Worldwide Medical Product Distribution Agreement

WORLDWIDE MEDICAL PRODUCT DISTRIBUTION AGREEMENT


This Worldwide Medical Product Distribution Agreement (the "Agreement") is effective as of May 31, 1996, between Collagen Corporation, a Delaware corporation with an address at 2500 Faber Place, Palo Alto, California 94303 ("Distributor") and Tissue Technologies, Inc., a corporation organized under the laws of California, with its principal place of business at 1370 Green Street, San Francisco, California 94109 (the "Supplier").


WHEREAS, Supplier is engaged in the development of products comprised of E-PTFE tubes for soft tissue augmentation and management of facial wrinkles;


WHEREAS, Distributor is engaged in the marketing and sale of medical products for soft tissue augmentation and management of facial wrinkles;


WHEREAS, Distributor wishes to be appointed Supplier's exclusive distributor of the Products in the Territory (as such terms are hereinafter defined), and Supplier wishes to appoint Distributor as its sole exclusive distributor;


WHEREAS, Distributor wishes to purchase Product(s) from Supplier, and Supplier wishes to sell Product(s) to Distributor for exclusive marketing and sale of the Product(s) in the Territory on the terms and subject to the conditions set forth herein.


NOW THEREFORE, in consideration of the premises and of the mutual covenants of the parties hereto, the parties agree:


1. DEFINITIONS


1.1 "First Commercial Sale" shall mean the first transfer of title to a Product by Distributor to a third party, excluding Distributor's subsidiaries or affiliates, for monetary consideration.


1.2 "Government Agency" shall include all local, national, and supranational bodies with the legal authority to establish rules, regulations, standards and guidelines (or to issue certificates of compliance with these), covering the design, manufacturing, and marketing of the Products in the Territory. This will include without limitation the United States Food and Drug Administration.


1.3 "Initial Period" shall mean the term beginning as of the First Commercial Sale of Product(s) and ending on *** .


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1.4 "Intellectual Property Rights" shall include all patents, copyrights, and other proprietary rights or applications therefor, including Supplier's rights under the Exclusive License Agreement between Supplier and The Regents of the University of California ("The Regents") dated December 1, 1993 appended hereto as Exhibit A, which the Supplier may at any time during the term of this Agreement own, license, adopt, use, or register with respect to the Products.


1.5 "Net Sales" means the amounts actually received from the sale of Products by Distributor or its subdistributor for cash or other forms of monetary consideration, in accordance with Generally Accepted Accounting Principles, less the following deductions: (a) allowances, rejections, returns, and volume discounts, (b) freight , transport packaging, insurance charges associated with transportation, and (c) taxes, tariff, or import/export duties.


1.6 "Product(s)" means any and all of those products described in Schedule A, and identified by a separate Product Specification (as hereinafter defined).


1.7 "Product Specification" shall mean any document that defines the manufacturing requirement of a Product, including but not limited to packaging configuration, labeling, material components, and information relating to material composition and release tests that may be certified pursuant to a Certificate of Analysis. Each Product Specification shall be incorporated into this Agreement as an Appendix to Schedule A.


1.8 "Territory" means any and all of the countries, or parts thereof, referred to in Schedule B.


2. APPOINTMENT OF THE DISTRIBUTOR


2.1 Supplier hereby appoints the Distributor, and the Distributor hereby accepts this appointment, as Supplier's sole and exclusive (subject to Section 5.9, Minimum Purchase) authorized distributor, with the right to grant subdistributorships, for the promotion, marketing, distribution and sale of Products in the Territory. As a result, Supplier will not sell Products in the Territory, other than through Distributor.


3. MILESTONE PAYMENTS


3.1 So long as the Supplier is not in breach of any material provision of this Agreement, and upon the occurrence of the following events, the Distributor shall make the following milestones payments to the Supplier:


(a) *** upon the execution of this Agreement;


(b) *** within *** days of Supplier's notice to the Distributor of the issuance of a United States patent claiming Supplier's soft tissue augmentation device; and


(c) *** upon *** of the Effective Date.


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-2- 3 4. PRICE, FORECASTS, PURCHASE ORDER, DELIVERY, ACCEPTANCE, TRANSFER OF
TITLE, FEES AND PAYMENT


4.1 Prices. Subject to the provisions of this Agreement, the Supplier shall sell Products to the Distributor at the unit prices set forth in Schedule A. The Purchase Price constitutes payment for the manufacturing cost of the Products and royalties due Supplier for Distributor's exclusive distribution right. Nothing herein shall obligate the Distributor to pay any additional past or future royalties to any third party, unless expressly included in this Agreement. The unit price set forth in Schedule A includes the cost of the Product, all expenses relating to packaging and labeling of the Products, all freight insurance premiums, and all freight charges to the mutually agreed upon delivery site(s) listed in Schedule D.


4.2 Forecasts. The Distributor shall provide non-binding, rolling twelve (12) month forecasts of Distributor's anticipated requirements of Products, updated *** , throughout the term of this Agreement. Such twelve (12) month forecast shall be based on Distributor's fiscal year cycle, beginning on July 1st and ending on June 30th.


4.3 Purchase Orders.


(a) Purchase orders shall be submitted by the Distributor in writing. During the Initial Period, purchase orders in any given year must meet the minimum purchase requirements set forth in Schedule C. In the event that the Supplier is unable to fulfill the terms of any purchase order, the Supplier shall so inform the Distributor in writing within five (5) business days of the Supplier's receipt of such purchase order. Any orders in the ordinary course of business, consistent with normal ordering practices, that are rejected or unfullfilled by Supplier shall be deducted from the minimum purchase requirement, in any given year, as set forth in Schedule C. Purchase orders shall be deemed accepted and binding by the Supplier unless the Supplier rejects any purchase order in writing by return facsimile within five (5) business days of the Supplier's receipt of such purchase order.


(b) Distributor, may at its option, either reschedule delivery of any Products or cancel any order or portion thereof, upon written notice to Supplier. A "reschedule" is defined as changing all or any portion of those Products scheduled for shipment on any ship date by moving the ship date later in time. Distributor shall have a right to cancel or reschedule any order for later shipment provided such request is received by Supplier at least thirty (30) days in advance of the original ship date.


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4.4 Delivery. Products shall be sold to the Distributor F.O.B. delivery site(s) listed in Schedule D. Supplier shall deliver an invoice to Distributor for each unit of Product sold to Distributor pursuant to Distributor's purchase order. Distributor agrees to conform its purchase orders to the minimum quantity of Products shipped to a particular delivery site as set forth in Schedule D.


4.5 Acceptance. The Distributor shall within ten (10) business days inspect each shipment of Products after delivery. In the event the Distributor determines that any shipment, or part thereof, is incomplete, damaged or defective, the Distributor shall so inform the Supplier in writing within such ten (10) business days. All Products shall be deemed accepted by the Distributor unless any such delivery, or part thereof, is rejected in writing by return facsimile within such ten (10) business days period.


4.6 Transfer of Title. Title to and ownership of Products shall pass to the Distributor upon acceptance by the Distributor, and the Distributor shall thereafter be responsible for any damage or loss of such Products. Supplier shall bear all risk of loss of, or damage to, all units of Products up to the time the Products are accepted by Distributor.


4.7 Fees. The Distributor shall be responsible for payment of customs and other duties and any taxes in the Territory and for obtaining any import and export licenses that may be required by proper authorities in the Territory.


4.8 Payments. Payment for Products shall be made in United States dollars. During the Initial Period, Distributor shall pay Supplier within *** after receipt of an invoice, and acceptance of the Products by the Distributor. Subsequent to the Initial Period, Distributor shall pay Supplier in arrears, within *** after Distributor's quarter end close. The calculation for such payments are described in Schedule A.


5. GENERAL OBLIGATIONS OF THE DISTRIBUTOR


5.1 Inventory Levels. The Distributor shall maintain an inventory of Products reasonably sufficient to meet *** of anticipated sales of the Products in the Territory. The Distributor shall store the Products under secure conditions and in compliance with all pharmaceutical or medical device laws applicable to storage of the Products.


5.2 Independent Agent. The Distributor shall conduct its business in the purchase and resale of Products as a principal for its own account and at its own expense and risk. The Distributor, its agents and employees are not the legal representatives, employees or agents of Supplier for any purpose and have no right or authority to incur any expenses on behalf of Supplier or to assume or create, in writing or otherwise, any obligations of any kind, express or implied, in the name of or on behalf of Supplier. Nothing contained in this Agreement shall create the relationship of partners, joint ventures, employer and employee, principal and agent, or any similar relationship, between Supplier and the Distributor.


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5.3 Regulatory Approvals and Compliance.


(a) Excluding the United States, Distributor shall obtain and own all regulatory approvals, certificates, registrations, licenses, and permits related to the Products unless prohibited by local law. In the event that necessary approvals, certificates, registrations, licenses, and permits required to sell and distribute the Products in the Territory are required by local law to be owned by, or held in the name of Supplier, Supplier agrees that it shall provide reasonable assistance to Distributor in order to obtain any and all applicable regulatory approvals required by Government Agencies under the laws and/or regulations of any jurisdiction in order to market the Products within the Territory, including but not limited to, meeting relevant standards and guidelines, preclinical, clinical, and safety approvals required by Government Agencies. Regulatory approvals, certificates, registrations, licenses, and permits filed during the term of this Agreement, excluding U.S. filings, and in the name of Supplier shall be assigned to Distributor upon termination of this Agreement. Distributor shall promptly inform Supplier of any changes in regulatory or compliance status that might significantly affect the marketing of the Products in the Territory;


(b) the Distributor agrees not to sell or distribute the Products in any country within the Territory until such time as all product licenses and approvals required by the laws of such country have been obtained;


(c) the Distributor shall comply with any recalls for the Products issued by Supplier or applicable Government Agencies;


(d) the Distributor shall maintain a record of any customer complaints or comments and promptly forward information relating to such complaints or comments to Supplier; the Distributor shall also disclose to Supplier promptly via facsimile any Medical Device Report ("MDR") related to the Products subject to the Code of Federal Regulations, 21 CFR Part 803, and/or subject to the Medical Device Vigilance System of the European Commission Guidelines, MED DEV 03/93, rev 2.


5.4 Sales Effort. The Distributor shall employ an appropriate number of sales personnel, maintain a suitable organization, and use its commercially reasonable efforts to actively market and sell the Products in the Territory.


5.5 Marketing Effort. The Distributor shall use its commercially reasonable efforts to promote the Products to persons engaged in all appropriate medical specialties, including but not limited to plastic surgery, dermatology, ENT (ear, nose, and throat), aesthetic and cosmetic medicine and other related areas of the medical profession.


5.6 Liability Insurance. The Distributor shall, if required by local law, obtain, and pay premiums and all costs associated with liability insurance in an amount sufficient to satisfy local laws and commercial practices.


5.7 License Fees and Taxes. The Distributor shall pay all license fees, taxes and other fees including, but not limited to, sales, use, service use, occupation, service occupation, personal property and excise taxes, assessments or taxes which may be assessed or levied by any national, state or local government, and any departments and subdivisions thereof, against the Distributor for the distribution and sale of the Products which are ordered by the Distributor and are under the Distributor's control.


5.8 Import/Export Licenses. The Distributor shall, at its own expense, pay all import and export licenses and permits, pay customs charges and duty fees, and take all other actions required to accomplish the export and import of the Products purchased by the


-5- 6 Distributor; the Distributor understands that Supplier is subject to regulation by agencies of the U.S. Government (including without limitation the U.S. Department of Commerce) which prohibit export or diversion of certain technical products to certain countries; the Distributor warrants that it will comply in all respects with the export and re-export restrictions set forth in the export license for every Product purchased under this Agreement.


5.9 Minimum Purchase Requirement.


(a) During the Initial Period and subject to Section 4.3(a), the Distributor agrees to purchase the number of units of Product(s) represented by the United States dollar amount set forth for each time period in Schedule C. In the event that (i) the Distributor fails to satisfy such minimum purchase requirement during the Initial Period, (ii) the Supplier provides written notice of such failure to the Distributor, and (iii) the Distributor fails to cure such condition within ninety (90) day of its receipt of such notice, the Supplier shall have the option to either (i) revert Distributor's exclusive distribution right to a non-exclusive distribution right, or (ii) terminate this Agreement.


(b) For each twelve-month period after the Initial Period and until the termination of this Agreement, to maintain Supplier's exclusive appointment of Distributor, the Distributor agrees to purchase the number of units of Product(s) represented by the United States dollar amount set forth for each time period in Schedule C. In the event that (i) the Distributor fails to satisfy such minimum purchase requirement for any twelve-month period subsequent to the Initial Period, (ii) the Supplier provides written notice of such failure to the Distributor, and (iii) the Distributor fails to cure such condition within ninety (90) day of its receipt of such notice, the Distributor shall be deemed to be a nonexclusive distributor of the Products and the Supplier shall be entitled to appoint another nonexclusive distributor for the Territory. If Distributor's rights become non-exclusive, then all minimum purchase requirements shall become null and void.


(c) Within the United States or the European Economic Area, if in any given period (i) the Supplier is unable to meet all applicable regulatory requirements by Government Agencies of a particular country relating to Supplier's obligations under this Agreement, and therefore Distributor is unable to obtain regulatory approval in such particular country, or (ii) the Supplier and Distributor fail to agree upon Product Specifications within *** after receiving all applicable regulatory approvals required by Government Agencies in a particular country, and Distributor's supply of Product(s) is interrupted, then Distributor's minimum purchase requirement for such interrupted period shall be reduced by *** for so long as Supplier is unable to meet Distributor's supply requirement.


5.10 Financial Audit. Payments made by Distributor to Supplier, excluding payments made pursuant to an invoice for delivery of Product(s) during the Initial Period, shall be subject to reasonable audit by Supplier upon sixty (60) days prior written notice, and at Supplier's expense, not more often than once in any twelve month period. Supplier's audit shall be limited to sales reports, order entry, and shipping records on Product(s). If such audit discloses an error between reported numbers and actual numbers by 5% or more, then Distributor shall pay Supplier's audit expenses.


6. GENERAL OBLIGATIONS OF SUPPLIER


6.1 Fulfillment of Purchase Orders. Following receipt and acceptance of a purchase order from the Distributor for Products, Supplier shall use all commercially reasonable endeavors to fulfill such purchase order without undue delay (subject, however, to normal


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-6- 7 manufacturing lead times) and to deliver the Products in accordance with the Distributor's instructions.


6.2 Initial Product Delivery. Supplier shall use its commercially reasonable efforts to manufacture and deliver at least *** units of Products by *** .


6.3 Manufacturing Compliance. Supplier shall manufacture and deliver Products which meet the Product Specifications, including packaging and labeling in multiple languages as needed, mutually agreed upon by the parties and which conform at all times to applicable regulations. Supplier shall have the primary responsibility for manufacturing compliance of the Products in the Territory as required by Government Agency rules and regulations, including but not limited to, recalls of Products. Supplier shall provide at least ninety (90) days written notice to the Distributor regarding any proposed changes, modifications, deletions or additions to be made to the Product(s) and shall consult with the Distributor prior (i) to discontinuing the manufacture, supply or sale of any type of Product, (ii) to making changes in materials or design, or (iii) to adding improvements to any Product. Supplier agrees that prior to implementing any manufacturing changes, it will have received notice from Distributor that such changes have been approved by all relevant Government Agencies.


6.4 Certification, Audits, and Second Supply. The Supplier shall use its commercially reasonable efforts to qualify its manufacturing contractor(s) as ISO certified facilities by *** , and shall obtain the permission of its manufacturing contractor(s) to allow the Distributor to audit the facilities of such manufacturing contractor(s). The Supplier shall use its commercially reasonable efforts to establish (or contract for) a second Product manufacturing capability promptly upon the first sale of a commercial lot of Product.


6.5 Regulatory Assistance. Supplier agrees that it shall provide reasonable assistance to Distributor in order to obtain any and all applicable regulatory approvals required by Government Agencies under the laws and/or regulations of any jurisdiction in order to market the Products within the Territory, including but not limited to, meeting relevant standards and guidelines, preclinical, clinical, and safety approvals required by Government Agencies. Supplier shall promptly inform Distributor of any changes in regulatory or compliance status that might significantly affect the marketing of the Products in the Territory.


6.6 Regulatory Compliance. Upon receipt of a notification by Distributor, relating to an MDR, the Supplier shall notify the Food and Drug Administration within five (5) business days in compliance with 21 CFR Part 803, and/or in accordance with the Medical Device Vigilance System of the European Commission Guidelines, MED DEV 03/93, rev 2.


6.7 Marketing Assistance. Supplier shall, at its own expense, from time to time and at the request of the Distributor, provide the Distributor with information, including but not limited to clinical protocol and data results, and assistance reasonably related to the marketing of Products in the Territory. Supplier shall, at its own expense, make the mutually agreed upon quantities, not to exceed *** units per year, of its promotional materials and demonstration products (not for human use), including in multiple languages as needed, available to the Distributor, for Distributor's use in promoting the Products in the Territory. Supplier's mutual agreement to make the quantities of demonstration product shall not be unreasonably withheld.


6.8 Prelaunch Assistance. The Supplier will, at its own expense, provide such Distributor training, marketing, and clinical support as reasonably requested by the Distributor in order for Distributor to effectively launch the marketing and sales of Products in any country of the Territory. If such training, marketing and clinical support requires Supplier to travel outside


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-7- 8 the Northern California Bay Area, then Distributor shall only pay Supplier's travel and out-of pocket expenses provided that Supplier provides reasonable documentation for such expenses. Such time commitment shall not exceed 35 hours, exclusive of travel time, over the twelve month period after the Effective Date.


6.9 Postlaunch Assistance. The parties anticipate that the Distributor and Drs. Robert Schindler and Corey Maas, founders of the Supplier, will enter into consulting arrangements separately for Supplier's attendance at major national and regional trade shows and educational forums where similar or competitive products are displayed and to present the Products fairly at such shows and workshops.


7. INTELLECTUAL PROPERTY


7.1 Grant of License.


(a) The Supplier hereby grants to the Distributor the sole and exclusive, worldwide, fully-paid up license, with the right to sublicense, under the Supplier's Intellectual Property Rights and subject to the rights granted by The Regents, to use such Intellectual Property Rights solely in connection with the sale and other distribution of Products in the Territory.


(b) Distributor shall have a first right of refusal to distribute any biocompatible product owned by Supplier for use in soft tissue augmentation and management of facial wrinkles. The Distributor and Supplier agree to negotiate in good faith the terms of such distribution right, including but not limited to any manufacturing obligations, and shall cooperate in the finalization of a definitive agreement within *** after Distributor's notice of acceptance of such distribution right.


7.2 Assistance. The Distributor shall promptly notify the Supplier (i) of any claims or objections that the Distributor's use of the Intellectual Property Rights in connection with the marketing or sale of the Products may or will infringe any third party patent, copyright, trademarks, trade names, or other proprietary rights, and (ii) of any and all third party infringements, imitations, illegal use, or misuse of the Intellectual Property Rights which come to its attention.


7.3 Patent Issuance Fee. In the event and solely upon the occurrence of the issuance of a United States patent claiming Supplier's soft tissue augmentation device described in Schedule A, the Distributor shall pay Supplier the total sum of *** which represents payment for the license fees set forth in Section 4.1 of the Exclusive License Agreement, dated December 1, 1993, between The Regents and the Supplier. Supplier acknowledges that it is solely responsible for paying The Regents any and all license fees pursuant to Section 4.1 of the Exclusive License Agreement.


7.4 University of California. Subsequent to the first quarter in which the Distributor makes sales of the Product, and each quarter thereafter in which the Distributor makes sales of the Products, the Supplier will make the royalty payments due to The Regents pursuant to Section 5 of the Exclusive License Agreement, dated December 1, 1993, between The Regents and the Supplier. Distributor shall pay Supplier the royalty payments due to The Regents pursuant to Section 5 of the Exclusive License Agreement, dated December 1, 1993, between The Regents and the Supplier. If the Distributor's rights become non-exclusive, then royalty payments will be limited to those in Section 5.1 of the Exclusive License Agreement and will not include the minimums in Section 5.5.


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7.5 Trademarks. Nothing in this Agreement will be construed as conferring any right to use in advertising, pubilicity, or other promotional activites any name, trade name, trademark, or other designation of either party hereto by the other (including contraction, abbreviation or simulation of any of the foregoing). Distributor shall solely own and maintain, at its expense, any and all trademarks used in its distribution of the Products in the Territory. Supplier shall not register any such trademark(s) of Distributor in any country of the Territory for its own or third party use.


8. CONFIDENTIAL INFORMATION


8.1 "Confidential Information" shall mean any confidential, secret, or proprietary information relating to the scientific and/or business affairs of either party, regardless of whether such information is specifically designated as confidential, and regardless of whether such information is in written, oral, electronic, or other form. Such Confidential Information may include, but is not limited to, trade secrets, know-how, inventions, technical data or development activities, product and marketing plans, customer and supplier information, and legal and regulatory activities. Each party shall treat as confidential all Confidential Information provided by the other party, shall not use such Confidential Information except as expressly set forth herein or otherwise authorized in writing, shall implement reasonable procedures to prohibit the disclosure, unauthorized duplication, misuse or removal of the Confidential Information and shall not disclose such Confidential Information to any third party. Without limiting the foregoing, each of the parties shall use at least the same procedures and degree of care to prevent the disclosure of Confidential Information as it uses to prevent the disclosure of its own confidential information of like importance, and shall in any event use no less than reasonable procedures and a reasonable degree of care.


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