German Joint Venture Agreement

Exhibit 10.20



Pages or exhibits where confidential treatment has been requested are stamped "Confidential portions omitted and filed separately with the Commission." The appropriate section has been marked at the appropriate place with an "*".



JOINT VENTURE AGREEMENT



MADE as of the 4th day of February, 1993 by and among DEPUY INC., an Indiana corporation with offices in Warsaw, Indiana, ("DePuy"), BIEDERMANN MOTECH GmbH, a legal entity existing under the laws of Germany, ("Biedermann GmbH") and Lutz Biedermann, an individual residing in V.S. Villingen, Germany ("Biedermann").



WHEREAS DePuy is engaged in the business of manufacturing and selling medical devices throughout the world,



WHEREAS Biedermann owns One Hundred Percent (100%) of Biedermann Motech GmbH, another corporation existing under the laws of Germany and located in Schwenningen, Germany ("Motech"),



WHEREAS Motech and Biedermann, either individually or together, have gained valuable experience, intellectual property, know-how and expertise in the design, development, manufacture and sale of medical devices used in the surgical treatment of the human spine, and,



WHEREAS Biedermann GmbH and DePuy desire to combine their respective abilities and resources to form a new company that will be engaged in the manufacture and sale of such products throughout the world.



NOW THEREFORE the parties agree as follows:



ARTICLE I



DEFINITIONS For purposes of this Joint Venture Agreement, unless the

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context clearly indicates a different intention, the following words and

phrases shall have the meaning set forth below:



1.1 "Moss System" shall refer to and mean those items identified on

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Attachment 1, which is intended to be substituted by a

replacement, Attachment 1, sometime after the execution of this

Joint Venture Agreement identifying those items by The Company's

Product Codes.



1.2 "Net Sales Price" shall mean the gross invoice price at which

-----------------

Product is sold by or on behalf of The Company to the first

consignee not a party to this Agreement, less commissions allowed

to distributors, discounts allowed dealers, cash discounts,

refunds, replacements or credits allowed to purchasers for return

of Product or as reimbursement for damaged Product, freight,

postage, insurance and other shipping charges, sales and use

taxes, customs duties and any other governmental charges imposed

on the production, importation, use or sale of Product. In the

case of Product sold outside the United States, Net Sales Price

shall be based on The Company's then current International

Distributor List Price (regardless of the transfer















price actually charged) from which will be deducted all of the

applicable discounts, refunds, credits and the like, itemized above.



1.3 "MOSS Miami" shall mean products which are the subject of a separate

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Consulting Agreement between Professor Jurgen Harms ("Professor Harms"),

and Dr. Harry Shufflebarger ("Dr. Shufflebarger"), and which are

described in greater detail on Attachment 2.



1.4 "New Products" shall mean any product designed or developed by or for

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Biedermann GmbH that is neither a part of the MOSS System nor a MOSS

Miami product, but is a product intended for use in the treatment of the

human spine and which is, therefore, subject to this Joint Venture



1.5 "Product" shall refer collectively to the MOSS System, MOSS Miami System

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and New Products.





1.6 "Trademarks" shall mean the name "MOSS". "MOSS Miami" and "Motech" used

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in conjunction with the sale or promotion of Product and any and all

rights Biedermann GmbH has or may have hereafter acquire in one or more

of such names throughout the Territory.



1.7 "Technology" shall mean all of the knowledge, techniques, processes,

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data, designs, prints, drawings, specifications, procedures and other

information of whatever type and configuration now in the possession of,

or hereafter acquired by Biedermann GmbH relating to the manufacture of



1.8 "Territory" shall mean every country throughout the world.

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1.9 "Company" shall mean DePuy Motech, Inc., a company more fully described

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hereafter in Article II.



1.10 "Biedermann Companies" shall mean collectively, Biedermann GmbH, Ort-Med

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B.V., a corporation existing under the laws of the Netherlands ("Ort-

Med"), Biedermann Motech, and any other company in which Biedermann owns

directly or indirectly, or exercises a controlling interest.



1.11 "Board" shall mean the Board of Directors of The Company.

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1.12 "Technology Agreement" shall refer to and mean an agreement between The

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Company and Biedermann Motech, attached as Attachment 3.



1.13 "Exclusive License Agreement" shall refer to and mean an agreement

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between The Company and Ort-Med, attached as Attachment 4.



1.14 "Consulting Agreement" shall refer to and mean an agreement between and

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among The Company and Professor Jurgen Harms, M.D. and Harry

Shufflebarger, M.D. attached as Attachment 5 as well as an Addendum to

Consulting Agreement attached as Attachment 5A.







1.15 "Distribution Agreement" shall refer to and mean an agreement between and

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among The Company, DePuy and Motech, attached as Attachment 6.



1.16 "Shareholders Agreement" shall refer to and mean an agreement between

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DePuy and Biedermann GmbH, attached as Attachment 7.



1.17 "Various Agreements" shall mean collectively, the Technology Agreement,

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Exclusive License Agreement, Consulting Agreement, Distribution Agreement

and Shareholders' Agreement.



1.18 "Manufacturing Services" shall mean the performance for or on behalf of

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The Company of one or more of the steps required to produce products in

final form ready for sale, including packaging, which are either performed

by a Party to this Agreement or by an outside vendor for a Party to this



1.19 "Distribution Services" shall mean the performance by a Party to this

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Agreement for or on behalf of The Company of one or more of package design,

labelling, display, promotion, ordering, selling, inventorying, accepting

and processing orders from customers, for shipping, invoicing, collecting

receivables, accepting returns, issuing credits for and paying commissions,

including incentive and post termination compensation, on Products.



1.20 "Administrative Services" shall mean the performance by a party to this

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Agreement for or on behalf of The Company of one or more tasks relating to

the maintenance of the books and records of The Company, the performance of

its legal obligations to various governmental and taxing authorities,

including financial, accounting, corporate, legal, tax, insurance,

litigation and such other services as the parties specify.



1.21 "Cost" shall mean:

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a) in case of Manufacturing Services, the out of pocket cost actually

incurred in obtaining services from outside vendors, the actual

manufacturing cost, including raw material, labor and factory

overhead, but no profit, for Manufacturing Services performed by

either DePuy or Motech for or on behalf of Customer.



b) in the case of Distribution Services and Administrative Services,

"Cost" shall mean the actual amount paid or incurred in producing,

procuring, or delivering such a service. In those cases where Cost

cannot be specifically identified, a reasonable approximation of cost

shall be used. Neither DePuy or Motech shall realize any profit on any

product or service to be provided at "Cost".



1.22 International Distributor List Price shall mean the number that is produced by a) multiplying The Company's then current United States list price by * percent (*%), b) further



* Confidential portions omitted and filed separately with the Commission.







multiplying the product produced in a) above by * percent (*%) and c)

further multiplying the product produced in b) above by the *



1.23 "Fehling" shall mean Fehling Medical AG.

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ARTICLE II



FORMATION OF COMPANY - -------------------- The parties agree that effective as soon as possible after the execution of this Joint Venture Agreement, and the occurrence of the conditions precedent set forth in Article XIV, they will cause a new company to be formed under the laws of the State of Indiana to be named DePuy Motech, Inc.



2.1 Capital The paid-in capital of DePuy Motech, Inc., shall be a total of *

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Dollars ($ * ) of which * Dollars ($ * ) shall be paid in by DePuy and

the remaining * Dollars ($ * ) shall be paid in by Biedermann GmbH.

Provided, however, that while DePuy shall pay its portion in at the time

The Company is incorporated, Biedermann GmbH may delay paying in its

share for a period not to exceed the earlier of; a) the date when

compensation is paid to Biedermann or his designee pursuant to Article

IV or, b) six months following the date of incorporation of The Company

by executing and delivering to The Incorporator of The Company, a

promissory note, satisfactory to him in form and substance, evidencing

such indebtedness which promissory note shall provide for the payment of

interest at a rate of Twelve And One-Half Percent (12-1/2%) per annum.



2.2 Articles of Incorporation and By-Laws The Articles of Incorporation and

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By-Laws of The Company shall be in substantially the forms as are set

out in Attachments 8 and 9, respectively.



2.3 Shareholders' Agreement DePuy, Biedermann GmbH and Lutz Biedermann agree

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that upon execution of Joint Venture Agreement, the performance of the

Condition Precedent and the formation of The Company, they will also

enter into the Shareholders' Agreement.



2.4 Directors DePuy and Biedermann GmbH agree that for so long as their

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respective ownership of shares in The Company remain in proportion to

each other as they are at The Company's incorporation, they will vote

their shares in The Company so as to provide at all times for The Board

to consist of at least five (5) members, one of whom shall be

Biedermann, and four (4) of whom shall be employed or otherwise

nominated by DePuy, or an affiliate of DePuy





* Confidential portions omitted and filed separately with the Commission.







engaged in the orthopaedic industry. Provided, however, the Parties

agree that the Directors shall have the power to constitute an Executive

Committee from among themselves, which the Executive Committee will be

given authority to act on behalf of The Company in all matters to the

fullest extent permitted by law. Unless otherwise agreed, no member of

The Board shall receive remuneration from The Company.



2.5 Officers DePuy and Biedermann GmbH further agree that for so long as

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their respective ownership of shares in The Company remain in proportion

to each other as they are at The Company's incorporation, they will vote

their shares in The Company so as to provide for a President, who shall

be nominated by DePuy, one or more Vice Presidents, no less than one of

whom shall at all times be Biedermann, or his nominee, and such other

officers as may, in the discretion of The Board, be desirable to permit

The Company to operate effectively. Unless otherwise agreed, no officer

shall receive any remuneration from The Company.





ARTICLE III



ADDITIONAL CAPITAL REQUIREMENTS - -------------------------------



Should The Company require additional operating capital, it is the Parties' intention that such needs be met first by The Company borrowing funds from either one or both Parties to this Joint Venture Agreement or from a third party and that in any event such borrowing provides for the payment of interest equal to no less than prime plus Six Percent (6%), prevailing in the lending Party's country. In the event the laws of the United States or accounting principles, which are generally recognized or practiced in the United States with respect to companies of like nature and size, including without limitation such laws and/or principles relating to taxation, deductibility of expenses for tax or other purposes, thin capitalization or the ratio between The Company's debt and equity structure result in The Company violating such principle, and thereby losing the deductions of expenses or having debt treated in any way as equity, then, in that event, and only to the extent necessary to correct such violation of law and/or accounting principle, or to insure all debt is treated as debt, the Parties will make such additional capital contributions in proportion to their then current respective shareholdings. Unless otherwise agreed, such additional contributions shall be made by converting The Company's indebtedness to each Party into equity to an extent that results in the desired debt to equity ratio under the accounting principles. If, thereafter, additional capital contributions are required to achieve the desired ratio, they will be made as set forth above. Thereafter, if at any time The Company shall not have sufficient working capital (after taking into account all bank and other facilities available to it) to





pay its debts as they fall due during the period of at least one year thereafter, the Parties will forthwith introduce such additional capital contributions, in proportion to their then current respective shareholdings, as are needed in order to put The Company in a position where it is and will be able to pay its debts as aforesaid.



ARTICLE IV



COMPENSATION - ------------



Upon execution of the Joint Venture Agreement and the occurrence of the Conditions Precedent set forth in Article XIV and the receipt of instructions from Biedermann specifying where and when to do so, DePuy Motech will pay to Biedermann or to whomsoever Biedermann may designate, the additional sum of * Dollars ($ *) ,as full and complete reimbursement to Biedermann and to the Biedermann companies for his and their past research, development and other efforts to develop MOSS and MOSS Miami, as payment for goodwill and as added consideration for entering into this Agreement, and the Various Agreements and persuading the Biedermann Companies and other third parties to enter into the Various Agreements.



ARTICLE V



PURPOSE - -------



The purpose of the Joint Venture and The Company shall be to combine the existing development, design, talents and resources of the Biedermann Companies with the manufacturing and distribution abilities of DePuy to develop, design and manufacture and market Products, as well as to permit their sale by The Company in The Territory through the selling organizations of DePuy and its affiliates. While the specific understanding between The Company and the Biedermann Companies, as well as between The Companies and Dr. Shufflebarger and Professor Harms are set forth in the Various Agreements, for purposes of avoiding any misunderstanding, the Parties hereby agree as follows: 5.1 Subject to certain temporary distribution restrictions relating to the

MOSS System in Europe and throughout the term of this Agreement, to no

more than two hospitals as set out in the Exclusive License Agreement

and Distribution Agreement, The Company is to acquire the right to make,

have made and sell Products, and to utilize the services of the parties

to the Various Agreements in this effort. 5.2 As compensation to Motech for providing The Company the manufacturing

and technical ability to make or have others make the MOSS System, The

Company will pay Motech compensation calculated at a rate equal to Four

Percent (4%) of the Net Sales Price of MOSS System not produced by

Motech or an outside vendor acting on behalf of Motech sold by The







* Confidential portions omitted and filed separately with the Commission.

Company anywhere in The Territory except Europe. Sales of MOSS System in

Europe will not this * compensation no matter where such MOSS System is

produced. Generally, it is the parties' intention that The Company sell

MOSS System products in the United States made for it by DePuy or by third

party vendors acting for DePuy, thereby incurring this financial obligation

on such sales, and that The Company sell MOSS System products in Europe

made for it by Motech or by third party vendors acting for Motech, thereby

not incurring any liability to pay this * Motech for these sales. Product

intended for sale in other than the United States or Europe shall be

produced as The Company may hereafter determine after due consideration is

given to all relevant factors, including the views of parties to this Joint

Venture Agreement.



5.3 Additionally, the parties intend that The Company pay royalties to Ort-Med

as the owner of Licensed Patents. Royalties paid to Ort-Med on MOSS System

sold in all parts of The Territory except Europe, shall be equal to *

Percent ( * %) of the Net Sales Price. With regard to the sale of MOSS

System in Europe. The Company shall pay Ort-Med royalties calculated as

follows:



a. * percent ( * %) of the Net Sales Price during the first five (5)

years following the execution of this Joint Venture Agreement.

Provided, however, at such time as the royalty produced in this sub-

paragraph plus the amount paid by Fehling as royalties after the date

of this Joint Venture Agreement, plus the amounts paid as

compensation to Motech under the Technology Agreement, plus the

amount of compensation paid under the Consulting Agreement to

Professor Harms equal * Dollars ($ * ), no further payments will be

made to Licensor .



b. * percent ( * %) of the Net Sales Price commencing on the first day

of the sixth year following the execution of this Joint Venture

Agreement and continuing for its remaining term.



These royalties are intended to be shared between Ort-Med's owners,

Biedermann, and Professor Harms and are intended to compensate them for

their future efforts to consult on or assist in the promotion of The MOSS

System and to continue their interaction with surgeons who use the MOSS

System referred to as the MOSS Study Group, as well as royalty for licensed







* Confidential portions omitted and filed separately with the Commission.



5.4 With respect to MOSS Miami Products, the parties intend The Company to sell

them throughout The Territory. In consideration of Motech's past and

continuing research and development activities, manufacturing, engineering

and clinical evaluation, The Company will pay compensation to Motech equal

to * percent (* %) of the Net Sales Price of MOSS Miami products sold by

The Company anywhere in The Territory except in Europe. The Company will

also utilize the services of Professor Harms and Dr. Shufflebarger and pay

them combined compensation equal to a total of * Percent (*%) of Net Sales

Price of MOSS Miami as set forth in the Consulting Agreement. With respect

to sales of MOSS Miami in Europe, The Company shall pay Motech compensation

as follows:



a. * percent (*%) of Net Sales Price of MOSS Miami during the first

five (5) years following the execution of this Joint Venture

Agreement. Provided, however, at such time as compensation

produced in this sub-paragraph plus the amount paid as royalty

for MOSS System under 5.3a above, plus the amount paid for New

Products under 5.5a below, plus the amount paid to Professor

Harms under the Consulting Agreement, plus the amount of

royalties paid by Fehling as royalties after the date of this

Joint Venture Agreement equal * Dollars($*), no futher payments

will be made to Motech.



b. * percent (*%) of Net Sales Price Of Moss Miami commencing on the

first day of the sixth year and continuing throughout the last

day of the tenth year of the term of this Joint Venture



c. * percent (*%) of the Net Sales Price commencing on the first day

of the eleventh year and continuing throughout the remaining term

of this Joint Venture Agreement.



5.5 With respect to New Products, the Parties intend that the Biedermann

Companies, most notably Motech, will provide all of the initial designs of

New Products conceived by Motech or others, produce prototypes and models

of them and perform mechanical and clinical testing, as well as computer

modelling on them to determine their safety and effectiveness and how best

to manufacture them. For these services, and subject to Paragraph 5.6

below, Motech will be compensated at a rate of * Percent (*%) of the Net

Sales Price of all New Products sold by The Company anywhere in The

Territory except Europe, and third parties shall be compensated as is set

forth in Paragraph 5.5 of the Technology Agreement. With respect to sales

of the New Product in Europe, The Company shall pay Motech compensation as

follows:







* Confidential portions omitted and filed separately with the Commission. a. * percent (*%) of the Net Sales Price of New Product occurring during the

first five (5) years following the execution of this Joint Venture

Agreement. Provided, however, at such time as the compensation provided for

in the sub-paragraph plus the amounts paid under 5.3a) and 5.4a above, plus

the amount of royalties paid by Fehling as royalties after the date of this

Joint Venture Agreement, plus the amount paid to Professor Harms under the

Consulting Agreement equal * Dollars ($*), no futher payments will be made.



b. * percent (*%) of the Net Sales Price of New Products commencing on the

first day of the sixth year of the term of this Joint Venture Agreement and

continuing for ten (10) years after the first sale of such New Product.



c. Thereafter, * percent (*%) of the Net Sales Price of such New Product.



5.6 The Parties agree that The Company will help fund the research and

development on New Products by reimbursing Motech for one half of the

expenses incurred in this effort and the parties further agree that The

Company will recoup these costs from future compensation otherwise payable

to Motech all as set forth in the Technology Agreement.



ARTICLE VI



MANUFACTURE OF PRODUCTS - -----------------------



The Parties intend that The Company will not manufacture Products. Rather they intend that Motech and DePuy will each manufacture products for The Company or contract with outside vendors to manufacture such products. Initially, the Parties intend that Motech will perform these Manufacturing Services for The MOSS System and MOSS Miami products that are sold in Europe and such other parts of The Territory as The Company may hereafter decide, and that DePuy, after receiving the information and assistance called for in the Technology Agreement, will perform Manufacturing Services on The MOSS System and MOSS Miami products sold in the United States and such other parts of The Territory as The Company may hereafter decide. In any event, the Parties agree that Motech will supply Manufacturing Services for the MOSS System and MOSS Miami for sales in Europe and such other parts of The Territory as The Company may, in its discretion, hereafter decide until at least the first day of January, 1994. Thereafter and until the first day of January, 1998, the Parties agree that Motech will continue to supply Manufacturing Services to MOSS System and MOSS Miami for











* Confidential portions omitted and filed separately with the Commission.





sales in Europe and such other parts of The Territory as The Company may decide, if the Cost is competitive to what the Cost would be if such Products were produced by or on behalf of DePuy. New Products will be manufactured as the Parties may hereafter agree, but always after Motech fulfills its obligations under the Technology Agreement. After Products are manufactured by ...