PROCESSING AGREEMENT BETWEEN MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC. BIOCON, INC. AND OSTEOTECH, INC. December 22, 2004

Page       

1.

DELIVERY AND PROCESSING OF TISSUE

6

1.1

BONE AND RELATED TISSUES SUPPLIED BY MTF

6

1.2

VOLUME AND FORECASTS

11

1.3

DONOR RECORDS

11

1.4

PROCESSING

12

2.1

Title

14

2.2

Storage

14

2.3

Shipping

14

2.4

Distribution

15

2.5

Joint Regulatory Compliance, Recalls and Labeling

15

2.6

Liability

16

2.7

Records and Reports

18

2.8

New Product Development

19

2.9

Publication and Public Disclosure

20

2.10

Certain Acquired Tissue

20

3.

FINANCIAL TERMS

22

3.1

Fees For the Processing of Base Tissue Products

22

3.2

Suggested End User Prices

22

3.3

Invoicing, Payment and Collection For Base Tissue Products

22

3.4

***

22

3.5

End User Billing and Collection for Proprietary Products

22

3.6

Maximum Inventory Level

23

3.7

Confidentiality of End User Information

24

4.

CONFIDENTIALITY

25

5.

TERM OF AGREEMENT

26

6.

TERMINATION

26

6.1

Breach or Insolvency

26

6.2

Certain Third Party Agreements

27

6.3

Non-Compliance With FDA Regulations

27

6.4

Termination of MTF-ARC Agreement

27

7.

INSURANCE

27

8.

FORCE MAJEURE

28

9.

BINDING AGREEMENT; ASSIGNMENT

28

11.

NOTICES

30

12.

ENTIRE AGREEMENT

31

13.

MODIFICATION

31

14.

APPLICABLE LAW

31

15.

WAIVER

31

16.

INDEPENDENT CONTRACTOR

31

17.

SEVERABILITY

31

18.

SUCCESSORS

32

EXHIBIT 1

YIELD CALCULATION METHODOLOGY

EXHIBIT 2.8

SPECIALTY PRODUCTS

EXHIBIT 2.10

MTF STICKER FOR ARC LABELED TISSUE

EXHIBIT 3.1

PROCESSING FEES

EXHIBIT 3.2

SUGGESTED END USER PRICES

(a)

Age and Gender. The average age of such Donors shall be within two years of the average age of donors retained by MTF and shall have a substantially equivalent male to female ratio as donors retained by MTF.

(b)

Suitability for bio-implants. At least *** of such Donors shall be equivalent to donors retained by MTF for processing into bio-implants for each year of the Term. The intent is that such Donors shall be substantially the same as donors retained by MTF for processing into bio-implants which are promoted and/or distributed by Synthes Spine LP. Furthermore, the intent is to meet Osteotech’s specifications for Donors suitable for Processing into bio-implants as such specifications are provided from time to time by Osteotech to MTF.

(c)

Younger Donors. No more than *** of all Donors will be ages *** at the date of death.

(d)

Donor Composition. Tissue from the typical Donor delivered to Osteotech by MTF shall consist of *** and such number of *** with *** as shall equal the average number of *** and *** with *** and *** as are recovered from donors retained by MTF during the preceding 12-month

(e)

Donor Consent. All Donors shall be governed by consents, obtained prior to recovery in accordance with the Recovery Standards, that permit the Processing of Tissue from such Donors as contemplated under this Agreement.

1.

DELIVERY AND PROCESSING OF TISSUE

1.1

Bone and Related Tissues Supplied by MTF

(a)

Minimum Donor Requirement. Subject to adjustment based on Actual Yield pursuant to Section 1.1(f), MTF shall exercise its best efforts to deliver to Osteotech for Processing no less than *** Donors per month during the Term (the “Minimum Donor Requirement”). For purposes of this Agreement a Donor shall be deemed to be delivered to Osteotech by MTF when Osteotech determines in good faith that the Donor has been recovered in accordance with the Recovery Standards and is able to be released for Processing. Osteotech shall use its best efforts to make such determination promptly after receipt of the Donor from MTF. The Donors to be delivered by MTF to meet the Minimum Donor Requirement in this Agreement shall be in addition to any donors MTF shall be required to deliver to Osteotech pursuant to the MTF Processing Agreement. The Donors delivered by MTF to Osteotech under this Agreement shall be clearly identified as such by MTF and their status as Donors shall be maintained by both parties throughout Processing and Distribution (if applicable). Except as otherwise specified in this Agreement, Donors shall be governed only by the terms of this Agreement and not any other agreement, including without limitation the MTF Processing Agreement.

(b)

Average Donor Profile; Donor Characteristics. Donors delivered by MTF in satisfaction of the Minimum Donor Requirement shall conform to the Average Donor Profile calculated on an average basis over all Donors delivered in any calendar year. Osteotech shall have the right on reasonable prior notice to MTF and at Osteotech’s sole expense to have an independent third party reasonably acceptable to MTF audit MTF’s compliance with the foregoing provisions regarding MTF’s achievement of the Average Donor Profile. MTF shall cooperate with such audit and shall provide such third party with such information as it shall request in order to conduct such audit. Osteotech shall be entitled to exercise such audit right no more than once per year Osteotech shall have the right to reject all Tissue from any particular Donor delivered to it pursuant to this

(c)

Donor Planning. Notwithstanding anything to the contrary contained in this Agreement, commencing on the Effective Date and for the remainder of the Term, Osteotech shall be responsible for planning Donors for Processing that are delivered by MTF to Osteotech in order to satisfy the Minimum Donor Requirement, as needed to produce Proprietary Products. Such planning shall be based upon Osteotech’s forecasted market needs solely with respect to Donors delivered in accordance with the Minimum Donor Requirement, and such plans shall be provided to MTF in good faith and on a quarterly basis at least 30 days prior to the quarter in which such forecast shall apply. MTF acknowledges that such planning by Osteotech shall be conducted with a priority on meeting the forecasted market demand of Proprietary Products first, with Base Tissue Products a secondary consideration. After each Donor is planned by Osteotech to meet the forecasted demand for Proprietary Products, Osteotech shall use its best efforts to follow the Donor master plan provided by MTF with respect to such Donor in order to plan the remainder of such Donor for Base Tissue Products. Osteotech acknowledges that MTF has certain commitments to its member recovery organizations to give priority in certain circumstances to member demands for Base Tissue Products currently Processed by Osteotech and Osteotech agrees to use its best efforts to follow MTF’s direction, as reflected in Donor master plans, to respond to such member priority demands as long as Processing of Proprietary Products is not disrupted.

(d)

Soft Tissue Products. Osteotech shall use its best efforts to Process the soft Tissue Products associated with any and all Donors delivered to Osteotech in accordance with specifications for such soft Tissue Products that are in place as of the Effective Date based upon the Donor master production plan submitted by MTF to Osteotech. In the event any such 

(e)

Additional Donors. Osteotech is not required to accept Donors for Processing in excess of the Minimum Donor Requirement and the terms for delivery, planning, and Processing of any such excess Donors must be agreed to in advance by the parties.

(f)

Changes in Minimum Donor Requirement. If the Actual Yield for any calendar quarter during the Term of this Agreement is less than the Minimum Yield, the Minimum Donor Requirement for each month during the next calendar quarter shall be reduced in accordance with Exhibit 1 subject to being increased (up to the original Minimum Donor Requirement) in subsequent quarters in accordance with Exhibit 1 if Actual Yield is increased. No downward adjustment of the Minimum Donor Requirement shall be made if the Actual Yield is below the Minimum Yield during a quarter to the extent there shall have occurred a shortfall in the Minimum Donor Requirement or non-compliance with the Average Donor Profile.

(g)

Cancellous Chip Yield. Osteotech shall use its best efforts to return cancellous chips to MTF Processed by Osteotech from MTF Tissue at a rate such that in each rolling three month period during the Term MTF shall receive, on average, *** of cancellous chips per Donor (the “Required Cancellous Chip Yield”).

(h)

Minimum Donor Requirement Shortfall. If for any reason MTF fails to deliver the number of Donors required in order to satisfy the Minimum Donor Requirement in a month and fails to make up any such shortfall in the next succeeding month such that the number of Donors delivered to Osteotech in such next succeeding month shall equal such shortfall plus

(i)

Compliance With Processing and Recovery Standards. The Tissue from Donors delivered by MTF and Processed by Osteotech, and the ARC Tissue which MTF re-releases to Osteotech for Processing, shall conform to the Processing Standards and the Recovery Standards. MTF and Osteotech shall provide each other a copy of its SOPs and copies of any material amendments to its SOPs promptly after such amendments are adopted; provided, however, that doing so will not require such party to disclose any trade secrets, technical know how or unpublished scientific data or technical art. If interpretation of the Standards is required or if there is a disagreement about the interpretation of the Standards, MTF and Osteotech will attempt to negotiate a resolution in good faith. If such interpretations or disagreements are not resolved by the parties, the parties will mutually agree upon a third party who will assist the parties in arriving at a resolution. In the event the FDA, any other applicable regulatory agency or the AATB implements new or additional regulations applicable to Tissue, the parties shall implement such changes to their respective SOPs as are necessary to comply with such regulations in respect of all Tissue. In the event FDA has determined (after any good faith appeal of such determination by the applicable party) that either party has failed to implement such changes in respect of Tissue by the effective date of such changes, the other party shall have the remedy set forth in Section 6.3.

(j)

Serology Testing. MTF shall be responsible for the performance of all serology testing on Tissue from each Donor procured by MTF and delivered to Osteotech pursuant to this Agreement which shall be performed by a laboratory certified by the Centers for Medicare and Medicaid Services under the Clinical Laboratory Improvement Amendments of 1988. The results of such tests will be forwarded to Osteotech promptly in accordance with the Standards or, in lieu of such records, summary sheets acceptable to both parties. In addition, if MTF becomes aware of adverse test results from tests performed by another party (e.g. eye bank, etc.) on tissue or organs obtained from a Donor procured by MTF and delivered to Osteotech pursuant to this Agreement, MTF shall notify Osteotech of such test results promptly after MTF becomes aware of such test results.

(k)

Reciprocal Audit Rights.

(i)

Annual Audit. Upon reasonable notice and at its own expense, each of the parties shall have the right to conduct an annual audit of the other party’s facilities and records related to regulatory compliance and, in the event there are repeated significant defects in such other party’s compliance with its SOPs or any applicable Standards, each party may conduct such additional audits of such other party’s facilities and records related to regulatory compliance as are reasonably necessary to ensure that such defects have been rectified. Absent material circumstances unique to this Agreement, any audits conducted under this Agreement shall be consolidated with audits conducted under the MTF Processing Agreement and shall not be in addition to the audits conducted thereunder. Notwithstanding the foregoing, in any such audit the auditing party will be entitled to review the other party’s records only to the extent such records relate to MTF and ARC Tissue.

(ii)

Access to Osteotech Facilities. Osteotech will grant designated MTF personnel access to its facilities to observe all steps of Processing for the purpose of conducting a standard MTF inspection (pursuant to this Section 1.1(k)) of Osteotech’s compliance with the Processing Standards applied to MTF and ARC Tissue. As part of this inspection, all such Processing Standards will be made available to the inspectors; provided, that such access will not require Osteotech to reveal any proprietary know-how or trade secrets unless it is necessary to MTF’s understanding of whether Osteotech is in compliance with such Processing Standards and to the extent applicable to Osteotech, the Recovery Standards, and then, in such case, such proprietary know-how and trade secrets shall be revealed only to a mutually agreeable third party. Such third party will have access to such proprietary know-how and trade secrets only if it signs a confidentiality agreement satisfactory to Osteotech. If such personnel require access to Osteotech’s clean rooms, the personnel must have on file with Osteotech appropriate blood serum test results and such other appropriate test results as Osteotech may require prior to such personnel being granted access to Osteotech’s clean rooms. Osteotech may, in its reasonable discretion, refuse any individual access to Osteotech’s clean rooms for cause. Such denial of access will not be a violation of this Agreement.

(iii)

Access to MTF Facilities. MTF will grant designated Osteotech personnel access to its facilities to observe MTF’s Tissue recovery activities for the purpose of conducting a standard Osteotech inspection of MTF’s compliance with the Recovery Standards and, to the extent applicable to MTF, the Processing Standards pursuant

1.2

Volume and Forecasts

(a)

Roles of MTF and Osteotech. MTF shall procure, store and, in the case of Base Tissue Products, distribute all Tissue covered by this Agreement in a manner that assures that such Tissue will conform to the Standards, and shall deliver such Tissue to Osteotech as necessary to meet the Minimum Donor Requirement. Osteotech shall Process, store and, in the case of Proprietary Products, Distribute all Tissue covered by this Agreement in a manner that assures that such Tissue will conform to the Standards, and shall deliver all Base Tissue Products to MTF as required in this Agreement.

(b)

Production Meetings. Osteotech will arrange with MTF to hold regular production meetings to discuss the forecasts and other processing issues related to the Donors delivered under this Agreement.

1.3

Donor Records

(a)

Maintenance of Records. As they relate to MTF Tissue and ARC Tissue, MTF will obtain and maintain (or in the case of ARC Tissue, have access to) all: (i) necessary books, records, and other data required under the Recovery Standards of MTF (including without limitation donor medical history, donor life style information, serology and blood culture testing); (ii) inventory records of MTF Tissue and inventory records of Processed Base Tissue Products received by MTF from Osteotech pursuant to this Agreement; and (iii) all end user orders received from MTF’s customers who utilize the Base Tissue Products Processed by Osteotech pursuant to this Agreement. Osteotech will maintain all (x) necessary books, records,

(b)

Records Requested by Regulatory Authorities. Each party shall also obtain and forward to the requesting governmental regulatory agency, in English, such records, within the requisite time period, as may be necessary to satisfy all Standards applicable to activities performed by such party under this Agreement.

(c)

Records Delivered to Osteotech. MTF shall obtain and forward to Osteotech, in English, such records, within the requisite time period, as may be reasonably necessary to satisfy all of the Processing Standards relating to MTF Tissue and ARC Tissue, including, but not limited to, Donor medical history, Donor life style information, and all Donor testing information or, in lieu of such records, summary sheets acceptable to both parties.

(d)

Records Necessary to Comply with Inspection of MTF. In the event any regulatory agency audits or otherwise inspects MTF’s facilities or records and requires information maintained by Osteotech relating to the Processing of MTF Tissue or ARC Tissue by Osteotech, Osteotech will provide MTF with such information in Osteotech’s possession as is necessary to satisfy any such request by any such regulatory agency.

(e)

Records Necessary to Comply with Inspection of Osteotech. In the event any regulatory agency audits or otherwise inspects Osteotech’s facilities or records and requires information maintained by MTF relating to the recovery, screening and testing of MTF Tissue or ARC Tissue, MTF will provide Osteotech with such information in MTF’s possession (or in the case of ARC Tissue to which it has access) as is necessary to satisfy any such request by any such regulatory agency.

1.4

Processing

1.4.1

Compliance With Processing Standards

1.4.2

Processing Considerations

(a)

Changes to Processing Standards. Osteotech may present valid evidence to MTF if Osteotech determines that FDA, AATB or

(b)

Consistent Donor and Processing Flow. The parties shall undertake best efforts to manage a consistent flow of Donors from delivery through Processing with the goal of minimizing end-of-month bunching of donors. Subject to the foregoing sentence, donors received at Osteotech for Processing will be Processed within a reasonable period of time (which shall be reviewed at the regular production meetings provided for in Section 1.2(b)) after (i) all related required Donor documentation is received at Osteotech, (ii) such documentation has been reviewed by Osteotech’s Quality Assurance Department and/or Regulatory Affairs Department and (iii) such documentation has been found by such department or departments, as the case may be, to be complete in every respect and to otherwise meet the requirements of the Processing Standards. Once Processing of the Donor is complete, all Base Tissue Products will be shipped to MTF upon final inspection and release thereof by Osteotech’s Quality Assurance Department within a reasonable time after such final inspection and release is complete.

(c)

Delay of Release. If the release of Base Tissue Products back to MTF is delayed due to: (i) Tissue histology of unknown etiology or (ii) microbial contamination of final product, Osteotech will immediately notify MTF of the reason for the hold and the approximate time period expected for the hold (in weeks).

(d)

Quality Assurance; Rework of Tissue. Osteotech will maintain a quality assurance program whose goal is to achieve zero defect processing. To the extent there are rejects of MTF Tissue, it is Osteotech’s goal that such rejects of MTF Tissue be no more than an average of *** of MTF Tissue Processed per Donor. All rejected MTF Tissue that can be reworked, will be reworked in accordance with the Processing Standards and returned to MTF (in

2.

Title, Storage, Shipping, distribution, indemnification, Regulatory Compliance and Labeling

2.1

Title

2.2

Storage

(a)

Storage of Proprietary Products. Osteotech shall store all Proprietary Products released by Osteotech awaiting shipment. Such storage shall be in compliance with all applicable portions of the Processing Standards.

(b)

Destruction of Stored Tissue. In the event that MTF Tissue which is being Processed by Osteotech or held by Osteotech in “quarantine storage,” “pre-processing storage,” or “post-processing storage” (as such terms are defined or described in the applicable portions of the Processing Standards) is destroyed or rendered unusable while in the possession of Osteotech due to the negligence of Osteotech, Osteotech shall pay, as the case may be, to MTF the following amounts: (i) in the case of Base Tissue Products which have already been Processed at the time of such destruction or damage, *** (ii) in the case of MTF Tissue which has not yet been Processed at the time of such destruction or damage and would be Processed by Osteotech into Base Tissue Products, *** (iii) in the case of Proprietary Products which have already been Processed at the time of such destruction or damage, *** and/or (iv) in the case of MTF Tissue which has not yet been Processed at the time of such destruction or damage and would be Processed by Osteotech into Proprietary Products, ***

2.3

Shipping

2.4

Distribution

2.5

Joint Regulatory Compliance, Recalls and Labeling

(a)

Joint Regulatory Compliance. Each party shall comply with regulatory requirements applicable to its activities under this Agreement. Without limiting the foregoing, Osteotech shall be responsible for obtaining and maintaining regulatory approvals for Proprietary Products Processed and Distributed hereunder. In instances where the party’s compliance responsibilities overlap, or where otherwise necessary and appropriate, each party shall use its best efforts to cooperate with and assist the other party in such other party’s regulatory compliance activities. If a difference arises as to (i) which party is responsible for meeting a particular regulatory compliance responsibility or (ii) joint compliance responsibilities, MTF and Osteotech will attempt to negotiate a resolution in good faith. If the difference is not resolved by the parties, MTF and Osteotech will agree upon a third party who will assist the parties in arriving at a resolution.

(b)

Recall of Base Tissue Products. In the event of any recall (either voluntary or mandated by FDA) of Base Tissue Products Processed under this Agreement, MTF shall be responsible for carrying out such recall, provided that Osteotech shall reimburse MTF for the costs of such recall if such recall is made necessary by Osteotech’s failure to comply with the Processing Standards with respect to such Tissue or Osteotech’s negligence in Processing such Tissue.

(c)

Recall of Proprietary Products. In the event of any recall (either voluntary or mandated by FDA) of Proprietary Products Processed under this Agreement, Osteotech shall be responsible for carrying out such recall, provided that MTF shall reimburse Osteotech for the costs of such recall if such recall is made necessary by MTF’s failure to comply with the Recovery Standards with respect to such Tissue or MTF’s negligence in recovering such Tissue.

(d)

Labeling. Containers of finished units of Base Tissue Products must bear a standard MTF label, approved by Osteotech and MTF, that contains the product name and identity code, donor number and expiration date. Containers of finished units of Proprietary Products must bear a standard

(e)

Labeling Costs. Osteotech shall bear the costs of producing labels, packaging and inserts in conformance with this Section 2.5. If the labels and/or package inserts are changed by request of ▇▇▇, ▇▇▇ will bear the costs of these changes, including label inventory replacements. Osteotech shall maintain no more than six months of label and package insert inventory by tissue type.

(f)

Labeling Standards. All labeling will be in accordance with Section 2.5(d) and the Standards.

(g)

Tissue Specifications. Specifications for all Base Tissue Products to be Processed from Donors will be developed by MTF and approved according to MTF SOPs and, as applicable, Osteotech SOPs. Specifications for all Proprietary Products to be Processed from Donors will be developed by Osteotech and approved according to Osteotech SOPs and, as applicable, MTF SOPs. Requests to Osteotech about its ability to comply with special specifications with respect to Base Tissue Products will be made in writing by MTF and will receive a written response from Osteotech within a reasonable period of time. Requests by MTF for labeling changes, including package inserts, will be responded to by Osteotech in writing within 10 business days indicating its ability to accomplish the changes.

2.6

Liability

(a)

Indemnification by Osteotech. Osteotech agrees to defend, hold harmless, and indemnify MTF and its member organizations against any damages, litigation costs, losses, obligations, liabilities, claims, actions or causes of action sustained or suffered by MTF or any of its member organizations arising from (i) a breach or default by Osteotech of any of its representations, warranties or covenants contained in this Agreement; (ii) a defect in any finished unit of MTF Tissue Processed by Osteotech under this Agreement to the extent such defect results from an error or omission by Osteotech (including any employee or agent of Osteotech or other person to whom Osteotech has delegated any Processing or Distribution activities or any Processing or Distribution-related activities hereunder) including without limitation any testing performed by or at the direction of Osteotech, or from a failure of workmanship by Osteotech; (iii) any medical claim made by any employee or authorized agent of Osteotech regarding any MTF Tissue Processed or Distributed by Osteotech pursuant to this Agreement (A) which is required by applicable laws or regulations to be approved by a relevant regulatory agency and has not been so approved and/or (B) which is not supported by credible objective scientific evidence; or (iv) a false and misleading representation made by any

(b)

Indemnification by MTF. MTF agrees to defend, hold harmless, and indemnify Osteotech against any damages, litigation costs, losses, obligations, liabilities, claims, actions or causes of action sustained or suffered by Osteotech arising from (i) a breach or default by MTF of any of its representations, warranties or covenants contained in this Agreement; (ii) a defect in any finished unit of MTF Tissue Processed by Osteotech under this Agreement to the extent such defect results from an error or omission by MTF (including any employee or agent of MTF or other person to whom MTF has delegated any MTF Tissue recovery or distribution activities or any MTF Tissue recovery or distribution-related activities hereunder), in connection with its MTF Tissue recovery or distribution activities, including without limitation any testing performed by or at the direction of MTF; (iii) any medical claim made by any employee or authorized agent of MTF regarding any MTF Tissue Processed or Distributed by Osteotech pursuant to this Agreement (A) which is required by applicable laws or regulations to be approved by a relevant regulatory agency and has not been so approved and/or (B) which is not supported by credible objective scientific evidence; or (iv) a false and misleading representation made by any employee or authorized agent of MTF regarding any MTF Tissue Processed or Distributed by Osteotech pursuant to this Agreement. For purposes of this Section 2.6(b), MTF Tissue Processed or Distributed by Osteotech under this Agreement shall include any ARC Tissue that is re-released by MTF for distribution.

(c)

Indemnification Procedures. For purposes of subsection (a) above, Osteotech shall be the “indemnifying party” and MTF shall be the “indemnified party” and for the purposes of subsection (b) above, MTF shall be the “indemnifying party” and Osteotech shall be the “indemnified party.” The obligations and liabilities of the indemnifying party hereunder with respect to claims resulting from the assertion of liability by third parties shall be subject to the following terms and conditions:

(ii)

In the event any action, suit or proceeding is brought against the indemnified party, with respect to which the indemnifying party may have liability under the indemnity agreement contained in subsection (a) or subsection (b) hereof, the action, suit or proceeding shall, upon the written agreement of the indemnifying party that it is obligated to indemnify under the indemnity agreement contained in subsection (a) or (b) hereof, as the case may be, be defended (including all proceedings on appeal or for review which counsel for the defendant shall deem appropriate) by the indemnifying party. The indemnified party shall have the right to be represented by advisory counsel and accountants, at its own expense, and shall be kept fully informed of such action, suit or proceeding at all stages thereof, whether or not it is so represented. The indemnifying party shall make available to the indemnified party and its attorneys and accountants all books and records of the indemnifying party relating to such proceedings or litigation. The parties will render to each other such assistance as they may reasonably require in order to ensure the proper and adequate defense of any such action, suit or proceeding.

(iii)

The indemnifying party shall not make any settlement of any claims without the written consent of the indemnified party, which consent shall not be unreasonably withheld or delayed.

(iv)

The indemnified party shall not make any settlement of any claims without the written consent of the indemnifying party.

(d)

Survival. The provisions of this Section 2.6 shall survive termination of this Agreement.

2.7

Records and Reports

(a)

Records. Osteotech shall maintain, on a daily basis, accurate records concerning Tissue received, Tissue processed and in storage at Osteotech and finished units of Tissue stored and shipped. Such records shall be available to MTF during normal business hours upon reasonable advance notice at MTF’s expense. Osteotech shall not be required to produce any data other than data which it is required to obtain and maintain by the Processing Standards, provided that MTF shall not have access to the records and reports referred to in this Section 2.7 to the extent they contain Proprietary Sales Information except as provided in Section 3.5.

(b)

Reports. In addition to the information provided in Section 2.7(a), Osteotech shall provide timely reports on each Donor showing Tissue processed and shipped. Reports at the time of shipping should include total disposition of all Tissue, including cortical storage, pending reworks and discards. Any Proprietary Products Sales Information contained in such reports shall be subject to Section 3.5.

(c)

Confidentiality of Information. Osteotech shall ensure that all information pertaining to MTF will be disclosed only to those Osteotech personnel with a need-to-know who have signed Osteotech’s standard confidentiality agreement.

(d)

Notice of Release of Donor Information. Osteotech shall notify MTF prior to the release of any MTF donor identifying information, such as donor identifying number, whether pursuant to request of a regulatory or governmental agency or court or administrative order or subpoena. The provisions of this subsection shall survive termination of this Agreement.

(e)

Monthly Reports by Osteotech. Osteotech shall provide MTF monthly written reports to include:

(i)

Complete Donor status report for all donors at Osteotech, including those in processing;

(ii)

Yield per Donor and trend analysis;

(iii)

Complaints (including packaging complaints), and trend analysis;

(iv)

Microbiologic contamination rates and trend analysis; and

(v)

Reject reports including amounts, explanations and trend analysis.

(f)

Monthly Reports by MTF. MTF shall provide Osteotech monthly written reports to include a summary report of eligible donors retained for processing by MTF for the prior month by age and gender.

2.8

New Product Development

(a)

***

(b)

***

(c)

***

(d)

***

(e)

***

(f)

***

(g)

***

(h)

***

(i)

***

(j)

***

(k)

***

2.9

Publication and Public Disclosure

2.10

Certain Acquired Tissue

(a)

Osteotech Acquisition of ARC Proprietary Products. Osteotech shall acquire from MTF as of the Effective Date all finished units of ARC Proprietary Products that are included in ARC Tissue, whether located at Osteotech or elsewhere, except for ARC Proprietary Products that are within 6 months of expiration as of the Effective Date (“Expiring ARC Proprietary Products”) and are not in ARC’s consignment inventory. In addition, Osteotech shall acquire from MTF all units of ARC Proprietary Products that are finished and released by Osteotech and MTF after the Effective Date.

(b)

Information Regarding ARC Proprietary Products. Each party shall provide to the other a report listing in reasonable detail the ARC

(c)

Payment Terms. Osteotech shall pay MTF an amount equal to *** of the *** for all ARC Proprietary Products acquired by Osteotech from MTF, except for such ARC Proprietary Products that are in ARC’s consignment inventory as of the Effective Date (including ARC Proprietary Products in such consignment inventory that are within six months of expiration), which Osteotech shall pay for at *** of the ***. Such payment shall be made in six equal monthly installments commencing on the one month anniversary of the Effective Date.

(d)

Base Tissue Products. MTF shall pay Osteotech processing fees pursuant to the ARC Processing Agreement for all Base Tissue Products processed from ARC Tissue and released and invoiced by Osteotech after the Effective Date.

(e)

Expiring ARC Proprietary Products. MTF shall pay Osteotech an amount equal to *** of the *** for all Expiring ARC Proprietary Products acquired by MTF from ARC excluding any ARC Proprietary Products in ARC consignment inventory on the Effective Date. Such payment shall be made in six equal monthly installments commencing on the one month anniversary of the Effective Date.

(f)

Labeling of ARC Proprietary Products. Osteotech shall affix a sticker to all ARC Proprietary Products acquired from MTF hereunder in a form substantially similar to the MTF sticker set forth in Exhibit 2.10 attached hereto. The parties shall cooperate regarding their respective stickers and the Osteotech sticker shall be subject to MTF’s prior approval which will not be unreasonably withheld.

(g)

ARC Trademark License. The parties agree to comply with their respective ARC trademark licenses.

(h)

Rejected Tissue. If MTF rejects any Tissue products processed by Osteotech from ARC Tissue for which Osteotech has not billed or is not able to ▇▇▇▇ ARC prior to the Effective Date and such rejection is not based on Osteotech’s failure to process such Tissue in accordance with applicable processing standards, MTF shall pay an amount to Osteotech for such rejected Tissue as mutually determined in good faith by MTF and Osteotech.

3.

FINANCIAL TERMS

3.1

Fees For the Processing of Base Tissue Products

3.2

Suggested End User Prices

3.3

Invoicing, Payment and Collection For Base Tissue Products

(a)

Processing Fee Invoices. Osteotech shall submit invoices in U.S. dollars to MTF for Processing of Base Tissue Products rendered in accordance with the then existing fee schedule. The invoice date shall be the date that Osteotech’s Quality Assurance Department releases the finished units of Base Tissue Products for shipment to MTF.

(b)

Payment Terms. MTF will pay all Osteotech Processing Fee invoices for Processing of Base Tissue Products within *** of the invoice date. All such payments shall be in U.S. dollars.

(c)

Late Fees. Any balance of any invoice which is not paid within the time specified above, at the option of Osteotech, ***.

3.4

***

3.5

End User Billing and Collection for Proprietary Products

(a)

Billing. Osteotech shall submit invoices, on behalf of MTF, to end user customers of Proprietary Products. Such invoices shall be on Osteotech letterhead and be submitted to end user customers at the time of shipment or, for customers who are holding Proprietary Products on a consignment basis, at the time the customer uses the Proprietary Products. Osteotech shall not engage a third party billing service without MTF’s prior written approval.

(b)

End User Fee Allocation. Osteotech shall pay MTF an End User Fee Allocation for each unit of Proprietary Products sold by Osteotech which is Processed from Donors pursuant to this Agreement. Such End User Fee Allocation shall be equal to the then Suggested End User Price for each respective unit set forth in Exhibit 3.2 ***

(c)

Reporting. On a monthly basis, Osteotech shall submit a report to MTF within three business days of the prior month end summarizing all Proprietary Products Processed from Donors pursuant to this Agreement sold to end user customers during such prior month and detailing the amounts due to MTF for the End User Fee Allocation.

(d)

Remittances by Osteotech. Osteotech shall remit to MTF, no later than *** after the end of each month, the End User Fee Allocation for all Proprietary Products sold to end user customers during such month.

(e)

Expired, Damaged or Destroyed Proprietary Products. Osteotech shall pay MTF an amount equal to *** of the Suggested End User Price for all Proprietary Products Processed under this Agreement that expire or are damaged or destroyed (including finished units of Proprietary Products in consignment, evaluation, or field inventory). Such payment shall be made no later than *** after the end of the month during which such Proprietary Products expire or are damaged or destroyed.

(f)

***

3.6

Maximum Inventory Level

(a)

Maximum Inventory Level. During the Term of this Agreement, Osteotech shall maintain no more than an aggregate of *** of inventory of Proprietary Products Processed from Donors under this Agreement (the “Maximum Inventory Level”), provided that any New Proprietary Product permitted in accordance with Section 2.8 would not be included in the calculation of the Maximum Inventory Level until *** following the Market Introduction Date of such Proprietary Product. The Maximum Inventory Level will be measured at the end of each calendar quarter during the Term and shall include all Proprietary Products shipped to agents and end users on consignment, evaluation, and other deferred billing or similar arrangements.

(b)

***

(c)

Permitted Sales Practices. Osteotech agrees that all Distribution activities with respect to Proprietary Products shall be conducted (i) in a manner that is consistent with (A) MTF’s mission of providing high quality human allograft tissue for transplantation and research, (B) generally accepted sales and marketing practices in the allograft transplant tissue industry, and (C) applicable laws, regulations, SOPs, Standards, and donor consents and (ii) in a manner that respects the value and status of the donated Tissue.

(d)

Audit of Osteotech Inventory. Osteotech shall provide its timely and reasonable cooperation and assistance for MTF’s independent auditors to complete their confirmation procedures associated with the audit of MTF’s annual financial statements as it relates to Osteotech’s inventory of Proprietary Products Processed pursuant to this Agreement.

3.7

Confidentiality of End User Information

(a)

Sensitivity of Competitive Information. MTF acknowledges that end user customer Proprietary Product sales information (“Proprietary Products Sales Information”) constitutes sensitive and valuable competitive information of Osteotech. For purposes of this Agreement, the identity and address of Proprietary Product end user customers and any other information that identifies such customers constitutes Proprietary Product Sales Information.

(b)

Confidentiality of Proprietary Products Sales Information. Proprietary Products Sales Information shall be considered Confidential Information and MTF acknowledges that Osteotech will safeguard the confidentiality of the Proprietary Products Sales Information. MTF access to such information shall be limited to the Chief Financial Officer of MTF who may have access to such information (but may not copy or take notes with respect thereto) at Osteotech’s premises promptly upon request, which requests will be limited to no more than one per month. The Chief Financial Officer of MTF shall not disclose the Proprietary Product Sales Information to any other person except to MTF as provided in the following sentence. MTF shall have access to Proprietary Products Sales Information as necessary (i) to comply with applicable law or court order, (ii) to respond to a governmental request, or (iii) to respond to a specific recovery partner or Donor family request in a manner consistent with MTF’s past practices. In the case of the events in clauses (i) and (ii) above, MTF shall use its best efforts to provide Osteotech with reasonable advance notice of such requirements or requests in order to provide Osteotech an opportunity to participate in the response thereto or seek a protective or other order preventing such disclosure. In the case of a request described in clause (iii) above, access will be limited to personnel in MTF’s Donor Services Department who have a reasonable need to have access to such information.

4.

CONFIDENTIALITY

(a)

Confidential Information. For purposes of this Agreement, “Confidential Information” means all general and specific knowledge, experience and information that is confidential and of value to MTF or to Osteotech, including without limitation, formulations, designs, products, processes, supplies, methods of manufacture or processing, SOPs, cost data, master files, the nature of research and/or development projects, as well as data relating to them, marketing or business plans, donor data and financial data. It shall also mean any information disclosed to either party by any third party which either MTF or Osteotech is obligated to treat as confidential or proprietary.

(b)

Non-Disclosure. Both parties agree that neither party will, at any time, without the express agreement of the other party, or except as expressly permitted by this Agreement, disclose to any other person or use any Confidential Information of the other party, except for the purposes of performing this Agreement or any successor Agreement or as may be required by law, governmental regulation or court order. Information shall not be considered to be Confidential Information of a party if it can be established that (i) such information was in the possession of the other party prior to disclosure to such other party by the party claiming that it is Confidential Information and such information is not otherwise subject to a confidentiality agreement, (ii) such information is then part of the public domain and became so without the breach of this or any other confidentiality agreement by such other party or any of its affiliates, or (iii) such information is developed independently by such other party or becomes known to or acquired by such other party by means other than as a result of a breach of a confidentiality agreement or any fiduciary obligation.

(c)

Confidentiality Agreements. MTF and Osteotech each agree to require employees, consultants or others granted access to such Confidential Information to execute appropriate Confidentiality Agreements, provided that each organization’s agreements are approved by such organization’s counsel.

(d)

Injunctive Relief. MTF and Osteotech recognize that violation in any material respect of any provision of subsection (b) may cause irreparable injuries to Osteotech or MTF and agree that MTF or Osteotech shall be entitled to preliminary and final injunctive relief against such violation. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all remedies or rights which MTF or Osteotech shall have at law or in equity for the enforcement of the provisions of this Section. In addition, MTF and Osteotech agree that the party responsible for the breach of confidentiality shall be responsible for all legal fees and other

(e)

Survival. The provision of this Section 4 shall survive the termination of this Agreement.

5.

TERM OF AGREEMENT

6.

TERMINATION

6.1

Breach or Insolvency

(a)

The material breach by the other party of any of its obligations under this Agreement if such breach shall not be cured within ninety (90) days after written notice thereof is given by the non-breaching party to the breaching party; or

(b)

An adjudication of the other party as bankrupt or insolvent; or the admission in writing by such other party of its inability to pay its debts as they mature; or an assignment by such other party for the benefit of its creditors; or such other party applying for or consenting to the appointment of a receiver, trustee or similar officer for its assets; or the appointment of a receiver, trustee or similar officer for such other party’s assets without the application or consent of such other party, if such appointment shall continue undischarged for a period of ninety (90) days; or such other party instituting (by petition, application, answer, consent or

6.2

Certain Third Party Agreements

6.3

Non-Compliance With FDA Regulations

6.4

Termination of MTF-ARC Agreement

7.

INSURANCE

(a)

Osteotech Insurance. Osteotech shall secure and maintain in force reasonable and adequate insurance coverage for Osteotech’s Tissue Processing and Distribution activities, provided such coverage is available

(b)

MTF Insurance. MTF shall secure and maintain in force reasonable and adequate insurance coverage of its Tissue recovery and distribution activities pursuant to this Agreement, provided such coverage is available at reasonable prices and terms. MTF has previously delivered to Osteotech certificates of insurance.

(c)

Subcontractor and Assignee Insurance. Osteotech shall require each subcontractor or assignee who Processes or Distributes Tissue (if any are permitted by MTF) to procure and maintain insurance of the types and amounts required of Osteotech. In addition, once approved by MTF, the subcontractor or assignees shall sign the indemnity agreement as it appears in Section 2.6(a) in favor of MTF. If there is any assignment to a majority owned subsidiary of Osteotech as provided in Section 9, that subsidiary shall meet each requirement of this Section 7.

8.

FORCE MAJEURE

9.

BINDING AGREEMENT; ASSIGNMENT

(a)

As of the Effective Date, each of Biocon and MTF represents, warrants and covenants (i) that this Agreement does not violate any law, rule or regulation applicable to it, nor does it conflict with or cause a breach of or default under any other agreement to which either of them or any other organization, entity or person which they control, are controlled by, or are

(b)

As of the Effective Date, Osteotech represents, warrants and covenants (i) that this Agreement does not violate any law, rule or regulation applicable to it, nor does it conflict with or cause a breach of or default under any other agreement to which it or any of its Affiliates is a party or is bound; (ii) that neither it nor any of its Affiliates will enter into any agreement which would conflict with or interfere with Osteotech’s ability to comply with its obligations under this Agreement; and (iii) that this Agreement has been duly authorized by all necessary actions and constitute its legal, valid and binding obligation enforceable against it in accordance with its terms. Osteotech agrees that all of Osteotech’s obligations under this Agreement are and will be binding upon all existing and future Affiliates of Osteotech and that each party whose signature to this Agreement is required to make such obligation binding on all such Affiliates has in fact executed this Agreement.

(c)

Each of Biocon and MTF, on the one hand, and Osteotech, on the other hand, represents, warrants and covenants that it is not a party to any agreement, or subject to any obligation or other duty, that would materially conflict with or interfere with MTF’s or Osteotech’s respective ability to comply with its obligations under this Agreement.

(d)

Except as otherwise expressly herein provided, this Agreement may not be assigned in whole or in part without the prior written consent of the other party, provided that either party may assign its rights under this Agreement to any majority-owned subsidiary of such party without the consent of the other party, provided that such subsidiary agrees in writing to be bound by the terms and conditions of this Agreement. In the event of any such assignment, the party making such assignment shall not be relieved of its obligations under this Agreement unless otherwise agreed to in a writing executed by the other party.

10.

NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK

(a)

Without the prior written consent of MTF, Osteotech shall have no right to use the trademark or emblem of MTF in connection with its Processing activities or to use the name of MTF for commercial purposes. However, Osteotech may disclose MTF’s name as may be required by law or government regulation.

(b)

Except as required by law or government regulations, MTF shall not have the right to use any trademark or emblem of Osteotech, including the name Osteotech, without the prior written consent of Osteotech.

(c)

(i) Nothing in this Agreement shall be interpreted to convey to MTF any trademark, patent or proprietary technology owned by Osteotech;

(d)

MTF recognizes that Osteotech performs processing services for other clients in addition to MTF, and therefore agrees that unless specifically developed or customized for MTF or as otherwise provided herein, all packaging and technology used by Osteotech to perform processing services will also be used to perform such services for Osteotech’s other clients.

(e)

MTF recognizes that Osteotech processes proprietary forms of tissue and agrees that if it were to distribute these tissues it will do so only under the trademark, packaging, labels and emblems developed and provided by Osteotech.

(f)

MTF shall not advertise or otherwise promote Osteotech Proprietary Products or processes without Osteotech’s prior review and written approval of all such programs and related material.

11.

NOTICES

If to MTF:

Chief Executive Officer

If to Osteotech :

Chief Executive Officer

12.

ENTIRE AGREEMENT

13.

MODIFICATION

14.

APPLICABLE LAW

15.

WAIVER

16.

INDEPENDENT CONTRACTOR

17.

SEVERABILITY

18.

SUCCESSORS

MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.

By:

▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President and Chief Executive Officer

BIOCON, INC.

By:

▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President

OSTEOTECH, INC.

By:

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer

For Information or Reorder

Contact MTF

▇-▇▇▇-▇▇▇-▇▇▇▇

1.

MTF shall pay to Osteotech the amount of***(as it shall be modified pursuant to the following clause 2, the “Processing Fee”) for Processing of the MTF Tissue of each Donor from which MTF Tissue is Processed pursuant to this Agreement on or prior to December 31, 2005;

2.

***

3.

Osteotech shall deliver to MTF written notice no less than 90 days prior to the effectiveness of any change in the Processing Fee for Processing of MTF Tissue. Each such notice shall state the new annual Processing Fee and the effective date thereof.