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EXHIBIT 10.6
CERF LABORATORIES AGREEMENT
This CERF Laboratories Agreement (this "Agreement") is made and
entered into as of this 30th day of June, 1999, by and between Smith & Nephew
Inc., a Delaware corporation (hereinafter "S&N"), and DonJoy, L.L.C., a Delaware
limited liability company (hereinafter "DonJoy, L.L.C.").
WHEREAS, pursuant to the Recapitalization Agreement, dated as of April
29, 1999 (the "Recapitalization Agreement") by and among S&N, DonJoy, L.L.C. and
Chase DJ Partners, LLC ("Investor"), DonJoy, L.L.C. is selling to Investor
645,500 Common Units of DonJoy, L.L.C. and DonJoy, L.L.C. is redeeming 2,000,000
Common Units from S&N, such that upon consummation of the transactions
contemplated by the Recapitalization Agreement Investor will own approximately a
ninety percent (90%) membership interest in DonJoy, L.L.C. (capitalized terms
not otherwise defined herein shall have the meanings assigned to such terms in
the Recapitalization Agreement);
WHEREAS, it is a condition to S&N's obligations under the
Recapitalization Agreement that S&N and DonJoy, L.L.C. enter into this
Agreement; and
WHEREAS, in accordance with the Recapitalization Agreement, S&N
desires for its employees, agents, representatives and invitees (collectively
"Users") to use the Facilities (as defined below) and DonJoy, L.L.C. desires to
make the Facilities available to S&N, all on the terms and conditions herein
described.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, S&N and DonJoy, L.L.C. do hereby
agree as follows:
In this Agreement,
I. USE OF THE FACILITIES
a) DonJoy, L.L.C. shall allow S&N and the Users to use the Clinical
Education Research Facility (CERF) laboratory located at DonJoy, L.L.C.'s
premises located on Scott Street, Vista, California, the equipment and supplies
located therein and the services offered thereby (collectively the "Facilities")
for the term of this Agreement on substantially the same terms as those upon
which S&N and the Users currently use such Facilities S&N shall pay to DonJoy,
L.L.C. on the first day of each calendar quarter a quarterly fee for the use of
the Facilities, which such fee shall be calculated in the same manner as it was
calculated prior to the date of this Agreement.
b) The parties hereto shall be treated for all purposes as independent
contractors and not as an agent or representative of the other party and neither
has any power, right or authority to bind the other party or to assume or to
create any obligation or responsibility, express or implied, on behalf of the
other party. Nothing stated in this Agreement shall be construed as constituting
S&N and DonJoy, L.L.C. as partners or as
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members of a joint venture, or as creating the relationship of employer and
employee, master and servant, or principal and agent between them.
I. TERM AND TERMINATION
a) This Agreement shall commence on the date hereof and shall expire on
June 30, 2001 unless renewed mutual agreement of the parties. S&N shall have the
right to terminate this Agreement by providing DonJoy, L.L.C. with at least
thirty (30) days prior written notice.
b) Either party may terminate this Agreement by written notice having
immediate effect in the event that any of the following events occur: (1) a
receiver is appointed over any of the assets of the other party and such
receivership shall not have been vacated or stayed within thirty (30) days; (2)
the other party is unable to pay its debts as they mature or ceases to pay its
debts as they mature in the ordinary course of business or makes an assignment
for the benefit of its creditors; (3) any voluntary proceedings are commenced by
or for the other party under any bankruptcy, insolvency, or debtors' relief law;
or for any proceedings commenced against the other party under any bankruptcy,
insolvency or debtors' relief law and such proceeding is not vacated or set
aside within thirty (30) days from the date of commencement thereof.; or (4)
material default by the other party under its respective Ancillary Agreements.
c) Any material breach of any term of this Agreement shall entitle the
other party to terminate this Agreement provided the non-breaching party first
gives notice to the breaching party and permits the breaching party twenty (20)
days to cure such breach, provided that in the event of delay of payment by S&N
the cure period shall be five (5) days. The right to terminate shall be in
addition to all other rights and remedies available at law or in equity.
3. INDEMNIFICATION
a) Indemnification by DonJoy, L.L.C.
DonJoy, L.L.C. agrees to defend, indemnify and hold harmless S&N and
S&N's officers, managers, equity holders and Affiliates from and against any and
all claims, actions, damages, losses, costs, liabilities and expenses (including
without limitation reasonable attorneys' fees) (hereinafter "Losses") sustained
or incurred by S&N as a consequence of (i) any injury, death or property damage
arising out of the negligence or willful misconduct of DonJoy, L.L.C. or its
employees or agents (except to the extent that such injury, death or damage was
caused by the negligent act or willful misconduct of S&N) in any action or
proceeding brought by any third party respecting such claim, (ii) DonJoy,
L.L.C.'s negligent act or omission, or (iii) DonJoy, L.L.C.'s failure to comply
with its obligations hereunder.
b) Indemnification by S&N
S&N shall indemnify, defend and hold harmless DonJoy, L.L.C. and
DonJoy, L.L.C.'s officers, directors, equity holders and Affiliates from and
against any
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Losses as a consequence of (i) any injury, death or property damage arising out
of the negligence or willful misconduct of S&N or its employees or agents
(except to the extent that such injury, death or damage was caused by the
negligent act or willful misconduct of DonJoy, L.L.C.) in any action or
proceeding brought by any third party respecting such claim, (ii) S&N's
negligent act or omission, or (iii) S&N's failure to comply with its obligations
hereunder.
c) Indemnification Procedures
Each party shall be entitled to the indemnity described in paragraphs
(a) and (b) of this Section provided the following conditions are met; the party
obliged to provide indemnification is referred to as the "Indemnifying Party",
and the party entitled to be indemnified is referred to as the "Indemnified
Party":
(i) Promptly upon learning of any claim for which indemnification is
sought from the Indemnifying Party, the Indemnified Party shall notify the
Indemnifying Party of such claim and shall furnish to the Indemnifying Party all
information known and available to the Indemnified Party related to such claim.
(ii) In the event of the commencement of litigation on the basis of
such claim, the Indemnified Party shall tender the defense of such litigation to
the Indemnifying Party.
(iii) The Indemnified Party shall comply with any such reasonable
instructions received from the Indemnifying Party relating to settlement of such
claim (unless settlement of the claim would establish an adverse precedent for
other similar claims in the future), if any, to the extent that it lies within
the power of the Indemnified Party to comply with any such instructions,
excluding any instruction that requires the Indemnified Party to license or
otherwise make available technology or other confidential information to a third
party.
(iv) If the Indemnifying Party undertakes defense of such litigation,
the Indemnifying Party shall be entitled to appoint its attorneys to defend the
case in the name of the Indemnified Party, and the Indemnified Party shall
cooperate fully with the Indemnifying Party and its chosen attorneys in the
defense of such litigation. The Indemnified Party shall be free to appoint its
own attorneys in the same litigation, at its sole expense, although all
decisions with respect to the conduct or settlement of such litigation shall
remain solely with the Indemnifying Party.
d) Insurance
Each party shall maintain at its own expense general public liability
coverage of not less than Three Million Dollars ($3,000,000) per occurrence with
respect to bodily injury and death and Three Million Dollars ($3,000,000) per
occurrence with respect to property damage for each claim with a deductible of
no more than Two Hundred Fifty Thousand Dollars ($250,000). Each party shall
provide the other with a
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certificate of insurance showing coverage and showing that the other has been
named as an additional insured. Further, each party's insurer shall give the
other party at least thirty (30) days prior written notice of any proposed
cancellation or modification of the product liability insurance policy.
4. GOVERNMENTAL PERMITS AND COMPLIANCE WITH LAWS
a) The parties shall maintain all governmental permits required in
order to perform their respective obligations under this Agreement. The parties
shall comply with all laws, rules and regulations in all material respects;
provided that DonJoy, L.L.C. shall have the sole responsibility for compliance
with all laws, rules and regulations relating to the Facilities.
5. MISCELLANEOUS
a) This Agreement shall be amended or modified only by a written
instrument executed by the duly authorized representatives of both parties.
b) The waiver by either party of a breach or default in any of the
provisions of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision.
c) All notices under this Agreement shall be in writing and shall be
sufficient if delivered in accordance with the requirements of the
Recapitalization Agreement.
d) The construction, performance and enforcement of this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware (other than conflicts of law provisions).
e) If any provision of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
f) Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, including, without limitation, any claim that
any of said Agreement, or any part thereof, is invalid, illegal or otherwise
voidable or void, shall be submitted to arbitration in accordance with the
Commercial Rules of the American Arbitration Association; provided, however,
that this clause shall not be construed to limit or to preclude either party
from bringing any action in any court of competent jurisdiction for injunctive
or other provisional relief as necessary or appropriate. The arbitration shall
be conducted in Chicago.
g) This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof. The parties represent that, in
entering into this Agreement, they are not relying upon any previous
representation, inducement or agreement of any kind.
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h) In the event of arbitration and/or litigation over any controversy
or claim arising out of or relating to this Agreement, or any breach thereof,
the prevailing party shall be entitled to recover its reasonable attorneys fees
and expenses in connection with such arbitration and/or litigation.
i) Neither party may assign this Agreement without the written consent
of the other party, which consent shall not be unreasonably withheld; provided,
however, that DonJoy, L.L.C. may assign its rights and obligations under this
Agreement to any Affiliate or subsidiary (including DJ Orthopedics, LLC) without
the prior written consent of S&N; provided further, that neither party hereto
shall be released from any of its obligations hereunder by reason of any such
assignment.
j) DonJoy, L.L.C. shall be not liable for its failure to perform its
obligations under this Agreement due to events beyond its reasonable control
including, but not limited to, strikes, riots, wars, fire, acts of God,
inability to obtain or shortages of labor, materials, equipment or
transportation and acts in compliance with applicable law, regulation, or order
(whether valid or invalid) of any governmental body.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
DonJoy, L.L.C. Smith & Nephew, Inc.,
By: /s/ Leslie H. Cross By: /s/ Clifford K. Lomax
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Title: President and CEO Title: Treasurer
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[Signature Page to CERF Laboratories Agreement]