Exclusive License, Supply & Distribution Agreement

Exhibit 10(ii)


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EXCLUSIVE LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT
----------------------------------------------------


This Agreement, made as of December 18, 2000 (the "Effective Date"), between ORGANOGENESIS INC., a company organized under the laws of the State of Delaware, having a present principal address at 150 Dan Road, Canton, Massachusetts 02021, USA (hereinafter "Organogenesis"), and Royce Medical Company, a corporation organized under the laws of the State of California, having a present principal address at 742 Pancho Road, Camarillo, CA 93012 (hereafter "Royce");


WITNESSETH:
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WHEREAS, Organogenesis has developed a proprietary natural acellular biomaterial ("ECM(tm)"), defined below, that has applications as a wound dressing; and


WHEREAS, Royce wishes to purchase products, devices, or processes which incorporate ECM and are covered by a Valid Patent Claim from Organogenesis exclusively for resale in the United States as a wound dressing from supplies purchased by Organogenesis from an entity of Organogenesis' choosing; and


WHEREAS, Royce desires to obtain an exclusive license from Organogenesis in the United States to distribute ECM, as described herein;


NOW, THEREFORE, the parties agree that:


ARTICLE 1. CERTAIN DEFINITIONS ------------------------------


The following terms shall have the following meanings whenever used in this Agreement:


1.1 "Affiliate" means any corporation or other entity that controls, is
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controlled by, or is under common control with, a party to this
Agreement. A corporation or other entity shall be regarded as in
control of another corporation or entity if it owns or directly or
indirectly controls more than fifty percent (50%) of the voting
stock or other ownership interest of the other corporation or
entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the
corporation or other entity.


1.2 "Alternate Site Market" means general and family practitioners',
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orthopedists', dermatologists', Home Healthcare Agencies',
diabeticians', obstetricians', gynecologists', cosmetic surgeons'
and podiatrists' offices or clinics; and nursing homes.


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1.3 "Collagen Wound Dressing" means any article that is (i) regulated
-------------------------
by FDA as a wound dressing, and (ii) consists primarily of
non-human collagen.


1.4 "Development Plan" shall mean the plan for the development and FDA
------------------
Approval of Products, as hereinafter defined, as set forth in
Schedule A. The parties shall modify and extend Schedule A from
time to time throughout the Term as required to assure successful
commercialization.


1.5 "ECM" means a natural acellular biomaterial derived from porcine
-----
small intestine, which biomaterial is covered by a Valid Patent
Claim, as hereinafter defined.


1.6 "FDA" means the United States Food and Drug Administration.
-----


1.7 "Field" means distribution of ECM to the Alternate Site Market for
-------
use solely as a Collagen Wound Dressing.


1.8 "First Commercial Sale" of any Product means the first bona-fide
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commercial sale for use or consumption of that Product in the
Territory after FDA has cleared or approved marketing of that
Product, if required.


1.9 "Marketing Plan" means the financial projections and timelines for
----------------
commercializing any Product as set forth in Schedule B, along with
supporting plans for selling strategies, promotional plans and
other related sales and marketing initiatives. The parties shall
modify and extend Schedule B from time to time throughout the Term
as required to facilitate successful commercialization.


1.10 "Net Sales" means the gross invoice price of any Product sold to
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independent, third-party customers in bona fide, arms-length
transactions, less all credits including (i) quantity and/or cash
discounts actually allowed or taken; (ii) freight, postage and
insurance (allocated in accordance with generally acceptable
accounting principles consistently applied (GAAP)); (iii) amounts
repaid or credited by reasons of rejections or return of goods;
(iv) amounts payable resulting from Government (or government
agency) mandated rebate programs; (v) third-party rebates to the
extent actually allowed; (vi) customs duties and taxes (excluding
income, value-added and similar taxes), if any, directly related to
the sale; (vii) bad debts from Products sold in accordance with
Royce's standard credit policies; and (viii) Product samples.


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1.11 "Patent(s)" means the patents and patent applications relating to
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Products owned or controlled by Organogenesis or its Affiliates as
indicated in Schedule C, attached, any divisions, continuations,
continuations-in-part, reissues, reexaminations, extensions,
supplemental protection certificates or other governmental actions
which extend the subject matter or the term of the patent
applications or patents, and any confirmations, registrations or
revalidations of any of the foregoing Patents also include any
patent derived from any Product Improvement.


1.12 "510(k)" means any application to FDA for clearance and/or approval
--------
to manufacture, sell and ship any Product commercially.


1.13 "510(k) Approval" means approval and/or clearance by FDA to
-----------------
manufacture, sell and ship Product commercially.


1.14 "Product(s)" means any Collagen Wound Dressing containing ECM, the
------------
sale of which would, but for the licenses herein, infringe a Valid
Patent Claim, as hereinafter defined, and includes any component
part to any such device.


1.15 "Product Improvements" means any enhancement or improvement invented
----------------------
or conceived by, or on behalf of either party to any Product.


1.16 "Proprietary Information" means all materials, products, trade
-------------------------
secrets, confidential or proprietary information designated as such
in writing by the parties, whether by letter or by the use of an
appropriate proprietary stamp or legend. Notwithstanding the
foregoing, information which is orally or visually disclosed to the
Recipient 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 a
writing summarizing the orally, visually or written disclosed
information in sufficient detail to advise the Recipient adequately
of its proprietary nature or confidentiality.


1.17 "Recipient" means that party to this Agreement that receives
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Proprietary Information from the other party.


1.18 Specification(s)" means the characteristics for any formulation of
----------------
Product agreed to by the parties to which each Product is
manufactured for commercial sale, consistent with regulatory
requirements such as FDA Quality System regulations. As agreed to,
Specifications for each Product shall be attached to this Agreement
as Schedule D, and be deemed a part hereof.


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1.19 "Supply Price" means the price charged to Royce by Organogenesis for
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a single commercial unit of any Product.


1.20 "Technical Information" means any or all results and technical
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information, including but not limited to Proprietary Information,
including preclinical, manufacturing, clinical or regulatory
information relating to Product.


1.21 "Term" means 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 any Valid Patent Claim.


1.22 "Territory" means the 50 United States.
-----------


1.23 "Trademark(s)" means any proprietary mark or marks jointly agreed to
--------------
by the parties to be applied to or identified with any Product as a
proprietary identification thereof.


1.24 "Valid Patent Claim" means either (a) a claim of an issued and
--------------------
unexpired Patent that has not been held permanently revoked,
unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not
been admitted to be invalid or unenforceable through reissue or
disclaimer or otherwise; or (b) a claim of a pending patent
application included within Patents that was filed in good faith
and has not been abandoned or finally disallowed.


ARTICLE 2. SUPPLY OF PRODUCT ----------------------------


2.1 CONDITIONS OF SUPPLY AND EXCLUSIVE PROVISION OF PRODUCT.


2.1.1 Organogenesis shall manufacture or have manufactured
Products according to the Specifications and shall sell them
exclusively to Royce for resale by Royce or its Affiliate to
the Alternate Site Market in the Territory for use in the
Field during the Term.


2.1.2 Notwithstanding Royce's entitlement to exclusivity,
Organogenesis shall manufacture or have manufactured
Products according to the Specifications and shall sell to
Royce for resale by Royce or its Affiliate to the Alternate
Site Market in the Territory for use in the Field during the
Term.


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2.2 SUPPLY DURING AND FOLLOWING THE TERM.


2.2.1 During the Term. Royce shall not itself manufacture and
shall purchase all of its requirements of Products which
meet Specifications from Organogenesis throughout the Term in
accordance with and subject to the remedies provided for
non-compliance with minimums in Schedule E at prices to be
agreed upon by the parties as described herein, and on such
other terms and conditions, acceptable to both parties, that
do not conflict with the terms of this Agreement


2.2.2 Remedy for failure to buy Products from Organogenesis. If
Royce fails to purchase all of its requirements of Product
from Organogenesis, then Organogenesis, in addition to any
other available remedy provided herein, may terminate this
Agreement and all the licenses granted herein as provided in
the Article hereof governing termination.


2.2.3 Purchase of Collagen Wound Dressings. Royce shall also
purchase all of its requirements of Collagen Wound
Dressings from Organogenesis throughout the Term. If Royce
does not purchase all of its requirements of Collagen Wound
Dressings exclusively from Organogenesis throughout the
Term, and fails to cure said failure within 60 days of
receiving notice from Organogenesis, then in lieu of all
other legal or equitable remedies available to
Organogenesis, Organogenesis may appoint one or more
additional distributors of Products in the Territory for
sale in the Alternate Site Market in the Field during the
Term.


2.2.4 Supply after the Term. Twelve months prior to the end of the
Term, both parties will need to negotiate a supply
agreement to take effect after the Term. If the parties are
unable to agree upon the provisions of a supply agreement
between the parties respecting sales of Product to Royce
after the Term, Organogenesis shall have no obligation to
continue to supply or cause any other entity to supply
Product to Royce, but will use its reasonable business
efforts to assist Royce in obtaining an adequate source of
Products meeting the Specifications from a qualified source.


2.3 Price. During the Term the parties shall agree to an initial Supply
Price for each Product which shall be equal to Organogenesis'
actual net cost for that Product. This price shall remain in
effect for twelve months from


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the date on which Organogenesis first sells that Product to Royce
for First Commercial Sale. For the remainder of the Term,
Organogenesis may, with 120 days prior written notice to Royce,
which notice shall be accompanied by supporting documentation,
adjust the Supply Price from time to time to reflect actual
increases or decreases in Organogenesis' actual production costs
net of any additional mark up.


2.4 Reasonable Business Efforts. Organogenesis shall use its reasonable
business efforts throughout the Term to meet Royce's order and
delivery requirements for Product.


2.5 Payment. Royce agrees to pay for each quantity of shipped and
accepted Product within 45 days of receipt by Royce of each such
quantity shipped and invoiced.


2.6 Purchase Orders. Royce throughout the Term shall order Product by its
purchase orders sent from time to time to Organogenesis. Royce
will forward its purchase orders for Product to Organogenesis by
facsimile, mail or otherwise.


2.7 Conflicting Forms. Any term of any document, including but not
limited to a purchase order or acceptance, sent to either party by
the other in connection with either's performance under this
Agreement, shall, only to the extent inconsistent herewith, or to
the extent that it purports to impose requirements on a party
beyond or different from those imposed by this Agreement, be null,
void and of no effect.


2.8 F.O.B. and Risk of Loss. All prices for Products are F.O.B. the dock
of the entity from which any Product is shipped to Royce. Title
and risk of loss shall pass to Royce upon delivery of product to a
common carrier for shipment to Royce.


2.9 Forecasts. Throughout the Term Royce shall provide Organogenesis
with a rolling four-quarter forecast of its estimate of its demand
for Product, within 30 days of the beginning of each calendar
quarter, for the next four quarters. Royce's forecast for the
first such subsequent quarter of each such forecast shall be
binding on Royce. Organogenesis shall advise Royce within ten
business days of receipt of each such forecast if the forecasted
requirements exceed Organogenesis' ability to supply.


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ARTICLE 3. MANUFACTURE OF PRODUCT ---------------------------------


3.1 Selection. Products shall be manufactured by an entity or entities
selected and qualified from time to time by Organogenesis.
Organogenesis shall use reasonable business efforts to locate and
qualify an entity or entities competent and willing to manufacture
Products according to the Specifications at the most
cost-effective price.


ARTICLE 4. EXCLUSIVE LICENSE GRANTS -----------------------------------


4.1 Patents and Technical Information. Organogenesis hereby grants to
Royce an exclusive license, or, where applicable, an exclusive
sublicense, under its Patents and Technical Information, to use,
offer to sell and sell, but not to make, have made or sublicense
to any entity not its Affiliate, Products for use in the Field to
the Alternate Site Market throughout the Territory during the Term.


4.2 Trademarks.


4.2.1 Use on Products. Products shall be marketed and sold by Royce
throughout the Term under a Trademark or Trademarks jointly
agreed to by the parties and owned and registered by
Organogenesis at its expense. Organogenesis hereby grants an
exclusive license of all Trademarks to Royce for use by it
in sales of Products in the Alternate Site Market in the
Field and Territory throughout the Term, and thereafter
pursuant to paragraph 7.3, infra.


4.2.2 Organogenesis use. Subject to the parties' mutual consent,
Organogenesis may at any time use any Trademark on any
Product if it is not sold in the Territory for use in the
Field.


4.3 Minimum Royalties. Solely to retain its exclusive rights to
distribute Product to the Alternate Site Market in the Territory
for use in the Field, Royce shall:


4.3.1 Make minimum quarterly royalty payments to Organogenesis
during each 12-month period commencing on the date of First
Commercial Sale as shown in Schedule E, attached.


4.3.2 Receive unused credit(s) towards minimums due in any year
for all royalties paid in prior years in excess of the
minimums due in those prior years. Any shortfall not cured
by the application of credits


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created by the preceding sentence must be cured, if at
all, within 12 months of the end of the calendar year to
which the minimum applies.


4.3.3 If Royce shall not timely make the minimum royalty payments
required by Schedule E, then, in lieu of any and all
other legal or equitable remedies available to
Organogenesis, Organogenesis may at its option, invoke the
remedies described in Schedule E.


ARTICLE 5. DEVELOPMENT OF PRODUCT ---------------------------------


5.1 Responsibilities. The parties will cooperate to develop and
improve Product to assure the greatest likelihood of success in
commercializing Product by undertaking and completing the tasks
required of each as set forth in the Development Plan. Except as
set forth in this Article, the costs incurred by either party in
such development will be borne by that party. The parties agree to
use their reasonable business efforts to provide to each other the
most appropriate personnel in a timely manner at the cost of the
party providing the personnel, to enhance this development and
commercialization.


5.2 Requests for Development Assistance. Requests from either party to
the other for the assistance described in Article 5.1 shall be
made, in the case of Royce to Jeffrey Haines, and in the case of
Organogenesis to Steven Bernitz or to such other senior manager as
either party may designate from time to time. The failure of
either party to provide any specific employee to the other at any
specific time or place shall not, however, be a breach of this
Agreement.


5.3 PRECLINICAL AND CLINICAL TRIALS.


5.3.1 Pre-commercialization. Organogenesis shall prepare, conduct
and pay for any preclinical or clinical trial required for
regulatory clearance of any Product, and shall be
responsible for the analysis of the data derived therefrom
or the submission thereof to FDA of any 510(k).
Organogenesis shall periodically and timely report in
writing to Royce on the progress and outcome of each trial
it undertakes. Each such report shall be deemed to be
Proprietary Information.


5.3.2 Post-Commercialization. The parties shall confer to agree
upon a protocol or protocols for post-marketing clinical
trials that shall be undertaken by Organogenesis and paid
for equally by the parties.


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5.4 Ownership of Submissions. Organogenesis shall own each 510(k) and
all other regulatory submissions and approvals relating to any
Product, and shall upon request provide Royce with copies of the
regulatory approval documents certified by an appropriate
representative of Organogenesis.


5.5 Reasonable Business Efforts: Organogenesis agrees to use reasonable
business efforts to obtain 510(k) Approvals for any Product
requiring approval.


5.6 Excused Performance. The obligations of either party with respect
to any Product are expressly conditioned upon the absence of any
adverse conditions relating to the safety, quality or efficacy of
that Product that would reasonably justify that party, after
consulting with the other, in exercising prudent and justifiable
business judgement, in concluding that development or marketing of
Product should be delayed, suspended or stopped altogether. The
obligation to develop or market Product shall be delayed or
suspended only so long as any such condition or event exists.


5.7 Product Improvements. Each party agrees to disclose and furnish to
the other, without charge, information on Product Improvements
made during the Term. Each such Product Improvement shall
thereupon be deemed to be part of Patents or Proprietary
Information, as the case may be, for all purposes hereunder.
Notwithstanding the foregoing, Organogenesis may make, have made,
use, and sell, or have sold Product Improvements, outside the
Territory and Field. The license provisions of Article 4 and the
royalty and record provisions of Articles 7 and 8 together with
all other applicable provisions shall apply to any such Product
Improvement.


ARTICLE 6. MILESTONE PAYMENT ----------------------------


6.1 Subject to the requirements of Schedule D relating to healthcare
professionals' advice with respect to specifications for Products
in partial consideration for the development costs for Product
incurred by Organogenesis, Royce shall pay to Organogenesis,
within thirty days of the later of FDA Approval of the first
Product or the delivery to Royce of the first 1500 units of
Product for commercial sale, [***] Royce shall submit its initial
purchase order for at least 1500 units of Product within 30 days
of notification by Organogenesis that Product is available for
commercial sale.


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ARTICLE 7. ROYALTIES --------------------


7.1 Royalty Levels and Term. In partial consideration for the exclusive
licenses granted and Technical Information provided by
Organogenesis hereunder, Royce shall pay Organogenesis royalties
on Royce's or its Affiliates' Net Sales of all Products sold by
Royce as described by the formula in Schedule F, attached, until
the expiration of the last Valid Patent Claim.


7.2 Related Entity Sales. For the purposes of this Article, Net Sales by
Royce to an Affiliate shall not be counted for ro ...