rights. Except as disclosed on
Schedule 2.11(a) hereto, to the Company's knowledge the Company or its
Subsidiary owns or has the right to use all of the Intellectual Property (as
defined below) necessary, required or desirable for the conduct of its business
as presently or as presently proposed to be conducted, except where the absence
of any thereof would not individually or in the aggregate have a Material
Adverse Effect.
(a) Except as disclosed on Schedule 2.11(b), neither the
Company nor its Subsidiary has interfered with, infringed upon or
misappropriated any Intellectual Property rights of third parties, except for
interferences, infringements and misappropriations which would not individually
or in the aggregate have a Material Adverse Effect, and neither the Company nor
its Subsidiary has received any claim, demand or notice alleging any such
interference, infringement or misappropriation (including any claim that it must
license or refrain from using any Intellectual Property rights of any third
party). To the best knowledge of the Company, no third party has interfered
with, infringed upon or misappropriated any Intellectual Property rights of the
Company or its Subsidiary, except for interferences, infringements and
misappropriations which would not individually or in the aggregate have a
Material Adverse Effect.
As used in this Agreement, "Intellectual Property" means all
intellectual property owned, leased, licensed or used by the Company or its
Subsidiary, including without limitation, (i) all world wide inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, renewals and derivatives in connection therewith, (iii) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (iv) all mask works and all applications,
registrations and renewals in connection therewith, (v) all know-how, trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, addresses, phone numbers, pricing
-5-
<PAGE>
and cost information, and business and marketing plans and proposals), (vi) all
other proprietary rights of any type or description (regardless of whether the
same have been formally registered), (vii) all copies and tangible embodiments
thereof (in whatever form or medium) and (viii) all licenses and agreements in
connection with the foregoing.
2.12. Title to Assets and Properties; Insurance.
(a) Each of the Company and its Subsidiary has good and
marketable title, or a valid leasehold interest in or contractual right to use,
all of its assets and properties, free and clear of any mortgages, judgments,
claims, liens, security interests, pledges, escrows, charges or other
encumbrances of any kind or character whatsoever ("Encumbrances"), except in
each case for such defects in title and such other liens and Encumbrances which
do not individually or in the aggregate materially detract from the value to the
Company or its Subsidiary of the properties and assets of the Company and its
Subsidiary taken as a whole.
(b) The Company and its Subsidiary maintain insurance in
such amounts (to the extent available in the public market), including
self-insurance, retainage and deductible arrangements, and of such a character
as is reasonable for companies engaged in the same or similar business.
2.13.Compliance with Laws; Permits.
(a) Except as provided in Schedule 2.13, the Company and
its Subsidiary are in compliance, and the business of the Company and its
Subsidiary have been conducted in compliance with, all federal, state, local and
foreign laws, rules, ordinances, codes, consents, authorizations, registrations,
regulations, decrees, directives, judgments and orders applicable to them, their
business and the ownership of their assets including, but not limited to,
Environmental Laws (as defined below) except where the failure to comply would
not individually or in the aggregate have a Material Adverse Effect. The Company
and its Subsidiary have all federal, state, local and foreign governmental
licenses, permits, qualifications and authorizations ("Permits") necessary in
the conduct of the business as currently conducted. All such Permits are in full
force and effect, and no violations have been recorded in respect of any such
Permits; no proceeding is pending or, to the best knowledge of the Company,
threatened to revoke or limit any such Permit; and no such Permit will be
suspended, canceled or adversely modified as a result of the execution and
delivery of this Agreement or the other documents delivered by the Company
pursuant to or in connection with this Agreement and the consummation of the
transactions contemplated hereby or thereby, except in any of the foregoing
cases where failure to have such Permit would not individually or in the
aggregate have a Material Adverse Effect.
(b) For purposes of this Agreement, "Environmental Laws"
means, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.ss. 9601, et seq.; the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601, et seq.; the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136, et
seq.; the Clean Air Act, 42 U.S.C. ss.ss. 7401, et seq.; the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C.
-6-
<PAGE>
ss.ss. 1251, et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f, et
seq.; the Occupational Safety and Health Act, 29 U.S.C. ss.ss. 641, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1801, et seq.; as any
of the above statutes have been or may be amended from time to time, all rules
and regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, rule or regulation
governing environmental matters, as the same have been or may be amended from
time to time, including any common law cause of action providing any right or
remedy with respect to environmental matters, and all applicable judicial and
administrative decisions, orders, and decrees relating to environmental matters.
2.14. Offering Exemption. Assuming the accuracy of the
representations and warranties contained in Section 3 hereof, the offer and sale
of the Common Stock and the issuance and delivery of the Common Stock to S&N are
each exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") and under applicable state securities and "blue sky" laws, as
currently in effect and are otherwise in compliance with applicable federal and
state securities laws.
2.15. Taxes. The Company and its Subsidiary have filed or
caused to be filed all income tax returns which are required to be filed and
have paid or caused to be paid all Taxes (as defined below) that have become
due, except Taxes the validity or amount of which is being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside. "Taxes," for purposes of this Agreement, means any taxes,
assessments, duties, fees, levies, imposts, deductions, withholdings, including,
without limitation, income, gross receipts, ad valorem, value added, excise,
real or personal property, asset, sales, use, license, payroll, transaction,
capital, net worth and franchise taxes, estimated taxes, withholding,
employment, social security, workers compensation, utility, severance,
production, unemployment compensation, occupation, premium, windfall profits,
transfer and gains taxes, or other governmental charges of any nature whatsoever
imposed by any government or taxing authority of any country or political
subdivision of any country and any liabilities with respect thereto, including
any penalties, additions to tax, fines or interest thereon, and includes any
liability of the Company and its Subsidiary arising under any tax sharing
agreement to which it is or has been a party.
3. Representations and Warranties of S&N. S&N hereby
represents and warrants that:
3.1. Authorization. This Agreement constitutes the valid and
legally binding obligation of S&N, enforceable against S&N in accordance with
its terms against S&N in accordance with their respective terms, (i) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
3.2. Purchase Entirely for Own Account. This Agreement is made
with S&N in reliance upon S&N's representation to the Company, which by S&N's
execution of this
-7-
<PAGE>
Agreement S&N hereby confirms, that the Common Stock to be received by S&N will
be acquired for investment for S&N's own account, not as a nominee or agent, for
investment purposes only, and not with a view to the resale or distribution of
any part thereof within the meaning of the Securities Act, and that S&N has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, S&N further represents that
it does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Common Stock. S&N represents that it will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the shares of Common Stock except in compliance with the Securities
Act), and the rules and regulations promulgated thereunder and applicable state
securities laws. S&N represents that it has full power and authority to enter
into this Agreement.
3.3. Disclosure of Information. S&N believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Common Stock. S&N further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of S&N to rely thereon.
3.4. Investment Experience. S&N is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters such that it is capable of
evaluating the merits and risks of its investment in the Common Stock.
3.5. Accredited Investor. S&N is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6. Restricted Securities. S&N understands that the shares of
Common Stock it is purchasing are characterized as "restricted securities"
("Restricted Securities") under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may not be
resold without registration under the Securities Act, except in certain limited
circumstances. In this connection, S&N represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
4. Use of Proceeds. The net proceeds received by the Company
from the sale of the Common Stock as contemplated by this Agreement will be used
by the Company for general working capital purposes.
5. Transfer Taxes. The Company agrees that it will pay, and
will hold S&N harmless from, any and all liability with respect to any stamp or
similar Taxes which may be determined to be payable in connection with the
execution and delivery and performance of this Agreement, and that it will
similarly pay and hold S&N harmless from all Taxes in respect of the issuance of
the Common Stock to S&N.
-8-
<PAGE>
6. Expenses. Each of the Company and S&N shall pay all the
costs and expenses incurred by it or on its behalf in connection with this
Agreement and the consummation of the transactions contemplated hereby.
In case any one or more of the covenants and/or agreements set
forth in this Agreement or any agreement contemplated by this Agreement shall
have been breached by any part hereto, S&N, with respect to a breach by Exogen
may proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in such agreement.
7. Miscellaneous.
7.1. Survival of Warranties. The warranties, representations
and covenants of the Company and S&N contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of S&N or the Company.
7.2. Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors, permitted assigns, heirs and
personal representatives of the parties (including transferees of any shares of
Common Stock sold hereunder), except that the Company may not assign its rights
and obligations under this Agreement to any person without the prior written
consent of S&N, except in connection with a merger, consolidation or sale of all
or substantially all of the assets of the Company. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3. Governing Law. This Agreement shall be governed and
construed under the laws of the State of Delaware without regard to the
principles of conflicts or choice of law.
7.4. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6. Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other address
as such party may designate by ten (10) days' advance written notice to the
other party.
-9-
<PAGE>
7.7. Finder's Fee. Each party represents that it neither is
nor will be obligated for any finder's fee or commission in connection with this
transaction. S&N agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which S&N or any of its officers, employees, or representatives
is responsible.
The Company agrees to indemnify and hold harmless S&N from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8. Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.9. Amendments and Waivers. No term of this Agreement may be
amended, discharged or terminated and the observance of any term of this
Agreement may not be waived (either generally or in a particular instance and
either retroactively or prospectively), without the prior written consent of
S&N. Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company. No
waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar). No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
7.10. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.11. Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement between the parties and no
party shall be liable or bound to the other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
7.12. Press Releases and Announcements. Each of the parties
hereto agrees that it will not issue any press release or announcement relating
to the subject matter of this Agreement without the prior written approval of
the other party; provided, however, that any party may make any public
disclosure it believes in good faith is required by law, stock exchange rules or
regulation (in which case the disclosing party shall advise the other party,
provide it with a copy of the proposed disclosure prior to making the
disclosure, and use reasonable efforts to agree upon the text of such press
release, before issuing any such press release).
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Common
Stock Purchase Agreement as of the date first above written.
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
-------------------------------
Name: Patrick A. McBrayer
Title: President and
Chief Executive Officer
Address: 10 Constitution Avenue
P.O. Box 6860
Piscataway, NJ 08855
SMITH & NEPHEW HOLDINGS, INC.
By: /s/ P. David Southworth
-------------------------------
Name: P. David Southworth
Title: President
Address: 1450 Brooks Road
Memphis, TN 38116
[SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT]
-11-
<PAGE>
SCHEDULE OF EXCEPTIONS
TO
COMMON STOCK PURCHASE
AGREEMENT (THE "AGREEMENT")
BY AND BETWEEN
EXOGEN INC. (THE "COMPANY")
AND
SMITH & NEPHEW HOLDINGS, INC. ("S&N")
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED
SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS IN THE AGREEMENT.
DISCLOSURE UNDER ANY SECTION SHALL CONSTITUTE DISCLOSURE UNDER
THE SCHEDULE OF EXCEPTIONS WITHOUT THE NEED FOR CROSS-REFERENCES. ALL
DESCRIPTIONS OF AGREEMENTS OR OTHER MATTERS APPEARING HEREIN ARE SUMMARY IN
NATURE AND ARE QUALIFIED BY REFERENCE TO THE COMPLETE DOCUMENTS, WHICH HAVE BEEN
SUPPLIED TO S&N OR WHICH THE COMPANY WILL MAKE AVAILABLE TO S&N UPON REQUEST. IN
NO EVENT SHALL ANY DISCLOSURE HEREUNDER BE DEEMED TO CONSTITUTE AN
ACKNOWLEDGEMENT THAT SUCH DISCLOSURE IS MATERIAL TO THE BUSINESS OR FINANCIAL
CONDITION OF THE COMPANY.
THE REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER
OBLIGATIONS AND AGREEMENTS OF THE COMPANY IN THE AGREEMENT ARE MADE, GIVEN AND
UNDERTAKEN SUBJECT TO THE DISCLOSURES IN THIS SCHEDULE OF EXCEPTIONS AND AS
PROVIDED IN THIS AGREEMENT.
i
<PAGE>
SCHEDULE 1.3(b)
Delaware
New Jersey
ii
<PAGE>
SCHEDULE 2.3
On September 8, 1997, the Company and [****], a Delaware
corporation ("[****]"), entered into an advisory agreement pursuant to which,
the Company issued to [****], for an aggregate purchase price of $20,000, a
warrant to purchase up to 100,000 shares of the Company's Common Stock at an
exercise price equal to $4.50 per share (the "Purchase Warrant"). The Purchase
Warrant is exercisable until (i) September 8, 2002 or (ii) November 1, 1998 in
the event that the Company does not, by July 31, 1998, consummate a strategic
partnering transaction relating to the commercialization of certain of the
Company's technologies (a "Strategic Partnering Transaction"). Further, if the
Company consummates Strategic Partnering Transactions with companies introduced
by [****] for three specific technologies, [****] will be entitled to a warrant
to purchase 75,000 shares of the Company's Common Stock at an exercise price
equal to $4.50 per share (the "Transaction Warrants") for each of the three
transactions; provided, however, that for any Strategic Partnering Transaction
consummated prior to July 31, 1998, [****] will be entitled to a warrant to
purchase 125,000 shares of the Company's Common Stock instead of 100,000 shares.
Such Transaction Warrants shall expire five (5) years from the date of issuance.
- ---------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
iii
<PAGE>
SCHEDULE 2.5
There are no exceptions.
iv
<PAGE>
SCHEDULE 2.6
Reference is made to the information contained in Part II,
Item 1 of the Company's Quarterly Report on Form 10-Q for the Quarter Ended
March 31, 1998. The hearings on pending motions in both the litigation matters
described have been adjourned, pending settlement negotiations which are in
process. There can be no assurance that a settlement will be finalized, in which
event the litigation would continue.
v
<PAGE>
SCHEDULE 2.11
See Schedule 8 to Master Agreement between Exogen, Inc. and
Smith & Nephew, Inc. dated as of August 10, 1998.
vi
<PAGE>
SCHEDULE 2.13
There are no exceptions.
vii
<PAGE>
ANNEX A
EXOGEN, INC.
REGISTRATION RIGHTS AGREEMENT
August 10, 1998
<PAGE>
TABLE OF CONTENTS
1. Registration Rights.............................................1
1.1. Definitions............................................1
1.2. Shelf Registration.....................................2
1.3. Company Registration...................................4
1.4. Obligations of the Company.............................4
1.5. Furnish Information....................................7
1.6. Expenses of Registration...............................7
1.7. Expenses of Company Registration.......................8
1.8. Underwriting Requirements..............................8
1.9. Delay of Registration..................................9
1.10. Indemnification........................................9
1.11. Reports Under Securities Exchange Act of 1934.........12
1.12. Assignment of Registration Rights.....................12
1.13. Limitations on Subsequent Registration Rights.........13
1.14. "Market Stand-Off Agreement"..........................13
1.15. No Required Sale......................................14
2. Miscellaneous..................................................14
2.1. Successors and Assigns................................14
2.2. Governing Law.........................................14
2.3. Counterparts..........................................14
2.4. Titles and Subtitles..................................14
2.5. Notices...............................................14
2.6. Expenses..............................................14
2.7. Amendments and Waivers................................14
2.8. Severability..........................................15
2.9. Nominees for Beneficial Owners........................15
2.10. Specific Performance..................................15
2.11. No Inconsistent Agreements............................15
2.12. Entire Agreement......................................16
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 10th day
of August, 1998 by and between Exogen, Inc., a Delaware corporation (the
"Company"), and Smith & Nephew Holdings, Inc., a Delaware corporation ("S&N").
RECITALS
WHEREAS, the Company and S&N are parties to the Common Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement");
WHEREAS, in order to induce the Company to enter into the
Stock Purchase Agreement and to induce S&N to invest funds in the Company
pursuant to the Stock Purchase Agreement, S&N and the Company hereby agree that
this Agreement shall govern the rights of S&N to cause the Company to register
shares of Common Stock issuable to S&N and certain other matters as set forth
herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1. Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(c) The term "Registrable Securities" means (1) the Common
Stock issued pursuant to the Stock Purchase Agreement and (2) any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock, excluding in all cases, however, any Registrable Securities which
are sold, assigned, pledged, hypothecated or otherwise disposed of by S&N in a
transaction in which S&N's rights under this Agreement are not assigned or
assignable;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the
<PAGE>
number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities; and
(e) The term "Holder" means S&N and any transferees and
assignees permitted by Section 1.12.
1.2. Shelf Registration.
(a) The Company shall, subject to the limitations
specified in this Agreement, use its best efforts (i) to file a shelf
registration statement on Form S-3 or any other form available to the Company
within ninety (90) days from the date hereof (the "Filing Date") covering the
registration under the Act of all Registrable Securities then outstanding to be
offered or sold on a delayed or continuous basis as provided by this Agreement,
pursuant to Rule 415 of the Act (the "Shelf Registration Statement"); and (ii)
to maintain the effectiveness of the Shelf Registration Statement for a period
of two (2) years from the date of this Agreement (or such shorter period in
accordance with Section 1.4(a)).
(b) If any offering pursuant to Section 1.2(a) hereof
involves an underwritten offering, an underwriter will be selected by the
Holders of two-thirds of the Registrable Securities then outstanding and shall
be reasonably acceptable to the Company. In such event, the right of any Holder
to include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute Registrable Securities through such
underwriting shall (together with the Company as provided in Section 1.4(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Section 1.2, if the underwriter advises the Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all Other Securities (as defined below) are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to the Holders a certificate signed by the Chief Executive officer or
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental (a "Detrimental
Condition") to the Company and its stockholders for a registration statement to
be filed or to become or remain effective, as the case may be, and provided that
the Detrimental Condition has not resulted from actions taken by the Company,
(i) the Company shall have the right to defer taking action with respect to the
filing of the Shelf Registration Statement for a period of not more than ninety
(90) days after the Filing Date, (ii) in case a Shelf Registration Statement has
been filed but has not become effective, the Company may cause such registration
statement to be withdrawn or may postpone amending or supplementing such
registration statement until such Detrimental Condition no longer exists, but in
no event for more than ninety (90) days, or (iii) in case a Shelf Registration
Statement has been filed and has become effective, the Company may cause such
registration statement to be withdrawn and its effectiveness terminated or may
postpone amending or supplementing such registration statement until such
Detrimental Condition no longer exists, but in no event for more
2
<PAGE>
than ninety (90) days. The Company may not declare a Detrimental Condition, or
take any of the actions specified in clauses (i), (ii) or (iii) of the preceding
sentence (and can take only one such action specified in clauses(i), (ii) or
(iii) per Detrimental Condition), more than once in any twelve-month period. The
Company shall give written notice of its determination to postpone or withdraw a
registration statement and of the fact that the Detrimental Condition for such
postponement or withdrawal no longer exists, in each case, promptly after the
occurrence thereof. The following events or circumstances may result in the
filing of a registration statement being seriously detrimental to the Company
and its shareholders: a pending material acquisition, merger or sale or purchase
of assets, pending or threatened material litigation, pending or threatened
material regulatory or governmental action, pending material change in the
business, prospects, condition (financial or other) or properties of the
Company. The foregoing list is for illustrative purposes only and is not meant
to be exclusive.
(d) If the Company shall give any notice of postponement
or withdrawal of any registration statement, the Company shall not, during the
period of postponement or withdrawal pursuant to clauses (i), (ii) or (iii) of
the prior paragraph, register any Common Stock, other than pursuant to a
registration statement on Form S-4 or S-8 (or an equivalent registration form
then in effect). Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company that the Company has determined to withdraw any
registration statement pursuant to the immediately preceding paragraph, such
Holder will discontinue its disposition of Registrable Securities pursuant to
such registration statement and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such notice.
If the Company shall have withdrawn or prematurely terminated a registration
statement filed under this Section 1.2 (whether pursuant to the immediately
preceding paragraph, or as a result of any stop order, injunction or other order
or requirement of the SEC or any other governmental agency or court), the
Company shall not be considered to have effected an effective registration for
the purposes of this Agreement until the Company shall have filed a new
registration statement covering the Registrable Securities covered by the
withdrawn registration statement and such registration statement shall have been
declared effective and shall not have been withdrawn. If the Company shall give
any notice of withdrawal or postponement of a registration statement, the
Company shall, at such time as the Detrimental Condition that caused such
withdrawal or postponement no longer exists (but in no event later than ninety
(90) days after the date of the postponement or withdrawal), use its best
efforts to effect the registration under the Securities Act of the Registrable
Securities covered by the withdrawn or postponed registration statement in
accordance with this Section 1.2 (unless the Holder shall have withdrawn such
request, in which case the Company shall not be considered to have effected an
effective registration for the purposes of this Agreement).
3
<PAGE>
(e) The registration statement filed pursuant to this
Section 1.2 may include other securities of the Company (i) which are held by
persons who, by virtue of agreements with the Company, are entitled to include
their securities in any such registration, (ii) which are held by officers and
directors of the Company, or (iii) which are being offered for the account of
the Company (collectively, the securities referred to in clauses (i), (ii) and
(iii) in this paragraph are hereinafter referred to as the "Other Securities").
1.3. Company Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock option,
stock purchase or similar plan or a SEC Rule 145 transaction, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 2.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered. No registration
effected pursuant to this Section 1.3 shall relieve the Company of its
obligations to effect the required registration pursuant to Section 1.2. Any
Holder shall have the right to withdraw his request for inclusion of its
Registrable Securities in any registration statement pursuant to this Section
1.3 by giving written notice to the Company of its request to withdraw.
1.4. Obligations of the Company. When required under this
Section 1 to effect the registration of the Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange
Commission (the "SEC") a Shelf Registration Statement or, if applicable, any
other form of registration statement, as the case may be, with respect to the
Registrable Securities and use its best efforts to cause such registration
statement to become effective within one hundred twenty (120) days after such
registration statement was filed and to keep such Shelf Registration Statement
effective for a period up to the second anniversary of the date hereof or until
the distribution contemplated in the Shelf Registration Statement has been
completed; provided, however, that before filing a registration statement or
prospectus or any amendments or supplements thereto, or comparable statements
under securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel for the Holders (the "Holders' Counsel") participating in the
planned offering (selected by the Holders of two-thirds of the Registrable
Securities then outstanding included in such registration), and the
underwriters, if any, copies of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel.
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(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders whose Registrable Securities
are covered by the Shelf Registration Statement such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders whose Registrable Securities are covered by the Shelf Registration
Statement; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions unless
the Company is already subject to service in such jurisdiction.
(e) In the event the Registrable Securities are to be sold
through an underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. The Holders proposing to distribute Registrable
Securities through such underwritten public offering shall also enter into and
perform their obligations under such an agreement.
(f) In the event the Registrable Securities are to be sold
through an underwritten public offering, use its best efforts to furnish, on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 1, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, and (ii) a
letter, dated such date, from the independent certified public accountants of
the Company addressed to the underwriters, stating that such accountants are
independent public accountants within the meaning of the Act and the applicable
published rules and regulations thereunder, and otherwise in form and in
substance as is customarily given by independent certified public accountants to
underwriters in connection with an underwritten public offering.
(g) Promptly notify (i) each Holder selling Registrable
Securities covered by such registration statement and each managing underwriter,
if any: (A) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the registration
statement has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (B) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose,
(C) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable
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Securities for sale under the securities or blue sky laws of any jurisdiction or
the initiation of any proceeding for such purpose, and (D) when a prospectus
relating to the registration statement is required to be delivered under the Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing; and (ii) Holders' Counsel and each managing
underwriter of any request by the SEC for amendments or supplements to such
registration statement or prospectus related thereto or for additional
information. If the notification relates to an event described in clause (i)(D),
the Company shall, in accordance with paragraph (b) of this Section 1.4,
promptly prepare and furnish to each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading.
(h) Cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities and instruct any transfer agent and registrar of Registrable
Securities to release any stop transfer orders in respect thereto Comply with
all applicable rules and regulations of the SEC, and make generally available to
its security holders, as soon as reasonably practicable after the effective date
of the registration statement (and in any event within 16 months thereafter), an
earnings statement (which need not be audited) covering the period of at least
twelve consecutive months beginning with the first day of the Company's first
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 thereunder.
(i) Cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of the 1934
Act (as defined below) or, failing that, secure NASDAQ authorization for such
shares and, without limiting the generality of the foregoing, take all actions
that may be required by the Company as the issuer of such Registrable Securities
in order to facilitate the managing underwriter's arranging for the registration
of at least two market
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makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. (the "NASD").
(j) Provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
(k) Deliver promptly to Holders' Counsel and each
underwriter, if any, copies of all correspondence between the SEC and the
Company, its counsel or auditors and all memoranda relating to discussions with
the SEC or its staff with respect to the registration statement, other than
those portions of any such memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by Holders' Counsel, by any underwriter, if
any, participating in any disposition to be effected pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause all of the
Company's officers, directors and employees to supply all information reasonably
requested by Holders' Counsel or such underwriter, attorney, accountant or agent
in connection with such registration statement.
(l) Use reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration statement.
(m) Upon written request, furnish to each Holder
participating in the offering and the managing underwriter, without charge, at
least one conformed copy of the registration statement and any post-effective
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference).
(n) Take all such other commercially reasonable actions as
are necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
1.5. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of the Holders whose Registrable
Securities are covered by the Shelf Registration Statement that each of such
Holders shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holders,
Registrable Securities.
1.6. Expenses of Registration.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Section 1,
including, without limitation: (i) SEC, stock exchange or NASD registration and
filing fees and all listing fees and fees
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with respect to the inclusion of securities in NASDAQ, (ii) fees and expenses of
compliance with state securities or "blue sky" laws and in connection with the
preparation of a "blue sky" survey, including without limitation, reasonable
fees and expenses of blue sky counsel, (iii) printing and copying expenses, (iv)
messenger and delivery expenses, (v) expenses incurred in connection with any
road show, (vi) fees and disbursements of counsel for the Company, (vii) with
respect to each registration, the fees and disbursements of one counsel for the
selling Holder(s) (selected by the Holders of two-thirds of the Registrable
Securities then outstanding included in such registration), (viii) fees and
disbursements of the Company's independent public accountants (including the
expenses of any audit and/or "cold comfort" letter) and fees and expenses of
other persons, including special experts, retained by the Company, (ix) any fees
and expenses payable to a Qualified Independent Underwriter (as such term is
defined in Conduct Rule 2720 of the NASD's By-Laws) and (x) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers of
securities.
(b) The Company shall pay all Expenses with respect to any
registration pursuant to Section 1.2, whether or not such registration statement
becomes effective or remains effective for the period contemplated by Section
1.2(a).
(c) Notwithstanding the foregoing, (i) the provisions of
this Section 1.6 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (ii) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (iii) the Company shall, in the case of all
registrations under this Section 1, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
1.7. Expenses of Company Registration. The Company shall bear
and pay all Expenses incurred in connection with any registration filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8. Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible
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with the success of the offering, then the Company shall be required to include
in the offering only that number of such securities, including Registrable
Securities, that the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders, but in any event subject to the apportionment rights of
certain selling stockholders under Section 1.8 of the Registration Rights
Agreement, dated October 20, 1997, between the Company and certain stockholders
of the Company). For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder that is a Holder of Registrable
Securities and that is a partnership or corporation, corporate partners, retired
partners and stockholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder," and
any pro-rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
1.9. Delay of Registration. The Holders shall not have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder whose Registrable Securities are covered
by the Registration Statement, its directors, officers, fiduciaries, employees
and stockholders or general or limited partners (and the directors, officers,
employees and stockholders thereof), any underwriter (as defined in the Act) for
such Holders and each person, if any, who controls such Holders or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), each officer, director, employee, stockholder or partner of
such underwriter, against any losses, claims, damages, or liabilities (joint or
several) or actions or proceedings (whether commenced or threatened) and
expenses (including reasonable fees of counsel and any amounts paid in any
settlement effected with the Company's consent), to which they may become
subject under the Act, the 1934 Act or any state securities law, insofar as such
losses, claims, damages, or liabilities (or actions or proceedings in respect
thereof) ("Claims") or expenses arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus, summary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, together with documents incorporated by reference therein,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Act, the
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1934 Act, any state securities law or any rule or regulation promulgated under
the Act, the 1934 Act or any state securities law; and the Company will pay to
such Holders, and each such underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, expense or action or
proceeding; provided, however, that (A) the indemnity agreement contained in
this Section 1.10 shall not apply to amounts paid in settlement of any such
Claim if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), (B) the Company shall not be liable
in any case for any such Claim to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holders, or any such underwriter or controlling person. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by as on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by the Shelf Registration Statement will,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter, and any controlling person of any such underwriter, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 Act, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 1.10, in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 1.10 shall not apply to amounts paid in settlement of
any such Claim if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld; provided that, in no
event shall any indemnity under this Section 1.10 exceed the net proceeds from
the offering received by such Holder. Such indemnity and reimbursement of
expenses shall remain in full force and effect regardless of any investigation
made by as on behalf of such indemnified party and shall survive the transfer of
such securities by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, (i) if
representation of such indemnified party
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by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding; (ii) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within 30 days after receiving notice from such
indemnified party; or (iii) if such indemnified party who is a defendant in any
action or proceeding which is also brought against the indemnifying party
reasonably shall have concluded that there may be one or more legal defenses
available to such indemnified party which are not available to the indemnifying
party. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.10.
(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any Claim or expense referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such Claim or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such Claim or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties, relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. If, however, the allocation provided in the first
sentence of this paragraph is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 1.10(d) were to be determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 1.10(d).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this Section 1.10(d)
to the contrary, no indemnifying party (other than the Company) shall be
required pursuant to this Section 1.10(d) to contribute any amount in excess of
the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the Claims of the indemnified
parties relate, less the amount of any indemnification payment made by such
indemnifying party pursuant to Section 1.10(b).
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(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11. Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times;
(b) take such action as is necessary to maintain the
Holder's ability to utilize Form S-3 for the sale of their Registrable
Securities; (c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and (d)
furnish to any Holder, so long as the Holder owns any Registrable Securities,
forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of SEC Rule 144, the Act and the 1934
Act (at any time after it so qualifies), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents filed by
the Company with the SEC, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.12. Assignment of Registration Rights.
(a) The rights to cause the Company to register
Registrable Securities pursuant to this Section 1 may be assigned (but only with
all related obligations) by a Holder to a transferee or assignees of such
securities who acquires at least two percent (2%) of the Registrable Securities
(as adjusted for stock splits, combinations and the like), provided: (i) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (ii) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including, without limitation, the provisions
of Section 1.14 below; and (iii) such assignment shall be effective only if such
transfer is exempt from registration under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holding of
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transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
(b) Subject to clause (a) above, the right to have the Company register the
Registrable Securities pursuant to this Section 1 may not otherwise be assigned;
provided, however, that any heir or the estate of S&N which acquires the
Registrable Securities from such Holder by will or intestate succession shall be
entitled to have the Company register the Registrable Securities pursuant to
this Section 1 (provided that such heirs or such estate shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving any notices
or taking any action under this Section 1), and (ii) any individual Holder may
sell, assign or transfer Registrable Securities to his or her spouse or children
or to a trust established for the benefit of his or her spouse, children or
himself or herself, and such transferee shall be entitled to have the Company
register the Registrable Securities pursuant to this Section 1, if, and only if,
such transferee agrees in writing to be bound by the terms of this Agreement. In
each such event and for purposes of this Agreement, the term "Holder" as used
herein shall include all such heirs, such estate or such transferees.
1.13. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of two-thirds of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective holder
to include such securities in any registration filed under Section 1.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of such holder's securities will not reduce the amount of the
Registrable Securities of the Holders that is included.
1.14. "Market Stand-Off" Agreement. S&N hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to those who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration, and S&N agrees to enter into an agreement to such effect with such
underwriter; provided, however, that (a) all officers and directors of the
Company enter into similar agreements, and, (b) such market stand-off time
period shall not exceed 120 days. If the underwriters agree to any waivers of
such restrictions, then S&N shall be entitled to sell, transfer or dispose of
the same number or amount of securities of the Company as the person or entity
receiving such waiver, upon the same terms and conditions set forth in such
waiver.
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In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
S&N (and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
1.15. No Required Sale. Nothing in this Agreement shall be
deemed to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2. Miscellaneous.
2.1. Successors and Assigns. Except as otherwise provided
herein, and provided that the transfer or assignment is in accordance with the
terms hereof, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including any permitted transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
2.2. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without regard to principles
of conflicts or choice of laws.
2.3. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5. Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party in the Stock Purchase Agreement, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
2.6. Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or
14
<PAGE>
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of two-thirds of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.7 shall be binding upon each Holder of any
Registrable Securities then outstanding, each future Holder of all such
Registrable Securities, and the Company.
2.8. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9. Nominees for Beneficial Owners. If Registrable Securities
are held by a nominee for the beneficial owner thereof, the beneficial owner
thereof may, at its option, be treated as the Holder of such Registrable
Securities for purposes of any request or other action by any Holder or Holders
of Registrable Securities pursuant to this Agreement (or any determination of
any number or percentage of shares constituting Registrable Securities held by
any Holder or Holders of Registrable Securities contemplated by this Agreement),
provided that the Company shall have received assurances reasonably satisfactory
to it of such beneficial ownership.
2.10. Specific Performance. The parties hereto acknowledge
that there would be no adequate remedy at law if any party fails to perform any
of its obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall be
entitled to injunctive relief, including specific performance, to enforce such
obligations without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
2.11. No Inconsistent Agreements. The Company represents and
warrants to S&N that the rights granted to the Holders of Registrable Securities
hereunder do not in any way conflict with and are not inconsistent with any
other agreements to which the Company is a party or by which it is bound.
Without the prior written consent of the holders of two-thirds of the
Registrable Securities then outstanding, neither the Company nor any Holder
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities which is inconsistent with the rights granted in this
Agreement or otherwise conflicts with the provisions hereof, other than any
lock-up agreement with the underwriters in connection with any registered
offering effected hereunder, pursuant to which the Company shall agree not to
register for sale, and the Company shall agree not to sell or otherwise dispose
of, Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a specified period following the registered
offering. The Company further agrees that if any other registration rights
agreement entered into after the date of this Agreement with respect to any of
its securities contains terms which are more favorable to, or less restrictive
on, the other party thereto than the terms and conditions in this Agreement are
(insofar as they are applicable to the Holders), then the terms and conditions
of this Agreement shall immediately be deemed to have been amended
15
<PAGE>
without further action by the Company or any of the Holders of Registrable
Securities so that the Holders shall be entitled to the benefit of any such more
favorable or less restrictive terms or conditions.
2.12. Entire Agreement. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
-----------------------
Name: Patrick A. McBrayer
Title: President and Chief Executive Officer
Address: 10 Constitution Avenue
P.O. Box 6860
Piscataway, NJ 08855
SMITH & NEPHEW HOLDINGS, INC.
By: /s/ P. David Southworth
-----------------------
Name: P. David Southworth
Title: President
Address: 1450 Brooks Road
Memphis, TN 38116
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
16
EXHIBIT 10.24
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT
FOR PORTIONS OF THIS EXHIBIT PURSUANT TO
RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
EXOGEN, INC.
AND
SMITH & NEPHEW, INC.
UNITED STATES SALES REPRESENTATIVE AGREEMENT
August 10, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Appointment...........................................................1
2. Current Arrangements in Certain Territories...........................2
3. Commission............................................................3
4. Minimum Number of Orders..............................................4
5. Prices and Terms of Sale..............................................6
6. S&N's Responsibilities................................................6
7. Exogen's Responsibilities.............................................7
8. FDA Laws and Regulations..............................................9
9. HCFA Reimbursement Codes and CPT Codes...............................10
10. Warranty Disclaimer; Limitation of Liability.........................10
11. Insurance............................................................10
12. Arbitration..........................................................11
13. Assignment and Successors............................................11
14. Effective Date, Term and Termination.................................11
15. Relationship of Parties..............................................13
16. Miscellaneous........................................................13
\<PAGE>
EXHIBITS
Exhibit A Current Arrangements in Certain Territories
Exhibit B Prices, Discounts, Allowances and Terms of Sale
Exhibit C Potentially Transferred Employees
Exhibit D [Intentionally Omitted]
Exhibit E Form of Assignment and Assumption Agreement
ii
<PAGE>
UNITED STATES SALES REPRESENTATIVE AGREEMENT
Agreement dated as of August 10, 1998 between Exogen, Inc., a
Delaware corporation of 10 Constitution Avenue, Piscataway, New Jersey 08855
("Exogen"), and Smith & Nephew, Inc., a Delaware corporation of 1450 Brooks
Road, Memphis, Tennessee 38116 ("S&N").
PRELIMINARY STATEMENTS
A. Exogen and S&N have entered into a Master Agreement, dated
as of the date hereof (the "Master Agreement"), providing for, among other
things, (i) the purchase of shares of Exogen's capital stock by S&N, (ii) the
option in favor of S&N to enter into a U.S. Stocking Distribution Agreement, a
Global Distribution Agreement and (in certain cases) one or more non-U.S.
individual country Distribution Agreements, and (iii) the option to acquire
additional shares of Exogen Common Stock.
B. The parties wish to enter into this Agreement as part of
the relationship contemplated by and pursuant to the terms of the Master
Agreement.
1. Appointment.
(a) Subject to the terms and conditions of this Agreement,
for the term of this Agreement Exogen hereby appoints S&N as its exclusive
representative for the Sale (as defined below) and promotion in the United
States and Puerto Rico of all models of Exogen's Sonic Accelerated Fracture
Healing System ("SAFHS"), including without limitation the SAFHS Model 2A
(subject to Exhibit B), the SAFHS 2000 and the Exogen (or SAFHS) 3000 currently
under development, including all improvements and enhancements thereto
incorporated into the Products on a commercial basis, for the treatment of bone
fractures, osteotomies, arthrodeses (other than spine fusion) and distractive
osteogenesis ("Products"). The terms "Sale," "Sell," "Sold" and "Selling" as
used in this Agreement shall include outright sales or transfer in which title
to a Product passes to the customer and short and long term leases, bailments
and other arrangements whereby Products are made available to users by Exogen.
S&N hereby accepts such appointment. Exogen shall not itself Sell or solicit
Sales, or authorize others to Sell or solicit Sales, for the use or delivery of
the Products anywhere in the United States. Any inquiries regarding the Sale or
potential Sale of the Products received by Exogen shall be referred to S&N.
(b) S&N shall have the right to discharge its obligations
hereunder through its own employees, through its Affiliates (as defined in the
Master Agreement), through independent sales representatives or distributors,
provided that S&N shall at all times remain liable for the activities of such
persons and for compliance with S&N's obligations under this Agreement. Attached
as Exhibit C is a complete and accurate list of all employees of Exogen whose
current primary responsibilities involve the Sale of the Products, together with
the job title, job description, compensation and benefits of each such employee
("Potentially Transferred Employees"). S&N shall have the right to offer any or
all Potentially Transferred Employees employment with S&N and Exogen shall
encourage the Potentially Transferred Employees to
<PAGE>
whom S&N offers employment to accept employment with S&N. S&N shall have
absolute discretion with respect to which, if any, of the Potentially
Transferred Employees S&N may offer employment. S&N shall also have absolute
discretion as to the compensation and benefits to be paid by S&N to any
Potentially Transferred Employee who accept S&N's offer of employment
("Transferred Employee"). S&N shall also have the right to establish the terms
of the employment of the Transferred Employees and shall have the right to
terminate or fire any Transferred Employee. Exogen shall be responsible for any
severance and other obligations owed to Potentially Transferred Employees who do
not become Transferred Employees and shall indemnify and hold S&N harmless from
any claims, losses or damages relating to the Potentially Transferred Employees
who do not become Transferred Employees. Exogen shall [****]; provided, however,
Exogen's obligations shall not exceed those set forth in Exogen's severance
policy in effect as of the date of this Agreement. Exogen shall also indemnify
and hold S&N harmless from and against any claims, losses or damages with
respect to Potentially Transferred Employees arising prior to or accrued to the
date of this Agreement and with respect to Transferred Employees arising prior
to or accrued to the date on which such employee becomes a Transferred Employee
(except for any claims, losses or damages caused by S&N). S&N shall indemnify
and hold harmless Exogen from and against any claims, losses or damages with
respect to Transferred Employees arising on or after the date on which such
employee becomes a Transferred Employee (except for (i) the specific severance
obligation of Exogen set forth in the precedent sentence; and (ii) any claims,
losses or damages caused by Exogen. The parties agree that if (a) any
Potentially Transferred Employees who are identified in Exhibit C do not, during
the first 180 days after the effective date of this Agreement, become a
Transferred Employee or do not remain a Transferred Employee or sales
representative or distributor of S&N (or employee thereof) at the end of such
180 day period, and (b) the percentage of volume as shown on Exhibit C
associated with all Potentially Transferred Employees who do not become
Transferred Employees or do not remain a Transferred Employee or sales
representative or distributor (or employee thereof) of S&N at the end of such
180 day period exceeds 20%, then the sum of the number of Units listed next to
such Potentially Transferred Employees will be deducted from the Minimum Number
of Units for Contract Year 1, but in no event shall the reduction exceed [****]
Units.
2. Current Arrangements in Certain Territories.
(a) Attached hereto as Exhibit A is a complete and
accurate list of territories in the United States in which Exogen currently has
agreements ("Distribution Agreements") with sales representatives or
distributors ("Distributors") for the Sale of Products. Exogen represents and
warrants that Exogen has delivered a full and complete copy of all Distribution
Agreements to S&N, together with all addenda, amendments, modifications,
extensions, renewals, and notices sent or received pursuant to the terms of each
Distribution Agreement and copies or summaries of any programs or policies
applicable to Distributors. Exogen further represents and warrants to S&N that
the Distribution Agreements constitute a
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
2
<PAGE>
valid and binding obligation of the parties thereto and are in full force and
effect and may be transferred to S&N and immediately thereafter will continue in
full force and effect, and in each case without breaching the terms thereof
resulting in the forfeiture or impairment of any rights thereunder and without
the consent, approval or act of, or the making of any filing with or providing
any notice to, any other party. Exogen has fulfilled and performed in all
material respects its obligations under each of the Distribution Agreements and
Exogen is not in nor, to the best of its knowledge, alleged to be in breach or
default under any of the Distribution Agreements, and there is no basis for
termination of the Distribution Agreements. Exogen further represents and
warrants that, to the best of Exogen's knowledge, no Distributor has breached or
defaulted thereunder, and no event has occurred and no condition or state of
facts exists which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by Exogen, or to the best of Exogen's
knowledge by any Distributor. Exogen also represents and warrants that Exogen is
not currently renegotiating any of the Distribution Agreements or has offered or
paid or agreed to pay any consideration to any Distributor not required under
the Distribution Agreements. Exogen further represents and warrants to S&N that
there have been no modifications or amendments to the Distributor Agreements
either orally or in practice other than those amendments delivered or described
to S&N. Exogen shall make all payments and satisfy all of its obligations under
the Distribution Agreements arising or accruing prior to the date of this
Agreement. Any announcement or initial communication to the Distributors
concerning the assignment of the Distribution Agreements from Exogen to S&N
shall be mutually agreed upon by Exogen and S&N.
(b) Exogen and S&N shall, on the date of this Agreement,
execute and deliver an Assignment and Assumption Agreement duly executed by
Exogen in the form attached hereto as Exhibit E pursuant to which Exogen shall
assign the Distribution Agreements to S&N and S&N shall assume the Distribution
Agreements.
3. Commission. S&N will be entitled to a commission of [****] on the
Net Sales of Products by Exogen for use or delivery anywhere in the United
States for sales up to the then applicable Minimum Number of Units (as defined
in Section 4) and [****] of the Net Sales for Sales in excess of the then
applicable Minimum Number of Units. "Net Sales" means the amount shown on the
invoice as due from the patient and/or insurer, after giving effect to quantity
or other discounts (as provided for in Section 5 hereof), less any shipping and
insurance charges and taxes shown on such invoice and a reasonable reserve for
bad debt. The reserve for bad debt shall be estimated based upon Exogen's
history of reimbursement for the Products by patients and/or insurers during the
preceding 12-month period. This reserve will be recalculated at the end of each
calendar quarter and the new estimate will be applied to all Net Sales of
Products sold during the next following calendar quarter. Adjustments to Net
Sales for Units returned unused shall not be included in the reserve for bad
debt, but shall be credited against and reduce any future commission payable to
S&N in an amount equal to the original commission paid to S&N on such Net Sales.
Exogen shall, within 15 days after the end of each
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
3
<PAGE>
month, deliver to S&N (i) a report showing the Net Sales of Products Sold during
such month (which report shall include physician and patient information) on a
sales territory by sales territory basis and (ii) payment of the commissions
owed to S&N for the Net Sales of Products shown in such report. In addition,
Exogen shall provide S&N with reports concerning sales commissions and order
activity to the same extent as Exogen generates such reports as of the date of
this Agreement. S&N shall have the right upon reasonable notice and during
regular business hours to audit the reports delivered to it by Exogen.
4. Minimum Number of Orders.
(a) Except as otherwise provided in this Agreement, S&N shall
place orders with Exogen for not less than the applicable minimum number of
Units (the "Minimum Number of Units") of Products set forth below for each year
commencing on August 1, 1998 and on August 1 of each year thereafter during the
term of this Agreement (each such year being referred to herein as a "Contract
Year"). The Minimum Number of Units for Contract Year 1 shall be reduced on a
pro rata basis for the period between August 1, 1998 and the date of this
Agreement.
Contract Year Tier 1 Tier 2 Requisite
Minimums Minimums Approval
Differential
Year 1 [****] [****] [****]
Year 2 [****] [****] [****]
Year 3 [****] [****] [****]
Year 4 and each subsequent year to be negotiated in good faith no sooner than 7
months and no later than 6 months prior to the expiration of the then current
Contract Year.
If the parties are unable to agree upon the Minimum Number of Units for any such
Contract Year, then this Agreement shall terminate in accordance with the
provisions of Section 14(e).
For purposes of this Agreement, a "Unit" shall consist of a main operating unit
and a transducer head but shall not include any Units covered by Sections 7(d)
and (e). S&N shall not be deemed to have "ordered" a Unit unless and until such
Unit has received reimbursement approval and has been shipped and invoiced by
Exogen (unless Exogen fails to ship such Unit in accordance with Section 7(a),
in which case such Unit shall be deemed to have been shipped in accordance with
Section 7(a)).
(b) Tier 1 Minimums shall apply commencing on the later of [****] or the
Requisite Approval Date. "Requisite Approval Date" shall mean the date on which
all of the following have occurred: (i) the Pre-Market Approval ("PMA")
Supplement for one or more of the Products for [****] fractures has been
approved by the U.S. Food and Drug Administration
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
4
<PAGE>
("FDA"), and (ii) the PMA Supplement for the Exogen 3000 Product has been
approved by the FDA, and can be marketed for [****] fresh fractures, and (iii) a
favorable national coverage policy for one or more of the Products has been
issued by the US Health Care Financing Administration ("HCFA"), (the approvals
under clauses (i), (ii) and (iii) being referred to herein as the "Requisite
Approval"). Tier 2 Minimums shall apply so long as the Requisite Approval has
not occurred.
(c) If the Requisite Approval Date occurs during Contract
Year 2, the applicable Minimum Number for Contract Year 2 and for Contract Year
3 shall be as follows:
(i) The Minimum Number for Contract Year 2 shall
equal the sum of [****]:
plus the product of (x) a fraction, the numerator of which is the number of days
occurring in Contract Year 2 after the Requisite Approval Date and the
denominator of which is 365, times (y) [****] (being the Requisite Approval
Differential for Contract Year 2 as shown in the above table).
(ii) The Minimum Number for Contract Year 3 shall
equal the sum of:
(A) The product of (A) a fraction, the
numerator of which is the number of days in Contract Year 3 ending on or before
the first anniversary of the Requisite Approval Date and the denominator of
which is 365, times (B) [****] (being the sum of the Tier 2 Minimum for Contract
Year 3 plus the Requisite Approval Differential for Contract Year 2, both as
shown in the above table); plus
(B) The product of (A) a fraction, the
numerator of which is the number of days in Contract Year 3 ending after such
first anniversary and the denominator of which is 365, times (B) [****] (being
the sum of the Tier 2 Minimum for Contract Year 3 plus the Requisite Approval
Differential for Contract Year 3, both as shown in the above table).
(d) If the Requisite Approval Date occurs during Contract
Year 3, the applicable Minimum Number for Contract Year 3 shall be the sum of
[****]:
plus the product of (x) a fraction, the number of which is the number of days
occurring in Contract Year 3 after the Requisite Approval Date and the
denominator of which is 365, times (y) [****] (being the Requisite Approval
Differential for Contract Year 2 as shown in the above table).
(e) If the applicable Minimum Number of Orders is not
achieved in any Contract Year, then, at S&N's option, S&N shall do one or a
combination of the following:
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
5
<PAGE>
(i) Within 60 days after the end of such Contract
Year, S&N shall pay to Exogen its Net Profit on the difference between the
applicable Minimum Number for such Contract Year and the actual number of Sales
of Products during such Contract Year. "Net Profit" means the average Net Sales
price to the patient or third party payor of each Product Sold in the United
States during the Contract Year, less S&N's commission and Exogen's Standard
Manufacturing Cost, multiplied by the difference between the number of units
actually sold and the Minimum Number for that Contract Year. "Standard
Manufacturing Cost" means direct materials, direct labor and factory overhead
computed in accordance with generally accepted accounting principles
consistently applied and averaged for each device on the basis of unit Sales
over the Contract Year; and/or
(ii) S&N may elect to have the Minimum Number for
the next Contract Year increased by the difference between the number of units
actually Sold under this Agreement and the Minimum Number for the applicable
Contract Year, up to 10% of the Minimum Number; or
(iii) S&N may elect to terminate this Agreement on
six months' written notice to Exogen, during which six-month period S&N shall
continue to be a sales representative for Products on a non-exclusive basis with
no obligation to meet any minimum requirement or to spend any particular amount
on marketing, advertising and promotional activities. Any election by S&N under
this Subsection (e) shall be exercised by written notice to Exogen no later than
60 days after the end of a Contract Year.
5. Prices and Terms of Sale. Products shall be offered for Sale by S&N
at such prices, discounts, allowances and on such terms of Sale as are
established by Exogen from time to time after reasonable consultation with S&N,
taking into account manufacturing, sales and marketing costs, customer demand,
and competitive factors in the marketplace. S&N shall receive at least 30 days'
advance written notice of any change in prices, discounts, allowances and terms
of Sale. Current prices, discounts, allowances and terms of Sale, which are set
forth in Exhibit B, will not be modified in any material respect prior to
December 31, 1998 without the prior written approval of S&N.
6. S&N's Responsibilities.
(a) S&N and its sales representatives and distributors shall
regularly call upon or otherwise contact physicians, trauma centers and other
organizations and individuals who are in a position to prescribe the use of
Products to their patients. Each order for a Product shall be written on an
order form to be developed jointly by S&N and Exogen, and shall be submitted
promptly to Exogen by S&N along with a physician's prescription and a letter of
medical necessity and any other information reasonably required by the
applicable third party payor.
(b) S&N shall provide reasonable follow up contact with
physicians and patients to demonstrate, explain and in-service the use of the
Products.
6
<PAGE>
(c) S&N shall submit a non-binding sales forecast to Exogen on
or prior to the first day of each calendar quarter for the next succeeding
twelve-month period. Exogen shall have the right to disapprove the forecast by
providing S&N with written notice of disapproval no later than ten (10) days
following receipt of the forecast. The forecast shall be deemed approved unless
a notice of disapproval is transmitted in accordance with this section. The
parties shall negotiate in good faith with respect to any dispute or
disagreement concerning the forecast. Such forecast shall be updated more
frequently if there is a material change in any information on which the
forecast is based.
(d) S&N shall incur costs for marketing, advertising and
promotional activities in connection with the Products of not less than [****]
during each of the first two Contract Years. Such marketing, advertising and
promotional activities shall be as agreed upon from time to time by Exogen and
S&N in the manner specified in Section 7(j).
(e) S&N shall provide a project manager for the Products at
S&N's expense. The project manager may support both the Products and other
products of S&N. The salary and benefits associated with the project manager
shall not be considered as marketing expenses for purposes of Section 6(d).
(f) S&N will use diligent efforts to integrate the Products
into its distribution structure within its Orthopaedics Division as well as
other divisions of S&N throughout the United States to enhance the distribution
channels established by Exogen and assigned to S&N as part of this Agreement.
(g) Exogen shall enter into service agreements for the benefit
of S&N with respect to other equipment, supplies and services as the parties
agree may be required or desired for S&N to satisfy its obligations under this
Agreement.
7. Exogen's Responsibilities.
(a) Except as provided in Subsection (b), Exogen shall process
all orders submitted to it by S&N and shall be responsible for pre-certifying,
arranging shipments and making collections from patients and/or their insurers.
Exogen shall use diligent efforts to supply Products in excess of the quantities
provided for on the forecast delivered under Section 6(c). Provided, however, in
no event shall Exogen be obligated to supply Products in excess of [****] of the
quantities provided for on the forecast delivered under Section 6(c) shall not
constitute a default under this Agreement. Upon receipt from S&N of the
documentation required under Section 6(a) and appropriate reimbursement
approvals under Section 6(a) of this Agreement, Exogen shall promptly (but no
later than 5 days after obtaining such documentation and approvals) ship the
Product. Shipments shall be made to S&N or directly to the prescribing physician
or patient as S&N shall direct. Each unit shipped shall be accompanied by
appropriate
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
7
<PAGE>
directions for use and a standard warranty. Exogen shall also transmit an
invoice to the patient and/or insurer, as applicable, setting forth the price,
discount or allowance, if any, and other terms of Sale. Exogen may reject orders
submitted to it by S&N only if Exogen has a good faith belief that the patient
and/or insurer may be unable or unwilling to pay the invoice submitted by
Exogen. In such a case, Exogen shall give S&N written notice within seven days
that the order has been rejected. S&N may then, at its option and on written
notice, require Exogen to fill such order and shall indicate in the written
notice whether the Units ordered are to be considered PCUs (as defined below).
If such Units are not considered PCUs and if the patient and/or insurer should
fail to pay Exogen's invoice within 150 days, S&N shall pay Exogen an amount
equal to 150% of Exogen's Standard Manufacturing Cost for the Product (less any
amount paid by such patient and/or insurer). Exogen shall thereupon assign to
S&N all of its legal rights against such patient and/or insurer with respect to
such invoice, and S&N shall be entitled to pursue such rights in its own name.
(b) S&N shall have the right to visit Exogen's manufacturing
facility and to observe the work in process and perform quality and compliance
audits during regular business hours on reasonable advance notice to Exogen. The
parties shall discuss S&N's observations and findings in good faith, and Exogen
will take any corrective actions mutually agreed to by Exogen and S&N resulting
from those good faith negotiations at Exogen's expense.
(c) Exogen will provide to S&N, at Exogen's cost, a reasonable
quantity of training materials, directions for use, advertising materials,
catalog sheets and other promotional material. Materials which refer to S&N in
any manner shall not be used or distributed without the prior written approval
of S&N.
(d) At the request of S&N, Exogen shall furnish to S&N up to
150 SAFHS fully operational demonstration units of the model requested by S&N
and 150 additional transducer heads during the first two Contract Years at no
cost to S&N.
(e) During the first two Contract Years, Exogen shall furnish
up to [****] Professional Courtesy Units ("PCUs") in the United States at no
cost to S&N. PCUs will either be designated by S&N on the orders submitted to
Exogen or designated as such in accordance with Section 5.
(f) Exogen will maintain a 24-hour a day hot line and
toll-free telephone number to respond to inquiries from physicians and patients
and will provide reasonable field service assistance as required from time to
time. Exogen will also provide other technical support for the Products,
including clinical and scientific data collected by Exogen with regard to the
use of the Products by patients.
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
8
<PAGE>
(g) Exogen will provide S&N with any changes in the plans or
specifications for existing Products or any new Product or improvement or
development no later than 60 days prior to implementing any change or
initiative. S&N shall have the right to provide comments regarding any such
change or initiative and Exogen shall consider such comments in good faith.
(h) Exogen shall perform all warranty work on Products and
shall process and refurbish all returned Products at its own cost and expense.
(i) Exogen shall incur out-of-pocket costs for marketing,
advertising and promotional activities in connection with the Products of not
less than [****] during each of the first two Contract Years. Such marketing,
advertising and promotional activities shall be as agreed upon from time to time
by Exogen and S&N and the parties shall develop an annual marketing plan and
budget which shall include, without limitation, scientific meeting support,
speaker forum activity and third-party payor marketing materials and programs.
(j) Exogen shall not pay or grant any consideration, bonus,
stock option or other benefit to any employee, distributor or sales
representative of S&N or its Affiliates, except as provided in this Agreement.
(k) Exogen will provide, during each Contract Year, up to
three 2-day training sessions at Exogen's offices, including the cost of the
trainers, facilities and equipment required for the training. Exogen shall also
reimburse S&N an amount not to exceed [****] in the aggregate during the first
two Contract Years for expenses paid or incurred by S&N for training (but in no
event including internal personnel or overhead costs of S&N). Exogen shall
reimburse S&N for any such expenses associated with training paid by S&N no
later than 30 days following receipt of S&N's invoice.
8. FDA Laws and Regulations.
(a) Exogen warrants and represents to S&N that the SAFHS
device received PreMarketing Approval ("PMA") from the FDA in October 1994, and
that a PMA Supplement for the SAFHS 2000 device was approved by the FDA in March
1997. Exogen will keep such approvals in full force and effect by filing
required supplements and annual reports with the FDA. Exogen further warrants
and represents that prior to the effective date of this Agreement, Exogen has
operated its business in the United States in compliance with all Permits (as
defined in the Master Agreement) in all material respects. Exogen has not
engaged in any practice or course of conduct, which, if continued or practiced
by S&N would result in a material breach of any law, rule or regulation.
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
9
<PAGE>
(b) Products shall be manufactured and labeled by Exogen in
accordance with the submissions it has made and the approvals it has received
from the FDA in all material respects and in accordance with all laws applicable
to the manufacture and labeling of medical devices including the rules and
regulations of the FDA and good manufacturing practices. Products or the
packaging shall indicate that the Product is manufactured by Exogen and
distributed by S&N, and the parties shall mutually agree on the artwork, layout
and presentation of company names, trade names, trademarks and logos; provided,
however, that Exogen shall have the right to review and approve in advance any
material changes to the promotional materials for compliance with FDA labeling
requirements and related regulatory issues.
(c) Exogen is currently involved in the development of the
Exogen (or SAFHS) 3000 device, in submitting a PMA Supplement with the FDA for
the Exogen (or SAFHS) 3000 device, and in submitting a PMA Supplement with the
FDA for expanded labeling for the SAFHS 2000 device for certain additional
indications. Exogen will use its diligent efforts to complete these activities
as soon as possible, and to obtain such FDA and other approvals as may be
required, in order to market in the United States the Exogen (or SAFHS) 3000
device and the SAFHS 2000 and/or 3000 device for additional indications, all at
Exogen's expense. S&N shall be kept advised of the status of the foregoing
programs.
9. HCFA Reimbursement Codes and CPT Codes. Exogen will use its diligent
efforts to obtain a favorable national coverage policy from HCFA for the
Products for the additional indications referred to above and Current Procedural
Terminology ("CPT") codes for all applications of the Products at Exogen's
expense. Exogen shall be solely responsible for verifying and using correct and
approved code numbers in all billing, reimbursement materials, labeling and
advertising and promotional material.
10. Warranty Disclaimer; Limitation of Liability.
(a) Except as specifically set forth in this Agreement, Exogen
makes no warranties to S&N with respect to the Products or any services. Exogen
disclaims all implied warranties, including warranties of merchantability and
fitness for a particular purpose.
(b) Neither Exogen nor S&N shall in any event be liable for
any loss of profits, or for any special, incidental or consequential damages
arising out of or in connection with the sale, use or performance of the
Products.
(c) In no event will Exogen be liable for: (i) damages caused
by S&N's failure to perform its covenants and responsibilities under this
Agreement and the Master Agreement, by reason of S&N's negligence or otherwise
(other than failures by S&N that are caused by Exogen's failure to perform its
covenants and responsibilities); or (ii) damages caused by repairs or
alterations to Products by S&N, its Affiliates, distributors and sales
representatives.
11. Insurance. Exogen warrants and represents to S&N that it has
products liability insurance coverage for its SAFHS devices in the amount of $3
million per occurrence and $3 million in the aggregate, and additional umbrella
coverage in the amount of $10 million
10
<PAGE>
per occurrence and $10 million in the aggregate. Exogen shall name S&N as an
additional party insured under all such policies, shall maintain such coverage
during the term of this Agreement and shall, upon request from S&N from time to
time, direct the carriers to issue certificates confirming that such coverage is
in effect.
12. Arbitration. Disputes regarding this Agreement shall be resolved
through arbitration by a single, qualified arbitrator selected by mutual
decision of the parties from three candidates furnished by the then President of
the Health Industry Manufacturers Association ("HIMA"). If the President of HIMA
is unwilling or unable to provide a list of candidates, the candidates shall be
proposed by the American Arbitration Association, Wilmington, Delaware office,
from its Large, Complex Dispute Panel. If the parties are unable to mutually
select the single arbitrator from said list, then the arbitrator shall be
selected by said American Arbitration Association, Wilmington, Delaware office.
The arbitration proceedings shall be conducted in accordance with the then
current Rules for Large, Complex Disputes of the American Arbitration
Association, or in accordance with such other rules or procedures as the
Arbitrator may specify. The arbitration shall take place in Wilmington,
Delaware. Each party will bear its own arbitration expenses plus one-half of the
arbitrator's fee. The ruling of the arbitrator shall be final and binding.
13. Assignment and Successors. Neither this Agreement nor any rights
granted hereunder may be assigned or transferred by either party except with the
prior written consent of the other party or in accordance with Section 7(b) of
the Master Agreement. Such consent shall not be unreasonably withheld, except in
the case of assignment to an Affiliate , in which case such consent shall not be
required. Any purported assignment which requires consent shall be void without
consent. Subject to the limitations on assignment herein, this Agreement shall
be binding upon and inure to the benefit of any successors and assigns of Exogen
and S&N. Any such successor or assignee of a party's interest shall expressly
assume in writing the performance of all the terms and conditions of this
Agreement to be performed by such party.
14. Effective Date, Term and Termination.
(a) This Agreement shall become effective on August 10, 1998
and shall remain in effect to and including August 9, 2008 or until the
execution and delivery of the U.S. Stocking Distribution Agreement (as such term
is defined in the Master Agreement) unless sooner terminated by mutual consent
or pursuant to Subsection 16(c).
(b) S&N shall have the right and option to renew the term of
this Agreement for successive three year terms, each upon mutually acceptable
terms and conditions. S&N shall exercise these renewal options by providing
Exogen with written notice no later than six months prior to the expiration of
the current term. The parties shall negotiate in good faith. In the event the
parties are unable to mutually agree upon such terms and conditions upon the
expiration of the initial term, S&N shall have the right to extend the term of
this Agreement for one five year period on the terms and conditions then in
effect, except that: S&N's appointment shall be non-exclusive; there shall be no
Minimum Number of Units; and S&N shall not be entitled to any improvements or
enhancements incorporated into the Products on a commercialized basis during the
five year extension term. Notwithstanding the foregoing, if any
11
<PAGE>
improvements or enhancements are incorporated into the Products on a
commercialized basis during that period, Exogen shall notify S&N in writing and
shall provide a description of the improvements or enhancements and an offer
whereby Exogen would include the improvements and enhancements under this
Agreement ("Initial Offer"). S&N shall have thirty (30) days from receipt of the
Initial Offer to accept the Initial Offer by providing written notice to Exogen.
Thereafter, the parties shall negotiate in good faith with respect to an
amendment to this Agreement which includes the improvements or enhancements as a
Product under this Agreement. If S&N does not accept the Initial Offer, then
Exogen shall be permitted to execute a sales representative or distribution
agreement with a third party provided the terms and conditions of such agreement
are no more favorable to the third party than the Initial Offer. If the terms of
the proposed agreement with a third party ("Third Party Terms") are more
favorable to the third party than the Initial Offer, then Exogen shall provide
written notice to S&N together with the Third Party Terms and S&N shall have a
period of thirty (30) days from receipt to provide written notice to Exogen that
S&N is willing to accept the Third Party Terms. If S&N provides a written
acceptance, the parties shall execute an amendment to this Agreement
incorporating the Third Party Terms. If S&N fails to accept, then Exogen shall
be permitted to enter into an agreement with the third party on the Third Party
Terms. Any dispute as to whether the Third Party Terms are more favorable to the
third party than the Initial Offer shall be decided by arbitration in accordance
with Section 12.
(c) This Agreement may be terminated at any time by either
party in the event of a material default by the other party, provided that the
party seeking to terminate the Agreement gives the other party written notice of
the default and a period of 60 days in which to cure the default. If this
Agreement is terminated pursuant to this Subsection (c), in addition to all
rights and remedies any party may have available at law or at equity, all orders
outstanding on the date of termination will be honored by Exogen and all
commissions due to S&N will be paid. If the material default is a result of
Exogen's failure to provide or supply Products in accordance with this
Agreement, S&N may elect not to terminate this Agreement, S&N shall retain all
of its rights under this Agreement and require Exogen to satisfy all other
obligations and responsibilities hereunder to the extent Exogen is able to
perform. If Exogen is not able to satisfy such other obligations and
responsibilities, S&N shall be permitted to do so.
(d) If the Agreement should be terminated because of a
material default on the part of S&N, S&N will within 60 days after the date of
termination pay to Exogen in a lump sum [****] and will assign to Exogen all
agreements relating to the Products with its distributors and, if requested by
Exogen, terminate its relationship with respect to the Transferred Employees. In
addition, S&N will allow Exogen to offer employment to all Transferred Employees
who remain employed by S&N and shall cooperate with Exogen in the transfer of
any such individuals who accept re-employment with Exogen. Provided, however,
S&N shall not be liable or responsible if Transferred Employees do not wish to
be re-employed by Exogen or elect to remain an employee of S&N. Nothing in this
Section 14(d) shall limit the rights and
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
12
<PAGE>
remedies of Exogen at law or in equity with respect to Losses (as defined in
Section 12.2 of the Master Agreement) from third party claims.
(e) If the parties are unable to agree upon the Minimum Number
of Units in accordance with Section 4(a), then this Agreement shall terminate
six months following the end of the then current Contract Year. During the six
month period S&N shall have the right to continue to be a sales representative
for Products on a non-exclusive basis with no obligation to meet any minimum
requirement or to spend any particular amount on marketing, advertising and
promotional activities. During the six month period the parties shall cooperate
in good faith to unwind this Agreement. At the end of the six month period S&N
will assign to Exogen all agreements relating to the Products with its
distributors and, at Exogen's election, terminate its relationship with respect
to the Transferred Employees. In addition, S&N will allow Exogen to offer
employment to all Transferred Employees who remain employed by S&N and shall
cooperate with Exogen in the transfer of any such individuals who accept
re-employment with Exogen. Provided, however, S&N shall not be liable or
responsible if Transferred Employees do not wish to be re-employed by Exogen or
elect to remain an employee of S&N.
15. Relationship of Parties. The parties hereto are independent
contractors. This Agreement shall not create any partnership or joint venture
relationship. Neither party has the authority, right or ability to bind or
commit the other in any way (including, without limitation, by S&N accepting
orders) and will not attempt to do so or imply that it may do so.
16. Miscellaneous.
(a) This Agreement shall be governed by the substantive law of
the State of Delaware. Any action to enforce the arbitration provisions of this
Agreement pursuant to Section 14, or any arbitration award, may be brought in
any State or Federal Court in the United States where the party is subject to
personal jurisdiction.
(b) This Agreement, together with all Exhibits attached
hereto, the Master Agreement and the other agreements contemplated by the Master
Agreement represent the entire agreement of the parties with respect to the
subject matter hereof.
(c) This Agreement may be amended only by an agreement in
writing executed by both parties.
(d) The obligations of the parties under this Agreement shall
be subject to Government regulations, significant material shortages, labor
disputes, war, embargoes, and causes beyond the reasonable control of a party.
The party whose performance is prevented or delayed as the result of any of the
foregoing shall use continuous, diligent efforts to remedy its inability to
perform.
(e) If one of the provisions of this Agreement should be
declared void or unenforceable, the remaining terms of the Agreement shall
continue in full force and effect unless such construction is unreasonable.
(f) This Agreement may be signed in one or more counterparts.
13
<PAGE>
(g) All notices shall be deemed complete on transmission by
facsimile or within ten days from the date of mailing if sent by registered or
certified mail. Notices shall be sent to the addresses set forth above unless
either party designates a different address.
[SIGNATURE PAGE TO FOLLOW]
14
<PAGE>
August 10, 1998 EXOGEN, INC.
By: /s/ Patrick A. McBrayer
-----------------------
Name: Patrick A. McBrayer
Title: President and Chief Executive Officer
SMITH & NEPHEW, INC.
By: /s/ B.J. Splan
---------------------
Name: B.J. Splan
Title: President
Healthcare Division
[SIGNATURE PAGE TO
UNITED STATES SALES REPRESENTATIVE AGREEMENT]
15
<PAGE>
EXHIBIT A
CURRENT ARRANGEMENTS
IN CERTAIN TERRITORIES
Contract Term/ Contract Executed Agency Key Contact General Territory
Change Notice
[****]
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
<PAGE>
EXHIBIT B
PRICES, DISCOUNTS, ALLOWANCES
AND TERMS OF SALE
List Price
SAFHS(R)Model 2A $2,950 (devices shipped prior to May 1997. The Company
ceased selling the model 2A in the United States
in May 1997)
SAFHS 2000(R) $3,500 (commenced commercial distribution in May 1997 in
the United States)
[****]
Standard Warranty and Return Policy
Attached is the Company's Service Agreement which outlines the Company's support
for the device while the patient is under treatment.
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Multi-Part Form - Press Hard/Use Ballpoint Pen Please sign where "x" appears and date your
signature.
EXOGEN(R), INC. Tel: 800-396-4325 & 732-981-0990
10 Constitution Ave., P.O. Box 6860, Piscataway, N.J. 08855, U.S.A. Fax: 800-836-5474
(I.R.S. Identification No. 22-3208468)
</TABLE>
- --------------------------------------------------------------------------------
SERVICE AGREEMENT
Dear Patient: Please read the entire Service Agreement. Record the main
operating unit (MOU) serial number on the bottom of this form. The serial number
is located on the backside of the MOU. Please sign both areas indicated by "X"
and return the white copy in the enclosed business reply envelope or fax a copy
to 800-836-5474. You should retain the yellow copy for your records.
Exogen, Inc. agrees to provide _______________________________________ ("USER")
with a SAFHS(R) treatment device subject to the following:
TERMS: This agreement shall become effective when signed by the User. The
agreement will continue until the attending physician determines that the
treatment is no longer necessary. The User will then ship the equipment back to
Exogen following the instructions included in the device container. All shipping
charges will be paid by Exogen.
SERVICE CHARGE: The service charge for this treatment service will be $3,500.
The User is responsible for the payment of the service charge and may assign
his/her insurance benefits to pay Exogen for the service charge. If the User
assigns his/her insurance benefits to Exogen, the User will remain responsible
for any co-payment or deductible insurance balance not paid by their insurer. If
payments are received from insurers and/or the patient in excess of the service
charge, Exogen will refund the balance to the patient or appropriate third party
insurer.
THE EQUIPMENT: The equipment is the sole property of Exogen, Inc. Exogen agrees
to maintain the equipment in proper working order at no charge to the User
except for those service costs that might result from improper use or accidental
damage to the equipment.
OBLIGATION OF THE USER: Exogen is not prescribing a course of treatment for the
User. The company merely provides instructions for the proper use of the
equipment for whatever indication is prescribed by the physician. Exogen may
terminate this agreement if the User attempts, or allows any other party to
attempt to make any unauthorized use, inspection, repair, or adjustment to, or
to make available to any other party the content, design, or mechanism of the
equipment. The User understands that the equipment is intended only for their
personal use. The User agrees to handle and use the equipment with reasonable
care. CAUTION: Federal law restricts this device to be used on the prescription
of a physician. Use is restricted to the individual for whom it is prescribed.
COLLECTING MEDICAL INFORMATION: Exogen is required by the Food and Drug
Administration (FDA) to collect certain patient, fracture and physician
information and to maintain a registry and collect follow-up data pertaining to
healing on all patients for whom SAFHS(R) therapy is prescribed. Confidentiality
of your records will be maintained and access will be limited to specific Exogen
clinical personnel and FDA employees as required. You will not be identified by
name at any time. If you do not wish to allow Exogen to collect this
information, please check the following box. |_| I will not allow Exogen to
collect information.
<PAGE>
MISCELLANEOUS: This agreement cannot be assigned by the User but is enforceable
against and binding on the User's successors and legal representative. This
agreement shall be governed by and construed in accordance with the internal law
of the State of New Jersey.
USER SIGNATURE: X ________________________________________________
(User/Parent/Guardian)
DATE: _______________
- --------------------------------------------------------------------------------
AUTHORIZATION TO RELEASE INFORMATION AND ASSIGNMENT OF INSURANCE BENEFITS TO
PROVIDER (EXOGEN, INC.)
I certify that the information given by me in applying for payment to my private
health insuring organizations and/or State Medical Assistance Program and/or
Federal Government's Medicare program is correct. I authorize the release, to
Exogen and their representatives, of any medical or other information about me
which may be required for the processing and payment of this claim with the
insuring organizations (private, State or Federal Government). I request that
payment of authorized benefits be made on my behalf and I assign the benefits
payable for the service performed by Exogen (service charge for the use of the
SAFHS(R) treatment device) to Exogen. Although I recognize that I have the
primary responsibility for contacting and submitting claims to my health
insurance organization (private, State or Federal Government), I authorize
Exogen to submit a claim to any of my insurers as may be required.
Although I may be covered by one or more insuring organizations (private, State
or Federal Government) I hereby personally assume all amounts owing for the
described services of Exogen (described in service agreement above). This
includes any amounts not paid by the insuring organization. For outpatient
services, I request that this authorization apply for the entire treatment
period:
SIGNATURE OF INSURED PARTY: X_______________________________ DATE: ___________
- --------------------------------------------------------------------------------
DEVICE APPLICATION PERFORMED BY: ___________________________ DATE: ___________
MOU SERIAL #: ______________________________________________
(located on the back of the Main Operating Unit at the bottom of the label)
<PAGE>
EXHIBIT C
POTENTIALLY TRANSFERRED EMPLOYEES
Name (L, F, M) Volume % Units [a]
[****] na [****]
[****] 16% [****]
[****] 7% [****]
[****] 8% [****]
[****] 9% [****]
[****] 9% [****]
[****] 6% [****]
[****] na [****]
[****] 9% [****]
[****] 7% [****]
[****] 6% [****]
[****] 10% [****]
[****] 13% [****]
Total 100% [****]
- ------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
<PAGE>
EXHIBIT D
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is
entered into this 10th day of August 1998, by and between Smith & Nephew, Inc.,
a Delaware corporation ("Assignee"), and Exogen, Inc., a Delaware corporation
("Assignor").
RECITALS
WHEREAS, Assignor and Assignee have entered into that certain
U.S. Sales Representative Agreement, dated the date hereof (the "Sales Rep
Agreement") by and between Assignor and Assignee, providing among other things
for the assignment by Assignor of the Distribution Agreements listed on Exhibit
A to the Sales Rep Agreement) (capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in the Sales Rep
Agreement);
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Assignment and Assumption. Assignor hereby assigns, sells,
conveys, sets over, transfers and delivers unto Assignee, effective as of the
Initial Closing Date, and Assignee hereby accepts and assumes, all of Assignor's
right, title and interest in and to all the Distribution Agreements. Except as
set forth in Section 2(a) of the Sales Rep Agreement, Assignee hereby assumes,
agrees to pay, perform and discharge when due, any liability or obligation with
respect to the Distribution Agreements arising on and after the Initial Closing
Date.
2. Entire Agreement; Amendment. This Assignment, together with
the Master Agreement and the Sales Rep Agreement, constitutes the entire
agreement and understanding between the parties hereto with respect to the
matters set forth herein, and supersedes and replaces any prior agreements and
understandings, whether oral or written, between and among them with respect to
such matters. Neither this Agreement nor any provisions hereof may be modified,
amended or waived except by the written agreement of the parties hereto.
3. Effect. Notwithstanding any other provisions of this
Assignment to the contrary, nothing contained in this Assignment shall in any
way supersede, modify, replace, amend, change, rescind, waive, exceed, expand,
enlarge or in any way affect the provisions, including warranties, covenants,
agreements, conditions, representations or, in general any of rights and
remedies, and any of the obligations and indemnifications of Assignor or
Assignee set forth in the Sales Rep Agreement or the Master Agreement nor shall
this Assignment expand or enlarge any remedies under the Sales Rep Agreement or
the Master Agreement including without limitation any limits on indemnification
specified therein. This Assignment is intended only to effect the transfer of
certain rights and obligations transferred pursuant to the Sales Rep Agreement
and shall be
<PAGE>
governed entirely in accordance with the terms and conditions of the Sales Rep
Agreement and the Master Agreement.
4. Additional Documents and Further Assurances. From time to
time after the date hereof, Assignor will execute and deliver, or cause its
affiliates to execute and deliver, to Assignee such instruments of sale,
transfer, conveyance, assignment and delivery, and such consents, assurances,
powers of attorney and other instruments as may be reasonably requested by
Assignee or its counsel in order to vest in Assignee all right, title and
interest of Assignor in and to the Distribution Agreements and otherwise in
order to carry out the purpose and intent of this Assignment.
5. Governing Law. This Assignment shall in all respects be
construed in accordance with and governed by the laws of the State of Delaware
without giving effect to its conflicts-of-laws principles (other than any
provisions thereof validating the choice of the laws of the State of Delaware in
the governing law).
6. Counterparts. This Agreement may be executed in any number
of counter parts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
[SIGNATURE PAGE TO FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first written above.
Exogen, Inc.
By: /s/ Patrick A. McBrayer
-----------------------
Name: Patrick A. McBrayer
Title: President and Chief Executive Officer
Address: 10 Constitution Avenue
P.O. Box 6860
Piscataway, NJ 08855
Facsimile Number: (732) 981-0648
Smith & Nephew, Inc.
By: /s/ B.J. Splan
------------------------
Name: B.J. Splan
Title: President, Healthcare Division
Address: 1450 Brooks Road.
Memphis, TN 38116
Facsimile Number: (901) 396-7824
<PAGE>
EXHIBIT 10.25
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT
FOR PORTIONS OF THIS EXHIBIT PURSUANT TO
RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
LICENSE AGREEMENT
THIS AGREEMENT is made this 10th day of August, 1998, between Exogen,
Inc., a Delaware corporation having an office located at 10 Constitution Avenue,
Piscataway, NJ 08855 ("Exogen"), and Smith & Nephew, Inc., a Delaware
corporation acting on behalf of its Orthopaedic Division having an office
located at 1450 Brooks Rd., Memphis, TN 38116 ("S&N").
P R E A M B L E :
WHEREAS, S&N and Exogen are concurrently herewith entering into a
Master Agreement ("Master Agreement"), United States Sales Representative
Agreement ("Sales Rep Agreement") and other agreements relating to certain
products that are covered by intellectual property owned by Exogen; and
WHEREAS, S&N seeks to obtain and Exogen has agreed to grant to S&N a
license under such intellectual property;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. DEFINITIONS
1.1. "Affiliates" has the meaning ascribed to such term in the Master
Agreement.
1.2. "Intellectual Property" as used in this Agreement shall mean all
intellectual property owned by Exogen relating to "Products" (as defined below),
including the patents, patent applications, trademark registrations and
trademark applications set forth in the attached Appendix A, together with all
patent applications or patents that are continuations, continuations-in-part,
divisional applications, reissues, extensions, or foreign counterparts thereof.
The parties agree to supplement Appendix A in order to identify all intellectual
property in all Territories covered by a Sales Rep/Distribution Agreement.
1.3. "Territory" and "Territories" shall mean any area in which S&N has
a Sales Rep/Distribution Agreement.
1.4. "Products" shall have the same meaning as ascribed to such term in
the applicable Sales Rep/Distribution Agreement.
<PAGE>
1.5 "Sales Rep/Distribution Agreement" shall mean the Rep Agreement,
U.S. Stocking Distribution Agreement, Global Stocking Distribution Agreement or
Individual Country Stocking Distribution Agreement (as such terms are defined in
the Master Agreement).
2. GRANT OF LICENSE
2.1. Exogen hereby grants to S&N and its Affiliates a royalty-free,
nonexclusive right and license under the Intellectual Property to use and sell
the Products within the Territory and to sublicense others to so do for the term
of this Agreement subject to the terms and conditions of this Agreement. The
parties acknowledge that the consideration paid by S&N to Exogen pursuant to the
Master Agreement at the Initial Closing (as defined in the Master Agreement)
shall serve as the consideration for this Agreement.
2.2. Exogen hereby grants to S&N and its Affiliates an exclusive
(except as to third party second source vendors of Exogen authorized to, from
time to time, and capable of, manufacturing the Products ( each referred to as a
"Manufacturer")) right and license under the Intellectual Property to
manufacture or have manufactured the Products and to sublicense others to so do,
in the United States and in such other territories as to which S&N then has the
right to distribute or sell Products for the term of this Agreement subject to
the terms and conditions of this Agreement. Provided, however, S&N and its
Affiliates shall be permitted to manufacture or to have manufactured the
Products pursuant to this subsection only in the event Exogen fails to provide
or supply Products in accordance with the requirements of the Sales/Rep
Distribution Agreement. S&N may begin such manufacturing commencing on the last
day of the cure period provided for in the applicable Sales/Rep Distribution
Agreement and ending on the date upon which Exogen resumes supplying Products to
S&N in accordance with the applicable Sales/Rep Distribution Agreement
("Manufacturing Term"). Exogen shall provide S&N with written notice of Exogen's
intent to resume supplying Products at least thirty (30) days prior to shipment
of the Products. S&N shall be permitted to fill orders that have been submitted
to S&N during the Manufacturing Term. During the term of this Agreement, Exogen
shall maintain one or more Manufacturers with all information, material,
technology, rights and know-how required to manufacture the finished Product
which is ready for marketing in the Territory and otherwise enable the
Manufacturer to manufacture Products. Exogen shall assign or transfer to S&N, to
the extent assignable, all contracts (or portions thereof) and rights Exogen has
with the Manufacturer with respect to the Products and otherwise assist S&N in
procuring Products from the Manufacturer. S&N shall not be obligated to satisfy
any obligation owed by Exogen to the Manufacturer. If the Manufacturer is unable
or unwilling to provide Products to S&N, Exogen shall provide S&N with all
information, materials, technology, rights and know-how required to manufacture
the finished Products ready for marketing in the Territory. At the end of the
Manufacturing Term or upon the expiration or earlier termination of this
Agreement, S&N shall reassign and retransfer the documents and rights set forth
in this section. The parties acknowledge that the consideration paid by S&N to
Exogen pursuant to the Master Agreement at the Initial Closing (as defined in
the Master Agreement) together with the "Royalty" (as defined below) shall serve
as the consideration for this Agreement. S&N shall pay Exogen a royalty
("Royalty") equal to [****] of the Net Sales (as defined in the Sales
Rep/Distribution Agreement) of Products manufactured by the Manufacturer or S&N
during the Manufacturing Term; provided, however, S&N shall not be obligated to
pay a Royalty on Net
- ------------------------------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-2-
<PAGE>
Sales of Products sold by S&N under the Sales Rep/Distribution Agreement and
manufactured under this License for a term equivalent to the period of time
commencing on the date upon which S&N provides a notice of default to Exogen and
ending on the date upon which S&N first receives Products from Manufacturer or
S&N manufacturers Products. The Royalty shall be paid quarterly within 45 days
after the end of each quarter. S&N shall keep and maintain detailed and accurate
books and records with regard to Net Sales of Products and the calculation
thereof. Exogen shall be entitled to review and audit such books and records
from time to time during normal business hours upon reasonable notice to S&N and
at Exogen's expense for the sole purpose of determining the accuracy of the
Royalty payment calculation. S&N shall remit to Exogen the amount of any
underpayment and interest thereon calculated at the rate of one percent (1%) per
month, calculated from the dates that the relevant payments should have been
made.
2.3. Exogen and S&N (or its relevant Affiliates) shall execute a
license or licenses in such other form or forms as may be necessary to give
effect to this Agreement in any country where such is required to conform with
the laws of any such country in respect of the Intellectual Property and such
license or licenses shall be subject to all the terms and conditions of this
Agreement.
2.4. All rights and licenses granted by Exogen to S&N under or pursuant
to this Agreement are and shall otherwise be deemed to be, for the purposes of
Section 365(n) of the United States Bankruptcy Code (the "Bankruptcy Code"),
licenses or rights to "intellectual property" as defined under Section 101(35A)
of the Bankruptcy Code or a "supplementary agreement" (as that term is used in
the Bankruptcy Code) to such licenses and grants of intellectual property
rights. Without limiting any of the other rights granted to S&N hereunder, all
of the rights of S&N and obligations of Exogen hereunder shall also apply from
the date a bankruptcy petition is filed by or against Exogen to the date this
Agreement is rejected; it being the intent of the parties that this Agreement
also grants S&N all of the rights, and imposes upon Exogen and the Exogen
bankruptcy estate all of the obligations, referenced in Section 365(n)(4) of the
United States Bankruptcy Code.
3. MARKING
If S&N exercises its rights under Section 2.2 of this Agreement to
manufacture or have manufactured the Products, S&N agrees that it will mark its
product with the appropriate patent number in accordance with the patent laws
within the Territory in which the Products are sold and will otherwise comply
with the FDA labeling, product labeling and other requirements of S&N pursuant
to the Master Agreement and the Sales Rep/Distribution Agreement.
4. TERM AND TERMINATION
4.1. The term of this Agreement shall commence upon the date first
above written. This Agreement shall continue in effect in a Territory as long as
the Sales Rep/Distribution Agreement is effective in that Territory. If,
however, the Sales Rep/Distribution Agreement
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<PAGE>
terminates for a reason other than a breach by S&N, then the term of this
Agreement shall be for the remaining term (including renewal options) of the
Sales Rep/Distribution Agreement if the same had not terminated.
4.2. S&N shall have the right to terminate this Agreement at any time
and for any reason upon providing Exogen thirty (30) days' written notice of its
intention to terminate.
5. NOTICES
All notices under this Agreement shall be in writing and shall be deemed given
if delivered in accordance with the terms of the Master Agreement.
6. REPRESENTATIONS AND WARRANTIES
6.1. Exogen warrants and represents that it has full right, power, and
authority to enter into this Agreement and to license such Intellectual Property
to S&N.
6.2. S&N warrants and represents that it has all requisite right and
power to enter into this Agreement and perform its obligations hereunder.
6.3. Exogen warrants and represents that, except as set forth on
Schedule 8 to the Master Agreement, the Intellectual Property is free and clear
of all liens, claims, encumbrances and interests. Exogen shall not, without the
prior written approval of S&N, which approval shall not be unreasonably
withheld, sell, transfer, convey, pledge or otherwise encumber the Intellectual
Property or any Intellectual Property developed in the future relating to
Products; provided, however, that Exogen shall not be precluded from granting a
security interest in substantially all of its assets in connection with
obtaining a loan or line of credit or similar financing from one or more
financial institutions, provided Exogen delivers an effective and legally
binding agreement from the secured party wherein the secured party agrees to
subordinate its claims and interests to those of S&N and not to disturb,
terminate or modify any rights S&N may have with respect to any security or
collateral if the secured party exercises rights with respect to such security
or collateral.
6.4. Except as specifically set forth in this Agreement, Exogen makes
no warranties to S&N with respect to the Products or any services. Exogen
disclaims all implied warranties, including warranties of merchantability and
fitness for a particular purpose.
6.5. Neither Exogen nor S&N shall in any event be liable for any loss
of profits, or for any special, incidental or consequential damages arising out
of or in connection with the sale, use or performance of the Products.
7. SEVERABILITY
If any provision of this Agreement shall be determined by a court of
competent jurisdiction to be unenforceable, invalid or illegal for any reason,
the other provisions shall be equitably modified by the parties so as to
accomplish as closely as possible the original intent of the parties.
-4-
<PAGE>
8. AMENDMENT AND WAIVER
This Agreement may be amended only by an agreement in writing executed
by both parties. The failure of either party to require the performance of any
term of this Agreement, or the waiver by either party of any breach under this
Agreement, shall not prevent a subsequent enforcement of such term or be deemed
a waiver of any subsequent breach.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the state of Delaware.
10. ENTIRE AGREEMENT
This Agreement, together with the agreements referred to herein,
contains the entire agreement of the parties with respect to the subject matter
hereof and may not be changed, modified or rescinded except by a written
instrument executed by all parties hereto.
[SIGNATURE PAGE TO FOLLOW]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties, intending to be legally bound, have
executed this Agreement as of the day and year first above written.
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
-----------------------
Name: Patrick A. McBrayer
Title: President and
Chief Executive Officer
SMITH & NEPHEW HOLDINGS, INC.
By: /s/ Larry W. Papasan
---------------------
Name: Larry W. Papasan
Title: President
Orthopaedic Division
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<PAGE>
APPENDIX A
U.S. AND FOREIGN PATENTS,
TRADEMARKS AND APPLICATIONS
(L) indicates license
<TABLE>
<CAPTION>
PATENTS
Index No. Number Country Status Issued (Filing) Inventor(s) Description
Date
Ultrasound
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1* 4530360 USA Issued 7/23/85 Duarte Method for Healing Bone
Fractures by Ultrasound
2 5003965 / USA Issued 4/2/91 Talish / Medical Device for Ultrasonic
8042 Lifshey Treatment of Living Tissue
and/or Cells
2A 1328485 / Canada Issued Talish / Medical Device for Ultrasonic
8042 Lifshey Treatment of Living Tissue
and/or Cells
3 5186162 / USA Issued 2/16/93 Talish / Ultrasonic Transducer Device
0089 Lifshey for Treatment of Living
Tissues and/or Cells
4 5211160 / USA Issued 5/18/93 Talish / Ultrasound Orthopaedic
0090 Lifshey Treatment Head and Body -
Mounting Means Therefor
5 5520612 / USA Issued 5/28/96 Winder / Acoustic System for Bone
4031 Talish / Ryaby Fracture Therapy
5A Kokai # Japan Published 12/17/96 Winder / Acoustic System for Bone
8-332209 Talish / Ryaby Fracture Therapy
601-11J
(Cross
Reference:
Section 28)
5B 080390 4031 Taiwan Issued 8/11/96 Winder / Acoustic System for Bone
Talish et al Fracture Therapy
6 5556372 / USA Issued 9/17/96 Talish / Apparatus for Ultrasonic Bone
601-8 Ryaby et al Treatment (SAFHS 2000(R))
6B Pub. EPO Published 12/03/97 Talish / Apparatus for Ultrasonic Bone
#0-809-470 Ryaby et al Treatment (SAFHS 2000(R))
601-8 PCT/EPO
</TABLE>
- -------------
* Patent Term Extension under 35 USC#156: Filed 12/5/94; Extension received
5/31/96; term extension --5 years to 11/12/2007.
-i-
<PAGE>
<TABLE>
<CAPTION>
Index No. Number Country Status Issued (Filing) Inventor(s) Description
Date
<S> <C> <C> <C> <C> <C> <C>
6F Kokai Japan Published 9/17/96 Talish / Acoustic System for Bone
#8-238284 Ryaby et al Fracture Therapy
601-8 Japan
7 5626554 / USA Issued 5/6/97 Ryaby / Gel Containment Structure
601-4 Talish /
McCabe
8 5755746 USA Issued 5/26/98 Talish / Locator Method & Apparatus
601-3FWC Lifshey
8B Pub. EPO Published 12/12/97 Talish / Locator Method & Apparatus
#0-810-844 Lifshey
601-3 PCT/EPO
8D PCT/US95-1 China Published 3/14/98 Talish / Locator Method & Apparatus
96742.I #CN-1175195A Lifshey
601-3
PCT/China
9 5762616 601-7 USA Issued 6/9/98 Talish Apparatus for Ultrasonic
Treatment of Sites
Corresponding to the Torso
9A PCT/US97 PCT Published 9/18/97 Talish Apparatus for Ultrasonic
WO97 / 33649 Treatment of Sites
601-7 PCT Corresponding to the Torso
11 D380440 601-9 USA Issued 7/1/97 Talish / Ultrasonic Transducer Housing
Ryaby / (Design Patent)
Urgovitch
11A Reg. # Japan Registered 8/29/97 Talish / Ultrasonic Transducer Housing
998899 601-9J Urgovitch / (Japanese Design Patent)
Scowen / Ryaby
12* 5730705 USA Issued 3/24/98 Talish / Ultrasonic Treatment for Bony
661905 601-13 Ryaby / Ingrowth
Tanzer / Bobyn
25A WO98 / 10729 PCT Published 3/19/98 Talish Cast Punch
601-19 PCT
28 Kokai Japan Published (10/28/97) Winder / Acoustic System for Bone
#9-276352 Talish / Ryaby Fracture Therapy
601-47 PCT
Japan
(Cross-reference:
Section 5A)
</TABLE>
- -------------
*Co-owned between Exogen, Inc. and inventors.
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Mechanical Strain
2 (L) 5273028 / USA Issued 12/28/93 McLeod / Rubin Non-Invasive Means for
3009 In-Vivo Bone Growth
Stimulation
2A (L) 183314 Mexico Issued 5/23/93 McLeod / Rubin Non-Invasive Means for
1450-002 In-Vivo Bone Growth
Stimulation
2C (L) 667113 Australia Issued 5/26/93 McLeod / Rubin Non-Invasive Means for
2030/3009 In-Vivo Bone Growth
Stimulation
3 (L) 5376065 3018 USA Issued 12/27/94 McLeod / Rubin Non-Invasive Method for
In-Vivo Bone Growth
Stimulation
4 (L) 5103806 2025A USA Issued 4/14/92 McLeod / Rubin Method for the Promotion of
Growth, Ingrowth & Healing of
Bone Tissue & Prevention of
Osteopenia by Mechanical
Loading of the Bone Tissue
5 (L) 5191880 2025B USA Issued 3/9/93 McLeod / Rubin Method for the Promotion of
Growth, Ingrowth & Healing of
Bone Tissue & Prevention of
Osteopenia by Mechanical
Loading of the Bone Tissue
Other
1 (L) 4993413/ USA Issued 2/19/91 McLeod / Electromagnetic: Method and
2032 Rubin Apparatus for Inducing a
Current and Voltage in Living
Tissue
2 4719907 USA Issued 1/19/88 Banko Orthopedic Pin Placement Guide
3.0-001
PATENT APPLICATIONS
Index No. Number Country Status Issued (Filing) Inventor(s) Description
Date
</TABLE>
[****]
- ---------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
-iii-
<PAGE>
<TABLE>
<CAPTION>
TRADEMARKS
Index No. Number Country Status Issued (Filing) Trademark
Date
<S> <C> <C> <C> <C> <C>
1 650974 10.1-002 USA Registered 11/3/87 SAFHS(R)
1A 7-112401 / Japan Listed (10/31/95) SAFHS(R)
10.1-002J
1B 548993 / Canada Registered 4/10/92 SAFHS(R)
10.1-002C Mexico
2 74/530521 USA Registered 7/11/95 EXOGEN(R)
10.1-008
3 720034 / USA Registered 7/16/96 SAFHS 2000(R)
10.1-009
3A 7 / 111521 / Japan Listed (10/30/95) SAFHS 2000(R)
10.1-009J
<CAPTION>
TRADEMARK APPLICATIONS
Index No. Number Country Status Issued (Filing) Trademark
<S> <C> <C> <C> <C> <C>
Date
2A 7-111520 / Japan Pending (10/30/95) EXOGEN(R)
10.1-011J
3A 7 / 111521 / Mexico Pending (10/30/95) SAFHS 2000(R)
10.1-009J Canada Pending
4 317,761 Exogen USA Pending (7/1/97) EXOGEN 2000(TM)
10.-007
</TABLE>
