“Competitive Product” shall mean a product utilizing bioresorbable polymers in combination with ceramic materials for bone grafting and/or osteochondral repair applications.    

“Confidential Information” means all data, specifications, training materials and other know how related to the design, use, implementation, performance or manufacture of the Products, as well as all other information and data provided by either Party to the other Party hereunder in written or other tangible medium and marked as confidential, or if disclosed orally or displayed, identified as confidential prior to or at the time of disclosure and confirmed in writing as confidential within thirty (30) days after disclosure or any other information which a reasonable person would deem to be confidential based on the nature of the information or the circumstances of the disclosure, in each case except any portion thereof which:  (a) is known to the receiving Party before receipt thereof under this Agreement as evidenced by the receiving Party’s written records; (b) is properly and lawfully disclosed to the receiving Party by a third person who has the legal right to make such disclosure; (c) is or becomes generally known in the trade through no fault of the receiving Party; or (d) is independently developed by the receiving Party without use of such information, as evidenced by the receiving Party’s written records.

“FDA” means the United States Food and Drug Administration, or any successor entity.

“Field” shall mean, with respect to the Products, medical uses of the Products for reconstructive surgical procedures of the spine.

 “Gross Sales” shall mean, for a given period, the gross amount received on sales invoiced, net of refunds, by ASI or any Affiliate or Agent on behalf of ASI, or by OBI in the case of Section 2.3, for the sale of the Products anywhere in the Territory during such period, excluding freight, insurance charges and sales taxes and other transfer taxes.

“Minimum Quarterly Order Requirements” are set forth in Exhibit B with respect to the periods indicated, as such amounts may be adjusted and agreed upon by both Parties from time to time.

“OBI Patent Rights” means all patents, patent applications and rights to file patent applications associated with or relating to any Products, their manufacture, sale, use or composition and are licensed to, owned or controlled by OBI now or in the future.

“Parties” shall mean both ASI and OBI, and “Party” shall mean either of them as the context indicates.

“Products” means the OBI PolyGraft™ Synthetic Bone Graft Substitute (BGS) products listed in Exhibit A and associated OBI disposable instrumentation listed in Exhibit A.  Products may be changed, discontinued or added from time to time by mutual agreement of the Parties.

“Product Approvals” means, for any country or other jurisdiction in the Territory, those authorizations by the appropriate Regulatory Authority(ies) required for importation, promotion, pricing, marketing and sale of the Products in such country or other jurisdiction.

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“Product Improvements” means any modifications to Products or subsequent version of Products that may replace such Products and be intended for use in the same or related spine surgery applications.  Prior to the commercial release of Product Improvements under this Agreement, Exhibit A shall be amended to include the Product Improvements as Products.

“Proprietary Rights” means all proprietary rights and interests of every nature, whether now existing or hereafter arising, including OBI Patent Rights, in, to, related to or covering or incorporated into any Product, including those relating to their manufacture, sale, use or design, to the extent that such rights and interests are of such legal status and nature to be capable of being lawfully licensed or sold and shall include without limitation inventions, ideas, improvements (including Product Improvements), manufacturing know how, technology, copyrights, trade secrets, trademarks or service marks (including Trademarks) and Confidential Information.

“Regulatory Authority” means any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, regulating the manufacture, sale or use of medical devices, including the FDA.

“Reimbursement Approvals” means governmental and other approvals in any country or jurisdiction, for a buyer to claim reimbursement at any level for the purchase of the Products, from private or public health insurance organizations in such country or jurisdiction.

 “Territory” means the United States of America and its territories and possessions.

“Trademarks” means those trademarks and service marks that OBI uses, owns or controls with respect to the Products, and any additional trademarks or service marks (other than ASI’s trademarks) that the Parties agree in the future may be used in connection with the sale of Products.

1.2           Other Defined Terms

Each of the following terms shall have the respective meaning ascribed to such term in the section of this Agreement set forth opposite such term below:

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2.             DISTRIBUTION

2.1           Appointment.  Subject to the terms and conditions set forth in this Agreement, OBI hereby appoints ASI and its Affiliates as OBI’s exclusive distributor (with the full right to appoint sub-distributors and Agents to sell the Products under ASI’s private label) of the Products under ASI’s private label for use in the Field within the Territory during the term of this Agreement, and ASI hereby accepts such appointment.  Subject to the terms and conditions set forth in this Agreement, as OBI’s distributor of Products under ASI’s private label in the Territory, ASI shall have the exclusive right to promote, market, distribute and sell Products as ASI’s private label products, with such labeling specifically including “Manufactured by OsteoBiologics, Inc.” or “Manufactured by OBI”, for use in the Field within the Territory.

2.2           Certain Restricted Parties; Distribution Relationship.  During any period in which ASI is appointed as the exclusive distributor of Products under ASI’s private label for use in the Field within the Territory, OBI agrees not to sell Products under ASI’s private label to any third party.  However, nothing in this Agreement shall limit, prohibit or otherwise restrict OBI, its Affiliates, Agents or distributors from promoting, marketing, distributing or selling any of OBI’s products, including, without limitation, any of OBI’s products that are the same or substantially similar to the Products, provided such products are not (i) packaged under ASI’s private label; or (ii) or sold in the in the Territory for use in the Field, except as permitted in this Agreement.

2.3           Intentionally Omitted.

2.4           ASI Marketing Efforts.

(a)           ASI shall use its commercially reasonable best efforts to market and sell the Products for use in the Field within the Territory during such time as ASI’s exclusive appointment within the Territory in the Field remains in effect.

(b)           The Parties agree that in the event of a material breach by ASI of its covenants set forth in Sections 2.4(a) and/or 2.4(c), OBI may terminate ASI’s exclusive appointment hereunder with respect to distribution of Products; provided that OBI shall have delivered to ASI written notice of such material failure, which notice shall set forth in reasonable detail the nature of the alleged material failure and such material breach has not been cured or waived within sixty (60) calendar days, or if such breach is of a nature that it can not be cured within such sixty day period ASI shall not be taking commercially reasonable measures to remedy or cure, following delivery of such notice.

(c)           ASI and its Affiliates or Agents shall not during the term of this Agreement, directly or indirectly, market, promote, sell or enter into any agreements (whether written or oral) with respect to any Competitive Products for use in the Field within the Territory without the written consent of OBI.

2.5           Audits.  Periodically during each calendar year, but only once during each twelve (12) month period and within one hundred and eighty (180) days following any termination or expiration of this Agreement, OBI shall have the right, upon prior written notice of at least ten (10) business days delivered to ASI, to review and audit all documentation that is retained by ASI in the ordinary course of business and relates to ASI’s performance under this Agreement.  Such audit shall be at

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the expense of OBI, unless such audit reveals a difference in favor of OBI of at least five percent (5%) between (i) the actual Transfer Prices paid by ASI to OBI in accordance with Section 3.6 and (ii) the Transfer Prices calculated using the unit prices based on actual Gross Sales for Products, in which case ASI shall bear all reasonable costs of the audit.  ASI shall pay OBI the amount of any difference discovered in the audit in favor of OBI within fifteen (15) business days of OBI’s request.  In the event an overpayment by ASI is reflected by the audit, then the amount of such overpayment shall be repaid to ASI by OBI within fifteen (15) business days of discovery of the same.  ASI shall maintain all books of account or records that it maintains in the ordinary course of business in its usual and customary practice or as otherwise required by applicable law and in actual practices with respect to Gross Sales of Products for a period of at least one (1) year following the calendar year to which such calculation relates.

2.6           Strategic Alliance.

(a)           [***]

(b)           [***]

(c)           [***]

(d)           [***]

3.             TERMS OF ORDER AND SALE OF PRODUCTS

3.1           Supply Forecasts.  Commencing on the Effective Date, and continuing during the remainder of the term of this Agreement, ASI shall provide to OBI, on a quarterly basis, a twelve (12) month nonbinding rolling forecast of expected orders of Products.  Such forecasts shall be consistent with ASI’s Minimum Quarterly Order Requirements and with purchase orders provided by ASI to OBI in accordance with this Agreement.

3.2           Product Orders.  All orders of Products shall be on ASI’s standard purchase order which ASI may employ from time to time (as may be modified by ASI from time to time), a current copy of which is attached hereto as Exhibit C, and OBI shall deliver the Products in accordance therewith, provided, that provisions of this Agreement shall prevail over any inconsistent statements, additional statements or provisions or rights and obligations contained in any document related to this Agreement passing between the Parties hereto including any purchase order, acknowledgment, confirmation or notice.  ASI will be required to submit purchase orders for Products to OBI in writing which shall set forth the quantity, requested delivery dates and shipping instructions.  ASI shall submit purchase orders at least [***] prior to the delivery dates requested in the order.  All deliveries of Product shall be F.O.B. at OBI’s offices in San Antonio, Texas.  ASI shall be responsible for all shipping costs.  Payment for ASI purchase orders subsequent to the initial stocking purchase order will be due within thirty (30) days of the date Products are shipped to ASI from OBI.

3.3           Product Specifications.  All Products delivered by OBI hereunder shall be ready for end-user sale, including all packaging, labeling, instructions-for-use and sterilization as approved by ASI.  OBI shall consult with ASI regarding the packaging and instructions-for-use of the Products and all Products will be sold under the ASI name and using ASI’s service marks and/or trademarks, but will bear a marking reasonably acceptable to OBI indicating that the Products were

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manufactured by OBI.  All Products shall be labeled (including bar coding/UPN numbers) in accordance with the procedures specified from time to time, and with all Product Approvals, and OBI shall have the right to approve the final form of any proposed labeling for Products, such approval not to be unreasonably withheld, conditioned or delayed.

3.4           Obligation to Supply.  OBI shall deliver Products to ASI in accordance with the terms of this Agreement.  If ASI submits a purchase order with respect to which no corresponding delivery schedule has been provided, OBI shall make every reasonable effort to deliver Products under such purchase order within [***] after receipt of ASI’s purchase orders for Products.  OBI shall have no obligation to deliver Products to ASI prior to [***] after receipt of the applicable purchase order from ASI.

3.5           Minimum Orders.  As consideration for its appointment as exclusive sales distributor of Products for use in the Field within the Territory, ASI agrees to meet the Minimum Quarterly Order Requirements set forth on Exhibit B attached hereto.  During the term of this Agreement, as long as ASI meets the Minimum Quarterly Order Requirements, OBI shall not provide the Products to any other person or entity to sell, distribute or otherwise use for applications in the Field within the Territory.  ASI’s Minimum Quarterly Order Requirements will be measured on a quarterly basis for Product ordered by ASI from OBI (as opposed to sold by ASI).  ASI must satisfy the Minimum Quarterly Order Requirements each quarter, and there shall be no carry over of orders from one quarter to the next quarter for purposes of determining whether the Minimum Quarterly Order Requirements for a quarter have been met.  ASI will not be allowed to return unsold Products, except as otherwise specifically provided in this Agreement.  If ASI fails to meet the Minimum Quarterly Order Requirements for any individual Product, and the shortage is less than [***] of the requirement, then ASI will have the right to cure the shortage with a cash payment to OBI equal to [***] of the Product Transfer Price effective at the time of the shortage for the applicable volume of  ordered Product (“Cure Payment”).  The Cure Payment shall be paid to OBI within five (5) days of the end of the quarter in which such shortage is calculated.  The Cure Payment will not be considered a prepayment of Product orders by ASI.  If ASI elects not to make the applicable Cure Payment, then OBI will have the right to convert ASI’s rights to be non-exclusive for such Product for the duration of this Agreement (and allow ASI to maintain its limited exclusivity on all other Products).  If ASI fails to meet the Minimum Quarterly Order Requirements for any individual Product, and the shortage is more than [***] of the requirement, then OBI will have the right to either (a) require ASI to pay OBI the applicable Cure Payment; or (b) convert ASI’s rights to be non-exclusive for such Product for the duration of this Agreement (and allow ASI to maintain its limited exclusivity on all other Products). If, following a Change of Control of ASI, the acquirer of ASI fails to meet the aggregate Minimum Quarterly Order Requirements and that shortage is more than [***] of the aggregate Minimum Quarterly Order Requirements for the applicable quarter, then OBI shall have the right to terminate this Agreement with [***] written notice to ASI or ASI’s acquiring party, as applicable.  The Parties agree to meet no less than once every [***] in order to evaluate the Minimum Quarterly Order Requirements in good faith and make any modifications that are mutually agreed upon by the Parties following such evaluation.

3.6           Product Pricing and Payment.  Payment for ASI purchase orders subsequent to the initial stocking purchase order will be due within thirty (30) days of the date Product is shipped to ASI from OBI.  With respect to Product, ASI will pay to OBI a transfer price for each individual Product as indicated under “Transfer Price” on Exhibit A  (“Product Transfer Price(s)”).  The Product Transfer Prices will be established each year on the anniversary of the Effective Date by

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mutual agreement to  an updated version of Exhibit A by no later than [***] prior to such anniversary.   The Parties agree and acknowledge, that it is the intention of the Parties that the Transfer Price shall be approximately [***] of ASI’s published list prices of each of the Products.

3.7           Samples.  OBI will provide to ASI [***] demo kits containing non-sterile samples of the Products at no charge to ASI, for use in sales demonstrations and trade shows (“Samples”).  ASI may order additional Samples from OBI, as reasonably requested by ASI, at pre-agreed prices representing a significant discount to sterile Products, under the same payment terms as provided in Section 3.6.

3.8           Inspection upon Delivery.

(a)           Product shipments from OBI to ASI shall include a certificate of compliance from OBI confirming that the Products meet product specifications and OBI’s quality standards, which are in compliance with the relevant requirements of applicable Regulatory Authorities.  Notwithstanding any prior inspection or payments, all Products capable of being inspected prior to use may, at ASI’s sole discretion, be subject to final inspection and acceptance at ASI’s designated location or other destination point within [***] after delivery.  If ASI elects to inspect Product, then ASI shall notify OBI within such [***] period of any defect in materials or workmanship or non-conformity of any Product to the Product Specifications or purchase order.  If ASI inspects Product and fails to so notify OBI, ASI will be deemed to have accepted the Product; provided, that the warranty set forth in Section 8.2 hereof shall survive acceptance of the Product by ASI.

(b)           Notwithstanding any prior inspections or payments, all Products incapable of being inspected until use will be subject to final inspection upon use.  ASI shall notify OBI within fifteen (15) days after the inspection-at-use of the defect in materials or workmanship or non-conformity of any Product to the Product Specifications or purchase order. If ASI fails to so notify OBI, ASI will be deemed to have accepted the Product; provided, that the warranty set forth in Section 8.2 hereof shall survive acceptance of the Product by ASI.