LICENSE AGREEMENT

Exhibit 10.54

EXCLUSIVE LICENSE AGREEMENT  ***

                THIS LICENSE AGREEMENT (the “Agreement”) is made and is effective as of the 1st day of February 2005, (the “Effective Date”) by and between RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY, having its statewide Office of Corporate Liaison and Technology Transfer at ASB III, 3 Rutgers Plaza, New Brunswick, New Jersey 08901-8559, (hereinafter referred to as “Rutgers”), and OSTEOTECH, INC, a publicly traded corporation having a principal place of business at 51 James Way, Eatontown, NJ 07724 and its Affiliates (hereinafter referred to as “Licensee” or “Osteotech”).

RECITALS

                WHEREAS, Certain inventions (hereinafter the “Inventions”) specifically identified as Rutgers patents in Exhibit A attached hereto and made a part hereof were made in the course of research at Rutgers under the direction of Dr. Joachim Kohn and other Rutgers employees listed as inventors on the patents listed in Exhibit A (hereinafter collectively “Inventors”); and

***  Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission.

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                WHEREAS, The development of the Inventions was sponsored in part by the National Institutes of Health under Grant GM39455, and in consequence this Agreement is subject to overriding obligations to the federal government as set forth in 35 U.S.C. sections 202-212 and applicable governmental implementing regulations, and

                WHEREAS, ***(hereinafter referred to as “***”), has developed certain process patents which are specifically identified as *** patents in Exhibit A, hereafter “*** Patent Rights”, which patents are related to the Inventions, and has licensed those patents to Rutgers with a right of sublicense; and

                WHEREAS, Licensee entered into a Materials Transfer Agreement with Rutgers effective February 1, 2004 for the purpose of evaluating the Inventions and/or negotiating a license agreement; and

                WHEREAS, said Materials Transfer Agreement is superceded and replaced by this Agreement; and

                WHEREAS, Licensee wishes to obtain certain rights from Rutgers for the commercial development, manufacture, use, and sale of the

*** Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is

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products using the Inventions and/or ***Patent Rights and Rutgers is willing to grant such rights on the terms and conditions set forth in this Agreement; and

                WHEREAS, Rutgers is desirous that the Inventions be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public.

NOW THEREFORE, the parties agree as follows:

                1.    DEFINITIONS

All definitions below or elsewhere in this Agreement apply to both their singular and plural forms, as the context may require. “Herein,” “hereunder,” and “hereof” and other similar expressions refer to this Agreement. “Section” and “Article” refer to sections in this Agreement. “Including” means “including without limitation.” “Days” means “calendar days,” unless otherwise stated.

being filed separately with the Securities and Exchange Commission.
*** ***  Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission.

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1.1    “Affiliate” means any corporation or business entity that directly or indirectly controls, is controlled by, or is under common control with Licensee to the extent of at least 50 percent of the outstanding stock or other voting rights entitled to elect directors.

1.2    “Confidential Information” (i) with respect to property owned or controlled by Rutgers, means all data, information, and/or tangible material owned or controlled by Rutgers and provided to Licensee, its Affiliates or its sublicensees directly or indirectly from or through Rutgers, its units, its employees, the Inventors, or its consultants relating to the Inventions, Licensed Products, or this Agreement, including but not limited to, all patent prosecution documents and all information received from Inventors and (ii) with respect to property owned or controlled by Licensee, means all data, information, and/or tangible material owned or controlled by Licensee, its Affiliates or its sublicensees and provided to Rutgers in accordance with Licensee’s obligations hereunder, including information provided in required reports.

1.3    “Improvements” means any change, modification or enhancement which is an improvement to an Invention, the *** Patent Rights or

*** Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is

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the *** Patent Rights, whether or not patentable or copyrightable. It is anticipated that Rutgers and Licensee may each make Improvements acting solely and/or jointly.

1.4.    “Licensed Field” means, solely with respect to Polycarbonates, as defined in Section 1.10 and further limited by Exhibit A, the use of *** Patent Rights and/or *** Patent Rights in ***. Said combination product may contain additional ingredients. For purposes of the foregoing definition “***. Products specifically included in the Licensed Field consist of Polycarbonates ***. Any product that does not contain ***, relative to pure Polycarbonate, is expressly excluded from the Licensed Field. Veterinary uses are not included in Licensed Field.

1.5.    “Licensed Method” means any process, method, or use that is covered by *** Patent Rights or *** Patent Rights or whose use or practice would constitute, but for the license granted to Licensee pursuant to this Agreement, an infringement of any issued or pending claim within *** Patent Rights or *** Patent Rights.

being filed separately with the Securities and Exchange Commission
***  Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission.

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1.6.    “Licensed Product(s)” means any material or product or kit, or any service, process, or procedure that (i) either is covered by *** Patent Rights and/or *** Patent Rights or whose discovery, development, registration, manufacture, use, or sale would constitute, but for the license granted to Licensee pursuant to this Agreement, an infringement of any claim within *** Patent Rights and/or *** Patent Rights or (ii) is discovered, developed, made, sold, registered, or practiced using Rutgers Technology provided the Rutgers Technology has not lawfully entered the public domain at the time of use, or using a Licensed Method as it relates to Polycarbonate or (iii) is used to practice the Licensed Method, in whole or in part.

1.7    “Major Market Countries” means the United States of America (including possessions and territories), ***.

1.8.  “Net Sales” means the total of the gross invoice prices of Licensed Products sold or transferred by Licensee, its Affiliates and its sublicensees, less the sum of reasonable and customary commissions, discounts, returns, transportation charges and any applicable sales or use or equivalent taxes or any other charges

***  Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is

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not directly related to Licensed Product. To the extent Licensee has deducted commissions, discounts, etc. as permitted by the preceding sentence and Licensee later receives a rebate against the amount deducted, the rebated amount shall be included as an invoiced sales amount. Payments shall be made only upon sales or transfers between unrelated third parties and shall be based on arms-length consideration. In the event Licensee or any of its Affiliates or sublicensees makes a transfer of a Licensed Product to a third party for other than monetary consideration or for less than fair market value, such transfer shall be considered a sale hereunder to be calculated at a fair market value for accounting and royalty purposes.

                A Licensed Product shall be deemed made, used, leased, transferred, sold, or otherwise disposed of at the time Licensee bills, invoices, ships, or receives payment for such Licensed Product, whichever occurs first.

1.9.    “*** Patent Rights” means the U.S. Patents listed in Exhibit A attached hereto specifically identified as owned by Rutgers and foreign patent(s) and patent application(s) corresponding to all of the foregoing, owned by Rutgers, including patent claims that

being filed separately with the Securities and Exchange Commission.
*** Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission

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pertain to Polycarbonate(s) in the Licensed Field and in any reissues, extensions (including governmental equivalents thereto), substitutions, continuations, and divisions hereof. “*** Patent Rights” means the process patents listed in Exhibit A attached hereto specifically identified as owned by *** and foreign patent(s) and patent application(s) corresponding to all of the foregoing, including patent claims that pertain to Polycarbonate(s) in any reissues, extensions (including government equivalents thereto), substitutions, continuations, and divisions hereof owned by *** and licensed to Rutgers.

1.10.    “Polycarbonate” means ***.

(Formula 1)

1.11.   “Rutgers Technology” means, to the extent they apply to Polycarbonates, all non-patentable, and tangible information, know-how and physical objects to the extent reasonably necessary or useful to practice the Inventions and *** Patent Rights in the Licensed Field, which are owned or controlled by Rutgers and Rutgers has the right to disclose and license to third parties, including but not limited to:

(a)  the contents of Master File No. ***, and

***  Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission.

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(b)  other information, know-how and physical objects (i) created by Dr. Kohn or scientists in the laboratory of Dr. Kohn prior to the Effective Date of this Agreement, or (ii) created as a non-patented “IMPROVEMENT” under a Research Agreement to be executed hereafter or (iii) licensed from *** by Rutgers in an agreement made as of January 27, 2004.

1.12    “Territory” means ***.

1.13    “Licensed-Back Field” means all fields of use other than the Licensed Field.

1.14     Master File No. *** means the Master File as submitted to the FDA for purposes of FDA review of Polycarbonates and related polymers described in the *** Patent Rights, *** Patent Rights and Rutgers Technology (other than Master File ***). This includes all material relating to the Licensed Field in Master File *** as of the Effective Date and material in the Licensed Field added during the term of this Agreement which has been funded by Licensee.

2.    LICENSE GRANT

                2.1.   Subject to the limitations set forth in this Agreement, Rutgers hereby grants to Licensee:

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                (a)  an exclusive license solely with respect to Polycarbonates in the Licensed Field in the Territory under *** Patent Rights and the Rutgers Technology, to make, have made, use, import, put into use, modify, distribute, sell and have sold Licensed Products and to practice Licensed Methods during the term of this Agreement.

                (b)  a non-exclusive license solely with respect to Polycarbonates in the Licensed Field in the Territory under the *** Patent Rights to make, have made, use, import, put into use, modify, distribute, sell and have sold Licensed Products and to practice Licensed Methods during the term of this Agreement.

                (c)  a non-exclusive license to make monomers under U.S. Patent Nos. *** and *** and corresponding *** Patent Rights solely for use under this Agreement in the Licensed Field.

                (d)  to facilitate Licensee’s exercise of the preceding licenses, (a) Licensee will have_access to Master File *** as defined above; and (b) Rutgers will authorize Licensee to reference said Master File *** in Licensee’s own regulatory submissions to the FDA and to similar regulatory bodies abroad and in submissions of Licensee’s sublicensees, all at no additional cost. Licensee acknowledges that other third parties may have access to Master File *** and may incorporate proprietary information unrelated to the Licensed Field of Licensee. The access rights provided to Licensee above are

*** Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is

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limited to all information contained in the Master File as of the Effective Date and those additions and amendments that are added to the Master File under funding provided by Licensee during the term of this Agreement. So long as Rutgers is permitted to do so, Rutgers agrees to make Osteotech aware of changes to the Master File which are relevant to Osteotech but which Osteotech has not funded.

                (e)    To the extent the above licenses omit any patent rights in any jurisdiction owned, licensable, or controlled by Rutgers as of the Effective Date that are necessary for Osteotech to exercise the license rights granted in sections 2.1 (a)-(d) above in the Licensed Field, Rutgers agrees that such rights shall be added to Exhibit A hereto.

                2.2.   During the term of this Agreement, Licensee shall also have the right to make Improvements as long as the Improvements in the Licensed Field are incorporated into a royalty bearing Licensed Product hereunder. The rights of Licensee in Improvements discovered and/or developed by or on behalf of Licensee during the term of this Agreement are hereafter referred to as “Osteotech Improvement Rights”. Licensee hereby grants to Rutgers an exclusive, worldwide, paid-up license, with right of sublicense, to make, use and sell products containing or covered by the claims of

being filed separately with the Securities and Exchange Commission.

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Osteotech Improvement Rights (as defined in this section) in the Licensed-Back Field (as defined in section 1.13). The foregoing grant of license rights to Rutgers by Licensee shall survive the termination or expiration of this Agreement as to Osteotech Improvement Rights arising before expiration. The foregoing grant of license rights to Rutgers by Licensee shall not imply any grant by Licensee to Rutgers of any other intellectual property rights owned by Licensee. The parties shall execute any and all documentation and take any such actions to achieve the intent of this Section 2.2.

                2.3    As the Inventions were funded in part by the U.S. Government, the licenses granted hereunder under the *** Patent Rights shall be subject to the overriding obligations to the U.S. Government set forth in 35 U.S.C. 200-212 and any future amendments thereto, and applicable governmental implementing regulations, as well as any other applicable governmental restrictions, if any, including, without limitation (i) to the obligation to manufacture in the United States Licensed Product intended for consumption in the United States unless a waiver is obtained, and (ii) to the royalty free non-exclusive license thereunder to which the U.S. Government is entitled.

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                2.4    Rutgers expressly reserves the right to have the Inventions and associated intellectual property rights licensed by Rutgers and Osteotech Improvement Rights in the Licensed Field used for educational, research and other non-business purposes and to publish the results thereof.

                2.5    To the extent Rutgers, principally through the Inventors, has provided Rutgers Technology to Licensee, it is understood that at the time of disclosure to the Licensee some of the Rutgers Technology may have been made available to the public without restrictions.

                2.6    Rutgers will promptly advise Licensee of Improvements in the Licensed Field owned by Rutgers to the Inventions made by Dr. Kohn or scientists in Dr. Kohn’s laboratory during the term of this Agreement and disclosed to the Rutgers Office of Corporate Liaison and Technology Transfer, to the extent owned or controlled by Rutgers and lawfully licensable by Rutgers to third parties without incurring obligations to other third parties. The rights of Rutgers in such Improvements in the Licensed Field discovered and/or developed by or on behalf of Rutgers during the term of this Agreement may be solely owned by Rutgers or jointly owned with Licensee in accordance with the U.S. law on inventorship of patents (the sole or joint rights, collectively “Rutgers Improvement

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Rights”).  To the extent such Rutgers Improvement Rights were funded by Licensee pursuant to a sponsored research agreement between Licensee and Rutgers, the Rutgers Improvement Rights will automatically be included within the definition of “Inventions”, *** Patent Rights and Rutgers Technology, as the case may be and be subject to the terms contained herein. However, if such Rutgers Improvement Rights were not so funded by Licensee, and if Rutgers has the right to grant licenses to such Rutgers Improvement Rights to Osteotech, then Rutgers shall be obligated to incorporate such Rutgers Improvement Rights (other than improvements to the Master File not funded by the Licensee) in this Agreement on the terms contained herein, as *** Patent Rights or Rutgers Technology as the case may be.

                3.    SUBLICENSES

                3.1    Rutgers grants to Licensee the right to grant sublicenses to third parties under any or all of the licenses granted in Article 2, provided Licensee has current exclusive rights to the *** Patent Rights under this Agreement at the time it exercises a right of sublicense. To the extent applicable, such sublicense shall include all of the rights of and obligations due

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to Rutgers (and to the United States Government) that are contained in this Agreement.

                3.2    Within thirty (30) days after execution thereof and within thirty (30) days after granting a sublicense, Licensee shall provide Rutgers with a copy of each sublicense issued hereunder, and shall thereafter collect and guarantee payment of all royalties and other obligations due Rutgers relating to the sublicensees and summarize and deliver all reports due Rutgers relating to the sublicensees.

                3.3    Upon termination of this Agreement for any reason, Rutgers shall make a good faith effort to continue the sublicense so long as the terms thereof are no less favorable to Rutgers than they are in this Agreement. If a sublicense is not continued, Rutgers shall provide the sublicensee a reasonable period to sell off any inventory of Licensed Products and terminate its operations in the Licensed Field on terms comparable to Section 12.1(i) below.

4.    LICENSE ISSUE FEE, LICENSE MAINTENANCE FEES
AND MILESTONE AND OTHER PAYMENTS

                 4.1    License Issue Fee:

Licensee shall pay to Rutgers a non-refundable license issue fee of Three Hundred Thousand Dollars ($300,000.00), which is not an

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advance against royalties. Of this amount, $50,000 will be due within 30 days of the Effective Date and the remaining $250,000 will only be due within thirty (30) days of satisfactory completion of all the following milestones, but no later than two hundred seventy (270) days after the Effective Date unless this Agreement has been terminated prior to the end of such two hundred seventy (270) day period:

Milestone 1:  ***.

Milestone 2:  ***.

Licensee shall select the source(s) at which production for the above milestones will occur, but may be guided by Licensor.

Licensee shall approve production budgets. In all cases, final selection of production sources will lie exclusively with the Licensee.

All of the work and all of the expense of achieving the foregoing milestones shall be Licensee’s responsibility, except as provided in the last sentence of this paragraph. Licensor shall provide

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reasonable cooperation to Licensee. Licensee shall have the right to approve the source at which production for the above milestones will occur and the production budgets and the right to observe the production process and any testing. Licensee will pay the costs of such production in accordance with the approved budget, shall own the lots of monomer and polymer produced and shall have the right to their delivery in accordance with its delivery instructions. Licensee will, with guidance from the Licensor if required by the Licensee, select the manufacturer. In the event that material produced during activities described in Milestones 1 does not meet the specifications, as defined in Exhibit C, the Licensor will be responsible for payment of all raw material and related costs incurred and Licensee will be responsible to pay the manufacturer any other costs it negotiates with the manufacturer.

4.2 

License Maintenance Fees:

4.2.a

being filed separately with the Securities and Exchange Commission.

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4.2.b.

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4.2.c.

is being filed separately with the Securities and Exchange Commission.
*** Indicates the omission of confidential material pursuant to the request for confidential treatment made in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential material is being filed separately with the Securities and Exchange Commission.

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4.2.d.

March 31 

June 30

September 30 

December 31

4.3    Milestone Payments

Licensee shall pay to Rutgers milestone payment fees in accordance with the following schedule:

Event

Amount

***

***

***

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Licensee shall make each such payment, within 60 days of the date of the event giving rise to the payment.

                4.4    Sublicensing Payments

                Licensee shall pay to Rutgers *** (***%) of all consideration received by Licensee (other than running royalty payments) from sublicensing or transferring the rights licensed to Licensee hereunder and *** (***%) of all amounts Licensee recovers from infringers or alleged infringers for rights licensed hereunder, (net of out-of-pocket expenses incurred by Licensee and Rutgers in prosecuting and obtaining such recovery). For purposes of clarification, the *** (***%) does not apply to fees paid to Licensee to fund scientific research or for scientific clinical or pre-clinical studies or reimbursed costs of expected work relating to regulatory approval of Licensed Product. In the event that the recovered amount is not sufficient to cover all out-of-pocket expenses incurred by the parties, Licensee shall first receive reimbursement of its respective total expenses incurred in seeking the particular recovery, after which any remaining recovered amount shall next be used to reimburse Rutgers.

5.    ROYALTIES

being filed separately with the Securities and Exchange Commission.
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                5.1    Except as otherwise required by law, Licensee shall pay to Rutgers a running royalty of *** (***%) of Net Sales of Licensed Products during the term of this Agreement where only *** Patent Rights but not *** Patent Rights are practiced in making, using or selling a Licensed Product, or a running royalty of *** (***%) of Net Sales of Licensed Products where *** Patent Rights are practiced, either alone, or in combination with *** Patent Rights, in making, use or selling a Licensed Product. Sales among Licensee, its Affiliates and its marketing and development partners for ultimate third party use shall be disregarded for purposes of computing royalties; royalties shall be payable only upon sales or transfers between unrelated third parties and shall be based on arms length consideration. On any Net Sales of Licensed Products where no *** Patent Rights or *** Patent Rights are practiced in developing, making, using or selling a Licensed Product, the royalty rates shall be reduced by *** (***%) relative to royalties otherwise due.

                5.2    Royalties payable to Rutgers shall be paid to Rutgers quarterly on or before sixty (60) days following these dates of each calendar year:

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March 31 

June 30

September 30 

       December 31

Each such payment will be for unpaid royalties that accrued within Licensee’s most recently completed calendar quarter. By way of example, within 60 days of March 31, Licensee shall pay royalties for the calendar quarter ending March 31.

                5.3    All amounts due Rutgers shall be payable in United States Dollars in Piscataway, New Jersey. When Licensed Products are sold for monies other than United States Dollars, the earned royalties will first be determined in the foreign currency of the country in which such Licensed Products were sold and then converted into equivalent United States Dollars. The exchange rate will be the United States Dollar buying rate quoted in the Wall Street Journal on the last day of the reporting period.

                5.4    Licensee shall be responsible for any and all taxes, fees, or other charges imposed by the government of any country outside the United Stat