PRODUCT DEVELOPMENT AND SUPPLY AGREEMENT

EXHIBIT 10(kk)


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Product Development and Supply Agreement


This Product Development and Supply Agreement, dated as of August 24, 2001 (hereinafter the "Effective Date"), sets forth the agreement between BIOMET, INC., an Indiana corporation ("Biomet"), having an office and principal place of business at 56 East Bell Drive, P.O. Box 587, Warsaw, Indiana 46581-0587, and ORGANOGENESIS INC., a Delaware corporation ("OI") having an office and principal place of business at 150 Dan Road, Canton, Massachusetts 02021.


BACKGROUND


WHEREAS, OI owns or has licenses for technology and is developing certain products relating to the use of natural acellular biomaterials for applications in human musculoskeletal tissues including bone and tissue, and is seeking funding to further its research and development of products using such technology through establishment of a sponsored product development program; and


WHEREAS, Biomet is willing to fund such further product development under the terms and conditions of this Agreement, and


WHEREAS, OI is willing to exclusively sell to Biomet such products for resale by Biomet for certain applications in human musculoskeletal tissues including bone and tissue as set forth herein; and


WHEREAS, Biomet is willing to purchase its requirements of such products for such application exclusively from OI as set forth herein; and


WHEREAS, the Parties acknowledge that as not all proposed products may be successfully developed or commercialized, the Parties agree that Biomet may, while retaining the rights for other products, return to OI the rights to purchase for resale the products which cannot be successfully commercialized in accordance with the terms and conditions of this Agreement;


NOW, THEREFORE, in consideration of the mutual representations, warranties and promises contained herein, Biomet and OI agree as follows:


Article 1 - Certain Definitions


When used herein, the following terms shall have the meanings set forth below:


1.1 "Affiliate" shall mean any corporation or other entity that controls, is controlled by, or is under common control with, a Party.


1.2 "Agreement" shall mean this Product Development and Supply Agreement.


1.3 "Biomet" shall mean Biomet, Inc., an Indiana corporation, and any Affiliate in which Biomet controls either directly or indirectly at least 50% dollar value of the stock or voting rights.


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1.4 "Biomet Technology" shall mean technology developed solely by Biomet after the Effective Date if used in the manufacture of Products, as hereafter defined, under this Agreement.


1.5 "Clinical Investigation" shall mean each investigation on humans, and the data derived therefrom, for a proposed or Launched Product, as hereafter defined.


1.6 "FDA" shall mean the U.S. Food and Drug Administration in the United States and, for regulatory matters in foreign countries, the competent regulatory agencies and authorities in such countries.


1.7 "FortaFlex" shall mean a natural acellular collagen derived from porcine small intestine embodying OI Technology, as hereafter defined. FortaFlex is a trademark of OI.


1.8 "Field" shall mean each of the following [***] market areas: [***] (each, separately, referred to as a "Product Application"), but excluding FortaFlex used as a [***].


1.9 "Improvement(s)" shall mean any enhancement or improvement to any Product invented or conceived by or on behalf of OI or jointly by both Parties during the Term, whether or not patentable.


1.10 "Joint Technology" shall mean Proprietary Technology Rights, as hereafter defined, developed jointly by both Parties during the Term.


1.11 "Launch(ed)" shall mean the first commercial sale of a Product.


1.12 "Management Committee" shall mean the committee described in paragraph 3.1 of this Agreement.


1.13 "Net Sales" shall mean the total of all amounts invoiced by Biomet or its authorized Affiliates and sublicensees for sales of Products to independent, unrelated entities, less only the following deductions: (i) trade and/or quantity discounts actually allowed and taken in such amounts as are customary in the trade; (ii) sales and other excise taxes and duties paid, absorbed or allowed; and (iii) amounts repaid or credited by reason of rejection, defects or returns, or because of retroactive price reductions.


1.14 "OI" shall mean Organogenesis Inc., a Delaware corporation, and any subsidiary or Affiliate thereof in which OI controls either directly or indirectly at least 50% of the stock or voting rights.


1.15 "OI Technology" shall mean the Proprietary Technology Rights developed or owned solely by OI that relate to FortaFlex and/or Products, including but not limited to Patents.


1.16 "Party or Parties" shall mean either or both Biomet and OI, as the case may be.


1.17 "Patents" shall mean the patents and patent applications listed in Appendix A as the same may be amended from time to time throughout the Term to include patents issued after the Effective Date that relate to OI Technology or Joint Technology, and any substitutions,


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divisionals, reissues, re-examinations, continuations, continuations-in-part, and inventor certificates and all foreign counterparts of any such patent or application, said patents having one or more valid patent claims that read upon one or more of the Products.


1.18 "Product" shall mean any device or product containing FortaFlex that is sold by OI to Biomet for resale by Biomet under this Agreement for use in one or more Product Applications.


1.19 "Product Plan" shall mean the written document described in Article 4.1.1.


1.20 "Proprietary Information" means all materials, products, trade secrets, confidential or proprietary information of a Party designated as such in writing by the Party, whether by letter or by the use of an appropriate proprietary stamp or legend, which is disclosed to the other Party. Notwithstanding the foregoing, information which is orally or visually disclosed to the recipient Party by the disclosing Party, or is disclosed in writing without an appropriate letter, proprietary stamp or legend, shall be deemed Proprietary Information if the disclosing Party, within thirty (30) days after such disclosure, delivers to the recipient Party a writing summarizing the orally, visually or written disclosed information in sufficient detail to advise the recipient Party adequately of its proprietary nature or confidentiality.


1.21 "Proprietary Technology Rights" shall mean all rights owned, licensed or developed heretofore by OI, or hereafter during the Term jointly by both Parties, relating to any and all Regulatory Approvals, Clinical Investigations, discoveries, modifications, know-how, trade secrets, inventions (whether or not patentable), patent applications and patents (including, without limitation, all substitutions, divisionals, reissues, re-examinations, continuations, continuations-in-part, and inventor certificates and all foreign counterparts of the foregoing), data, information or physical, chemical or biological materials useful or necessary to the development or manufacture of Products. It includes Improvements.


1.22 "Regulatory Approval" shall mean all approvals and clearances by regulatory authorities (including but not limited to FDA), which are necessary and required to manufacture, sell and ship commercially a Product in each country in the Territory that requires such approval and clearance.


1.23 "Specifications" means the characteristics for any formulation of a Product agreed to by the Management Committee to which each Product is manufactured for commercial sale, consistent with all applicable regulatory requirements, including, but not necessarily limited to FDA Quality System regulations. As agreed to and as amended from time to time by agreement of the Management Committee, Specifications for each Product shall be attached to this Agreement as part of Appendix B, and thereafter be deemed a part of this Agreement.


1.24 "Study" or "Studies" shall mean, as to any Product, one or more investigations performed to evaluate the overall risk-benefit relationship of an interventional treatment in vitro, or in animals (but not in humans), and that, collectively, can provide scientific bases for physician labeling and Regulatory Approval.


1.25 "Term" shall mean the period during which this Agreement is in effect, commencing on the Effective Date and ending on the date of the last to expire of the Patents.


1.26 "Territory" shall mean all the countries of the world.


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1.27 "Trademark" shall mean any proprietary mark or marks jointly agreed to by the Management Committee to be applied to or identified with any Product as a proprietary identification.


Article 2 - Licenses Granted to Biomet


2.1 Exclusive License to Biomet. Subject to the terms and conditions of this Agreement, OI hereby grants to Biomet and Biomet hereby accepts from OI the exclusive rights to distribute, market, offer to sell, and sell, but not make Products for use in the Field throughout the Territory. OI shall neither, directly or indirectly, distribute, market, offer to sell, or sell Products for use in the Field through its own sales force or through other distributors, dealers or agents, nor grant any such rights to market, offer to sell, or sell Products to its own sales force, other distributors, dealers, or agents.


2.2 Trademarks.


2.2.1 Selection and Ownership. Products shall be marketed and sold by
Biomet throughout the Term bearing a Trademark or Trademarks
selected by the Management Committee and owned and registered by
Biomet at its expense.


2.2.2 OI Use. Upon execution of an appropriate royalty-bearing license
to Biomet, OI may use any Trademark on any Product for use
outside the Field.


2.2.3 OI Trademarks. In addition to any Trademark selected by the
Management Committee, the finished package of any Product sold
by Biomet shall conspicuously bear a proprietary trademark owned
and selected solely by OI and used to identify FortaFlex
technology.


Article 3 - Administrative Structure, Management Control and Cooperation


3.1 Management Committee. The Parties shall form a Management Committee consisting of one voting member designated by each Party. Additional representatives of either Party may attend meetings, but shall not have voting rights. The Management Committee shall have overall responsibility for oversight of each Product Plan. The Management Committee may create subcommittees, as it deems appropriate (as, for example, a design review board).


3.2 Decisions. Decisions of the Management Committee shall be by unanimous vote of both members, each of whom shall be entitled to one vote. In the event of an inability of the Management Committee to obtain a unanimous vote on any issue, at the request of either Party the matter at impasse shall be submitted to the Chief Executive Officers of both Parties, or a designee of either CEO with decision-making authority, who shall negotiate a good faith resolution to the impasse.


3.3 Meetings. Normally, meetings of the Management Committee will be held approximately 4 times a year throughout the Term to coincide with significant milestones in each Product Plan. Additional meetings may be held at the request of a Party to review the activities under each Product Plan approved by the Management Committee.


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3.4 Information Exchange. During the Term, personnel of either Party may find it necessary or desirable to visit laboratories or facilities of the other to observe or inspect such work and become familiar with the laboratory methods and techniques that are used to produce the Products. The Parties shall accommodate and arrange these visits to such facilities in good faith, it being understood that neither Party will make unreasonable demands in this regard and each will make advance arrangements for such visits. During such visits, neither Party shall be obligated to provide any technology or information for inspection by the other that is not related to the Products.


3.5 Third Party Technology. If either Party during the Term incurs substantial expenses in connection with obtaining a license to technology from a third party, and that license would, if embodying technology conceived by either Party or both Parties, amount to an Improvement, then the other Party shall, if it wishes to include the in-licensed technology in Products subject to this Agreement in order to receive the benefits of its inclusion under this Agreement, bear a reasonable share of the license expense, as mutually agreed between the Parties.


3.6 Standards in Excess of Legal Requirements. Unless approved by the Management Committee, neither Party shall be required to exceed the requirements of any regulation or law in the development, testing, manufacture or marketing of Products.


Article 4 - Product Application Development


4.1 Product Plan


4.1.1 Contents. A Product Plan is a written document drafted by the
Parties describing the Product or Products proposed for use in a
Product Application. There shall be one, and only one, Product
Plan for each Product Application. Each Product Plan shall
define and justify each Product in a Product Application from
both a technical and commercial perspective. A Product Plan
shall include an outline of the development process and the key
risks and assumptions for each Product. Specifications may be
added to a Product Plan after its approval by the Management
Committee, or amended thereafter to reflect increasing knowledge
of that Product throughout development. Each Product Plan shall
also propose minimum annual product sales for each proposed
Product as required by Article 7.


4.1.2 Preparation and Review. A draft recommended Product Plan for
each Product Application shall be prepared by the Parties as
follows:


4.1.2.1 The Product Plan for [***] Product Application shall be attached
hereto as Appendix C and deemed approved by the Management
Committee.


4.1.2.2 The Product Plan for each of the remaining [***] Product
Applications shall be drafted by the Parties periodically after
the Effective Date, at the rate of at least one every [***].


4.1.3 Approval. Each Product Plan shall be reviewed and approved by
the Management Committee within 60 days of its initial draft by
the Parties. Approval of the Product Plan signifies that the
Product or Products


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described therein, as the case may be, have proceeded to the
design specification phase of design control.


4.1.4 Remedies for Failure to Approve: If:


4.1.4.1 the Management Committee does not approve the Product
Plan for a Product Application within 60 days of its
submission to the Management Committee, and if


4.1.4.2 the CEO's of both Parties do not subsequently approve
such a Product Plan as described in Article 3.2 within
30 days of the failure of the Management Committee to
approve the Product Plan as described in Article
4.1.4.1, and if


4.1.4.3 thereafter an arbitrator has not issued an award
approving a Product Plan after arbitration commenced
pursuant to Article 18 by either party within 30 days of
the failure of the CEO's to approve the Product Plan as
described in Article 4.1.4.2, then


4.1.4.4 OI shall be deemed free thereafter to manufacture, sell,
have sold or sublicense to any person or entity each
Product proposed in each Product Plan that the
Management Committee has failed to timely approve. OI
shall also be deemed free to use, disclose and
sublicense any Proprietary Technology Rights related to
each such proposed Product in each such Product Plan;
provided, however, if OI wishes to use any Biomet
Technology to make, use, sell, or offer to sell any such
proposed Product, then Biomet agrees to license such
Biomet Technology for such purposes under mutually
agreed upon and commercially reasonable terms and
conditions consistent with prevailing terms and royalty
rates in the medical device industry. The rights herein
granted to Biomet to obtain an exclusive license for
each such proposed Product shall thereafter be deemed
void and of no effect, but all rights herein granted to
Biomet for every other Product shall remain in full
force and effect.


4.1.5 Amendment. With the approval of the Management Committee, each
Product Plan may be amended from time to time throughout the
Term to reflect unforeseen circumstances that make an existing
Product Plan not feasible, unrealistic as to its timelines, or
to reflect changes in the requirements for any Product.


4.2 Spending and Payments


4.2.1 Funding. [***] will fund and pay for in accordance with each
approved Product Plan [***] work performed pursuant to the
approved Product Plan, including [***] of the cost of [***] of
each Product, and any other expenses associated with the Launch
of any Product intended for use in that Product Application
incurred by the Parties; provided, however, all costs and
expenses related to building, equipping, operating, maintaining,
qualifying, and obtaining regulatory approval of a manufacturing
facility


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owned or operated by OI or a subcontractor are not the
responsibility or obligation of Biomet.


4.2.2 Budgets. The Management Committee shall consider and approve
semi-annually throughout the Term a budget for work to be
undertaken under any approved Product Plan for the following six
months.


4.2.3 OI Capital Investments. Notwithstanding the foregoing, Biomet
shall have no responsibility for capital investments associated
with OI's exercise of its manufacturing rights related to
Products. OI shall fully fund and make all capital investments
as may be reasonably required to carry its obligations under
this Agreement.


4.2.4 Payments. Biomet shall pay to OI, in advance, on a quarterly
basis, as of the first day of each calendar quarter, the portion
of each Product Plan's budget that relates to activities
undertaken by OI as approved by the Management Committee for
such quarter in each Product Plan.


4.2.5 Variances. In the event that the sum of OI's actual expenditures
pursuant to all approved Product Plans for a calendar quarter
shall be greater than or less than the total amount budgeted, an
adjustment shall be made at the time the next quarterly payment
shall be due, following the closing of the books for the subject
quarter. This will result in credits and charges for the
subsequent quarter following the subject quarter. No adjustment
from expenditures in excess of the approved budget shall exceed
20% of the approved budget without the approval of the
Management Committee.


4.2.6 Accounting. OI shall maintain a separate accounting of its
direct and indirect costs for all its development work,
manufacturing, and related activities for each approved Product
Plan. OI's direct and indirect costs are defined in Appendix D
and shall be applied on a consistent basis, unless a different
basis is selected by mutual agreement. OI shall provide Biomet
with a quarterly statement itemizing the direct and indirect
costs incurred under each Product Plan during each quarter.


4.2.7 Audit. OI shall maintain complete and accurate records of all
information necessary for the determination of OI's direct and
indirect costs, shall retain such records for three years, and
shall allow such records, upon Biomet's request and at its
expense, to be audited during normal business hours no more than
once per year, by an independent auditor of Biomet's choice with
the understanding that all information received will be regarded
as Proprietary Information. If the audit discloses discrepancies
in charges greater than five percent in OI's favor, the
reasonable cost of such audit and the discrepancy shall be paid
by OI.


4.2.8 Failure to Fund: Remedies. In the event that Biomet fails to
timely provide payment to OI for OI's activities pursuant to
each approved Product Plan, OI shall be deemed free thereafter
to manufacture, sell, have sold or sublicense each Product
proposed in each Product Plan for which Biomet has failed to
provide timely payment: provided, however, if OI wishes to use
any Biomet Technology to make, use, sell, or offer to


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sell any such proposed Product, then Biomet agrees to license
such Biomet Technology for such purposes under mutually agreed
upon and commercially reasonable terms and conditions consistent
with prevailing terms and royalty rates in the medical device
industry. OI shall also be deemed free to use, disclose and
sublicense any Proprietary Technology Rights related to each
such proposed Product in each such Product Plan. The rights
herein granted to Biomet to obtain an exclusive license for each
such proposed Product shall thereafter be deemed void and of no
effect, but all rights herein granted to Biomet for every other
Product shall remain in full force and effect; provided,
however, that OI shall provide Biomet with notice of its
intention to terminate any of Biomet's rights and Biomet shall
have 60 days from the notice in which to provide the required
payments. In the event Biomet fails to make timely payments as
set forth in this paragraph, OI shall not be required to pay
compensation for the subsequent commercialization of any such
Product or to reimburse Biomet for any prior funding of any
activities related to any Product Plan.


4.3 Execution and Completion of Product Development.


4.3.1 Expeditious Completion. Each Party shall use its reasonable
business efforts to undertake and complete the activities
required in each approved Product Plan as expeditiously as
possible.


4.3.2 Failure to Launch Products: Remedies. Subject to the proviso in
the next sub-paragraph regarding unanticipated changes in
development or commercialization, if Biomet has not Launched at
least one Product in each Product Application in the Field
within [***] of the date of approval by the Management Committee
of the Product Plan for the Product Application to which that
Product pertains, OI shall be deemed free thereafter to
manufacture, sell, have sold or sublicense one or more Products
for each Product Application, and to use, disclose and
sublicense any Proprietary Technology Rights related to each
such Product Application in the Territory: provided, however, if
OI wishes to use any Biomet Technology to make, use, sell, or
offer to sell any such proposed Product, then Biomet agrees to
license such Biomet Technology for such purposes under mutually
agreed upon and commercially reasonable terms and conditions
consistent with prevailing terms and royalty rates in the
medical device industry. The rights herein granted to Biomet to
obtain an exclusive license for each such Product Application
shall thereafter be deemed void and of no effect, but all rights
herein granted to Biomet for every other Product Application as
to which Biomet has timely Launched a Product in any country in
the Territory shall remain in full force and effect. In any of
the circumstances recited in this section OI shall not be
required to pay compensation for the subsequent
commercialization of any such Product or to ...