EXHIBIT 10.1
REVENUE INTERESTS ASSIGNMENT AGREEMENT
Dated as of October 16, 2001
among
VITA SPECIAL PURPOSE CORP.,
as Assignor,
ORTHOVITA, INC.
and
▇▇▇▇ CAPITAL ROYALTY ACQUISITION FUND, L.P.,
as Assignee
Table of Contents
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Page
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ARTICLE I DEFINITIONS..................................................................................... 1
Section 1.01 Definitions............................................................................. 1
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ARTICLE II PURCHASE AND SALE OF ASSIGNED INTERESTS........................................................ 20
Section 2.01 Purchase and Sale....................................................................... 20
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Section 2.02 Payments in Respect of the Assigned Interest............................................ 20
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Section 2.03 Purchase Price.......................................................................... 24
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Section 2.04 No Assumed Obligations.................................................................. 24
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF ASSIGNOR AND ORTHOVITA...................................... 25
Section 3.01 Organization............................................................................ 25
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Section 3.02 Corporate Authorization................................................................. 25
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Section 3.03 Governmental Authorization.............................................................. 25
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Section 3.04 Ownership............................................................................... 26
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Section 3.05 Financial Statements.................................................................... 27
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Section 3.06 No Undisclosed Liabilities.............................................................. 27
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Section 3.07 Solvency................................................................................ 27
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Section 3.08 Litigation.............................................................................. 27
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Section 3.09 Compliance with Laws.................................................................... 28
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Section 3.10 Conflicts............................................................................... 28
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Section 3.11 Material Contracts...................................................................... 29
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Section 3.12 Intellectual Property................................................................... 29
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Section 3.13 Regulatory Approval..................................................................... 30
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Section 3.14 Transfer of Intellectual Property Rights................................................ 30
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Section 3.15 Subordination........................................................................... 31
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Section 3.16 Place of Business....................................................................... 31
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Section 3.17 Broker's Fees........................................................................... 31
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Section 3.18 Other Information....................................................................... 31
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Section 3.19 Distribution Agreements and License Agreements.......................................... 31
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Section 3.20 Insurance............................................................................... 34
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Section 3.21 Organizational Documents of Assignor.................................................... 34
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ASSIGNEE..................................................... 34
Section 4.01 Organization............................................................................ 35
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Section 4.02 Authorization........................................................................... 35
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Section 4.03 Broker's Fees........................................................................... 35
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i
Table of Contents
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(continued)
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Section 4.04 Conflicts............................................................................... 35
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Section 4.05 Consents................................................................................ 36
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ARTICLE V COVENANTS....................................................................................... 36
Section 5.01 Consents and Waivers.................................................................... 36
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Section 5.02 Access; Books and Records............................................................... 36
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Section 5.03 Material Contracts...................................................................... 38
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Section 5.04 Confidentiality; Public Announcement.................................................... 38
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Section 5.05 Right of First Refusal.................................................................. 39
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Section 5.06 Quarterly Reports....................................................................... 40
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Section 5.07 Purchase Options........................................................................ 41
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Section 5.08 Security Agreements..................................................................... 43
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Section 5.09 Best Efforts; Further Assurance......................................................... 44
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Section 5.10 Remittance to Lockbox Account........................................................... 45
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Section 5.11 Additional Covenants of Assignor and Orthovita.......................................... 47
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Section 5.12 Future Agreements....................................................................... 52
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Section 5.13 Licensing Agreement..................................................................... 53
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Section 5.14 Guarantee............................................................................... 53
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Section 5.15 Financial Statements.................................................................... 56
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Section 5.16 Special Purpose Entity.................................................................. 57
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Section 5.17 No Short Selling or Trading While in the Possession of Material Non-Public Information.. 58
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Section 5.18 Notification of Significant Discounts and Write-Offs.................................... 58
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Section 5.19 Financial Covenants..................................................................... 59
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ARTICLE VI THE CLOSING; CONDITIONS TO CLOSING AND FUNDING................................................. 59
Section 6.01 Closings................................................................................ 59
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Section 6.02 Conditions Applicable to Assignee....................................................... 60
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Section 6.03 Conditions Applicable to Assignor....................................................... 63
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Section 6.04 Termination Event....................................................................... 64
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ARTICLE VII TERMINATION................................................................................... 64
Section 7.01 Termination Date........................................................................ 64
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Section 7.02 Effect of Termination................................................................... 65
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ii
Table of Contents
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(continued)
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ARTICLE VIII MISCELLANEOUS................................................................................ 65
Section 8.01 Survival................................................................................ 65
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Section 8.02 Specific Performance.................................................................... 65
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Section 8.03 Notices................................................................................. 66
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Section 8.04 Schedules............................................................................... 68
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Section 8.05 Successors and Assigns.................................................................. 68
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Section 8.06 Indemnification......................................................................... 68
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Section 8.07 Expenses................................................................................ 70
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Section 8.08 Independent Nature of Relationship...................................................... 70
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Section 8.09 Entire Agreement........................................................................ 71
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Section 8.10 Amendments; No Waivers.................................................................. 71
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Section 8.11 Interpretation.......................................................................... 71
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Section 8.12 Headings and Captions................................................................... 72
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Section 8.13 Counterparts; Effectiveness............................................................. 72
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Section 8.14 Severability............................................................................ 72
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Section 8.15 Force Majeure........................................................................... 72
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Section 8.16 Governing Law; Jurisdiction............................................................. 73
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Section 8.17 Intentionally omitted................................................................... 74
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Section 8.18 Waiver of Jury Trial.................................................................... 74
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iii
EXHIBITS AND SCHEDULES*
EXHIBITS
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Exhibit A Projected Net Sales
Exhibit B 1999, 2000 and 2001 Financial Statements of Orthovita (on a
consolidated basis)
Exhibit C Form of Assignment
Exhibit D Form of Security Agreement
Exhibit E(i) Form of Legal Opinion of Counsel to Assignor
Exhibit E(ii) Form of Legal Opinion of Patent Counsel to Assignor
Exhibit E(iii) Form of Infringement Opinion of Patent Counsel to Assignor
Exhibit F Form of Stock Purchase Agreement
Exhibit G Certificate of Incorporation of Assignor
Exhibit H Bylaws of Assignor
Exhibit I Form of Pledge Agreement
Exhibit J Orthovita Assignment Agreement
Exhibit K Orthovita Trademark Assignment Agreement
Exhibit L Vita Licensing Patent Assignment
Exhibit M Vita Licensing Trademark Assignment
SCHEDULES
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Schedule A Proprietary Technology
Schedule 3.03 Governmental Authorization
Schedule 3.04 Ownership
Schedule 3.10(a) Filings
Schedule 3.12(a) List of Patents and Trademarks Owned by Assignor
Schedule 3.12(i) Intellectual Property (Payments)
Schedule 3.13(a) Regulatory Approval
Schedule 3.13(b) Status of FDA Applications
Schedule 3.16 Place of Business of Assignor and Orthovita
Schedule 3.20 Insurance Policies
Schedule 6.02(g) List of Filing Offices
* Non-material Exhibits and Schedules have been omitted from this filing.
iv
REVENUE INTERESTS ASSIGNMENT AGREEMENT
REVENUE INTERESTS ASSIGNMENT AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement") is made and entered into
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as of October 16 , 2001 by and among ORTHOVITA, INC., a Pennsylvania corporation
("Orthovita"), VITA SPECIAL PURPOSE CORP., a Delaware corporation and wholly-
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owned subsidiary of Orthovita ("Assignor"), and ▇▇▇▇ CAPITAL ROYALTY ACQUISITION
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FUND, L.P., a Delaware limited partnership ("Assignee").
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WHEREAS, Orthovita has assigned, transferred and/or licensed all of
its rights, title and interests in and to the Intellectual Property (as
hereinafter defined) and the Royalty Interests (as hereinafter defined) to Vita
Licensing, Inc. ("Vita Licensing"), and Vita Licensing has in turn transferred
such assets to Assignor; and
WHEREAS, Assignor wishes to sell, assign, convey and transfer to
Assignee, and Assignee wishes to purchase from Assignor, the Assigned Interests
(as hereinafter defined), upon and subject to the terms and conditions
hereinafter set forth;
WHEREAS, Orthovita wishes to sell, assign, convey and transfer to
Assignee, and Assignee wishes to purchase from Orthovita, the common stock of
Orthovita, in the amount and for the purchase price set forth in the Stock
Purchase Agreement (as hereinafter defined) and
NOW, THEREFORE, in consideration of the mutual covenants, agreements
representations and warranties set forth herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
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The following terms, as used herein, shall have the following
meanings:
"Advance Payments" shall mean for the calendar year ending December
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31, 2003, the first $1.0 million received by Orthovita in the Fiscal Year 2003
in respect of annual Net Sales for Fiscal Year 2003 (including payments under
License Agreements and Distribution Agreements); for the calendar year ending
December 31, 2004, the first $2.0 million received by Orthovita in the Fiscal
Year 2004 in respect of annual Net Sales for Fiscal Year 2004 (including
payments under any License Agreements or Distribution Agreements); and for each
subsequent calendar year thereafter through the year ending December 31, 2016,
the first $3.0 million received by Orthovita in respect of annual Net Sales
during the applicable Fiscal Year (including payments under License Agreements
or Distribution Agreements).
"Advance Payment Amounts" shall have the meaning set forth in Section
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2.02(a).
"Affiliate" shall mean, with respect to any Person, any other Person
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that, directly or indirectly, controls, is controlled by, or is under common
control with, such Person.
"Aggregate Purchase Price" shall mean the sum of (x) the Closing
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Purchase Price Payment, and (y) the Common Stock Purchase Price.
"Agreement" shall have the meaning set forth in the first paragraph
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hereof.
"Applicable Discount Rate" shall mean, ***.
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"Applicable Percentage" shall mean, as of any date of determination,
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(a) with respect to annual Net Sales of up to $100 million, the Initial
Applicable Percentage; and (b) with respect to annual Net Sales in excess of
$100 million, 1.75%.
"Appraisal Firm" shall mean a nationally recognized firm that engages
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in the business of valuing financial assets similar to the assets to be
appraised hereunder, which firm shall be selected by Assignee and shall be
reasonably acceptable to the Assignor. The Appraisal Firm shall not be an
Affiliate of the Assignee.
"Assigned Interests" shall mean Assignee's right to receive amounts
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equal to the Applicable Percentage of the Net Sales.
"Assignee" shall have the meaning set forth in the first paragraph
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hereof.
"Assignee Concentration Account" shall mean a segregated account
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established for the benefit of Assignee and maintained at the Lockbox Bank
pursuant to the terms of the Lockbox Agreement and this Agreement. Assignee
Concentration Account shall be the account into which the funds held in the
Joint Concentration Account which are payable to Assignee pursuant to this
Agreement are swept by the Lockbox Bank in accordance with the terms of this
Agreement and the Lockbox Agreement.
"Assignee Indemnified Party" shall have the meaning set forth in
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Section 8.06(a).
"Assignee Option Repurchase" shall have the meaning set forth in
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Section 5.07(a).
"Assignee Option Repurchase Price" shall have the meaning set forth in
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Section 5.07(a).
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
2
"Assignee RHAKOSS Purchase Option" shall have the meaning set forth in
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Section 5.07(d).
"Assignee's Account" shall mean an account maintained by Assignee at
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any financial institution and designated in writing by Assignee to Assignor, as
Assignee may so designate from time to time.
"Assignee's Consultants" shall mean, collectively, Assignee's
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employees, officers, directors, agents or other authorized representatives.
"Assignment" shall mean each Assignment pursuant to which Assignor
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shall assign to Assignee all of its rights and interests in and to the Assigned
Interests purchased hereunder, which Assignment shall be substantially in the
form of Exhibit C.
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"Assignment Documents" shall mean collectively, (i) the Orthovita
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Assignment Agreement, (ii) the Orthovita Trademark Assignment Agreement; (iii)
the Vita Licensing Patent Assignment Agreement and (iv) the Vita Licensing
Trademark Assignment.
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"Assignor" shall have the meaning set forth in the first paragraph
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hereof.
"Assignor Concentration Account" shall mean a segregated account
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established for the benefit of the Assignor and maintained at the Lockbox Bank
pursuant to the terms of the Lockbox Agreement and this Agreement. Assignor
Concentration Account shall be the account into which the funds held in the
Joint Concentration Account which are payable to Assignor pursuant to the terms
of the Vita SPC Patent License Agreement (less the amounts payable to Assignee
pursuant to this Agreement) are swept in accordance with the terms of this
Agreement and the Lockbox Agreement.
"Assignor Indemnified Party" shall have the meaning set forth in
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Section 8.06(b).
"Assignor Option Repurchase" shall have the meaning set forth in
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Section 5.07(c).
"Assignor Option Repurchase Price" shall have the meaning set forth in
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Section 5.07(c).
"Assignor RHAKOSS Repurchase Option" shall have the meaning set forth
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in Section 5.07(d).
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
3
"Assignor's Account" shall have the meaning set forth in Section 2.03.
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"Audit Costs" shall mean, with respect to any audit of the books and
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records of Assignor or Orthovita with respect to amounts payable or paid under
this Agreement or any License Party Audit, the cost of such audit, including,
without limitation, all reasonable fees, costs and expenses incurred in
connection therewith.
"Audit Reports" shall mean, with respect to a License Party Audit, any
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and all reports, findings and other written information related to such License
Party Audit.
"Bankruptcy Event" shall mean:
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(i) Orthovita or Assignor shall commence any case, proceeding
or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, relief of debtors or the like,
seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-
up, liquidation, dissolution, composition or other relief
with respect to it or its respective debts, or (B) seeking
appointment of a receiver, trustee, custodian or other
similar official for it or for all or substantially all of
its assets, or Assignor or Orthovita shall make a general
assignment for the benefit of its respective creditors; or
(ii) the commencement against Assignor or Orthovita of any case,
proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order
for relief or any such adjudication or appointment, and (B)
remains undismissed, undischarged or unbonded for a period
of forty-five (45) days; or
(iii) the commencement against Assignor or Orthovita of any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against
all or substantially all of its assets which results in the
entry of an order for any such relief which shall not have
been vacated, discharged, stayed, satisfied or bonded
pending appeal within forty-five (45) days from the entry
thereof; or
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
4
(iv) Assignor or Orthovita shall take any action in furtherance
of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) above of this definition of "Bankruptcy
Event"; or
(v) Assignor or Orthovita shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay
its respective debts as they become due; or
(vi) Assignor or Orthovita shall be Insolvent.
"Business Day" shall mean any day other than a Saturday, a Sunday, any
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day which is a legal holiday under the laws of the City of New York, or any day
on which banking institutions located in the City of New York are required by
law or other governmental action to close.
"Call Option Event" shall mean any one of the following events:
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(i) ***;
(ii) ***; or
(iii) ***.
***.
"Certificate of Incorporation" shall mean the certificate of
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incorporation of Assignor, dated as of October 9, 2001, as amended to date, a
copy of which is attached hereto as Exhibit G.
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"Change of Control" shall mean:
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(i) any Person (other than Assignor, Orthovita, any trustee or
other fiduciary holding securities under an employee
benefit plan of Assignor, Orthovita or any Affiliate
thereof or any controlling stockholder of Assignor or
Orthovita on the date hereof) shall, after the Closing
Date, become the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of securities of either Assignor
or Orthovita representing more than 50% of the combined
voting power of Assignor's or Orthovita's, as the case
may
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
5
be, then outstanding securities eligible to vote
generally in the election of directors; or
(ii) Assignor's members or Orthovita's stockholders approve a
merger or consolidation of Assignor or Orthovita, as
applicable, with any other Person, other than a merger
or consolidation which would result in either Assignor's
or Orthovita's voting securities outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the
combined voting power of Assignor's or Orthovita's, as
the case may be voting securities or such surviving
entity's voting securities outstanding immediately after
such merger or consolidation; provided, however, that a
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merger or consolidation effected to implement a
recapitalization or redomestication of either Assignor
or Orthovita (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of
Assignor's or Orthovita's, as the case may be, then
outstanding securities shall in no way constitute a
Change of Control; or
(iii) during any period of two consecutive years (not including
any period prior to the date of this Agreement),
individuals who at the beginning of such period
constitute the Board of Directors of Orthovita (together
with any new directors, as applicable (other than a
director designated by a Person who has entered into an
agreement with Assignor or Orthovita to effect a
transaction described in clause (i) or (ii) of this
definition of "Change of Control"), whose election by
such Board of Directors or nomination for election by
Assignor's or Orthovita's stockholders, as applicable,
was approved by a vote of a majority of the directors
then still in office who were directors at the beginning
of such period or whose election or nomination for
election was previously so approved) cease for any
reason to constitute at least a majority of the Board of
Directors of Orthovita or Assignor, as applicable, then
in office.
"Closing" shall have the meaning set forth in Section 6.01.
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[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
6
"Closing Date" shall mean October 16 , 2001.
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"Closing Purchase Price Payment" shall have the meaning set forth in
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Section 2.03.
"Collateral" shall have the meaning set forth in the Security
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Agreement.
"Combination Product" shall mean a product, method or service that
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incorporates, contains or combines as one of its elements (A) (i) VITOSS,
RHAKOSS or CORTOSS, ***.
"Common Stock Purchase Price" shall have the meaning set forth in the
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Stock Purchase Agreement.
"Confidential Information" shall mean, as it relates to Assignor,
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Orthovita and the Products, the Proprietary Technology, know-how, trade secrets,
confidential business information, financial data and other like information
(including ideas, research and development, know-how, formulas, schematics,
compositions, technical data, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), client lists and
tangible or intangible proprietary information or material. Notwithstanding the
foregoing definition, Confidential Information shall not include information
already in the public domain at the time such information is disclosed.
"CORTOSS" means a cortical bone void filler comprising a resin
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composite.
"Daily Amount" shall have the meaning set forth in Section 2.02(d)(i).
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"Deposit Accounts" shall mean, collectively, the Lockbox Account, the
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Concentration Account, the Joint Concentration Account, Assignor Concentration
Account and Assignee Concentration Account, each established and maintained
pursuant to the Lockbox Agreement.
"Discrepancy Notice" shall have the meaning set forth in Section
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2.02(k).
"Distribution Agreement" shall mean any existing or future agreement
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pursuant to which Orthovita or any affiliate or agent of Orthovita agrees to
sell the Products in the Territories, whether to end-users, for redistribution
by the purchaser thereof, or otherwise.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
7
"Distributor" shall mean any Person that enters into a Distribution
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Agreement with Orthovita or any Affiliate of Orthovita for the redistribution of
the Products.
"Dollars" or "US$" shall mean the freely transferable lawful money of
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the United States.
"Europe" shall mean (i) the member states of the European Union, (ii)
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Gibralter, Norway, Iceland, Switzerland, Malta, Albania, Croatia, Macedonia,
Slovakia, Bosnia-Hercegovina, Czech Republic, Poland, Slovenia, Bulgaria,
Hungary, Romania and Yugoslavia, and (iii) any states or other political
entities that may succeed to the geographical territories occupied by the states
referenced in the preceding clauses (i) and (ii).
"European Union" shall mean Belgium, France, Italy, Luxembourg,
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Netherlands, Germany, Denmark, Greece, Ireland, United Kingdom, Spain, Portugal,
Austria, Finland and Sweden.
"Existing Distribution Agreement" shall mean each Distribution
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Agreement in existence on the date hereof or as of any date as of which a
representation or warranty herein is deemed made or remade, as applicable.
"Existing License Agreement" shall mean each License Agreement in
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existence on the date hereof or as of any date as of which a representation or
warranty herein is deemed made or remade, as applicable.
"Excluded Liabilities and Obligations" shall have the meaning set
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forth in Section 2.04.
"Fair Market Value" shall mean the amount reasonably calculated by
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Orthovita's Board of Directors or a duly appointed committee of the Board;
provided, that if Assignee, in its sole discretion, disagrees with such
calculation of Fair Market Value, then Fair Market Value shall mean the amount
as determined by an opinion of the Appraisal Firm. The Appraisal Firm shall
determine the Fair Market Value of the security, property, or assets, as the
case may be, in question on the basis of what a willing buyer, under no
compulsion to buy, would pay a willing seller, under no compulsion to sell, in
an arm's-length transaction. For the avoidance of doubt, it is agreed and
understood that any Appraisal Firm calculating Fair Market Value shall be
entitled to utilize such valuation methodologies as it deems appropriate for
making such calculation, and the foregoing sentence shall not create any
implication that the parties intend to in any way designate any particular
valuation methodology as the preferred approach. The Appraisal Firm
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
8
shall deliver its determination of Fair Market Value in writing to Orthovita and
to the Assignee. The fees and expenses of the Appraisal Firm shall be paid by
the Assignee unless the Appraisal Firm's determination of Fair Market Value is
at least 25% higher than that of Orthovita's Board of Directors.
"FDA" shall mean the United States Food and Drug Administration.
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"Field of Use" shall mean: (a) *** or (b) any other uses and
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indications cleared as of the date hereof or cleared in the future for VITOSS,
CORTOSS or RHAKOSS (i) *** or (c) for use in bone replacement, bone void filling
or spinal implants (except, in the case of clause (c), where Orthovita has
certified that such product is not and cannot be used for any purpose for which
VITOSS, CORTOSS or RHAKOSS are used or are intended to be used).
"Financial Statements" shall mean (i) the consolidated balance sheets
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of Orthovita and its subsidiaries at December 31, 1999, December 31, 2000 and
June 30, 2001 and the related consolidated statements of operations and cash
flows and the consolidated statements of changes in stockholders' equity of
Orthovita and its subsidiaries audited for the years ended December 31, 1999 and
December 31, 2000 and unaudited for the six months ended June 30, 2001, and the
accompanying footnotes thereto, copies of which are attached hereto as
Exhibit B.
"Fiscal Year" shall mean the calendar year, except that for 2001
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Fiscal Year shall mean from the Closing Date through December 31, 2001.
"GAAP" shall mean generally accepted accounting principles in the
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United States in effect from time to time.
"Government Authority" means any government, court, regulatory or
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administrative agency or commission, or other governmental authority, agency or
instrumentality, whether federal, state or local (domestic or foreign),
including, without limitation, the U.S. Patent and Trademark Office, the FDA,
the U.S. National Institute of Health or any other government authority located
in North America.
"Guaranteed Obligations" shall have the meaning in Section 5.14(a).
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"Initial Applicable Percentage" shall mean 3.5%; provided, however,
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that if the Initial Applicable Percentage is adjusted pursuant to Section
2.02(e) or (f), then "Initial Applicable Percentage" shall mean the percentage
as so adjusted.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
9
"Insolvent" shall mean, with respect to Assignor or Orthovita, as
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applicable, a financial condition such that Assignor's or Orthovita's respective
debts (in the case of Orthovita, on a consolidated basis) (excluding the
obligation of Assignor to make payments in respect of the Assigned Interests
pursuant to this Agreement, including pursuant to Section 5.07) is greater than
the Fair Market Value of Assignor's or Orthovita's tangible and intangible
assets (in the case of Orthovita, on a consolidated basis), respectively.
"Intellectual Property" shall mean all inventions (whether patentable
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or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent rights, patent applications and invention
disclosures, together with all reissues, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, all registered or
unregistered trademarks, trade names, service marks, including all goodwill
associated therewith, and copyrights and all applications and registrations for
any of the foregoing owned or controlled by or issued to Orthovita or Assignor,
and relating to the Proprietary Technology and the Products in the Territories.
"Investor Shares" shall have the meaning ascribed to such term in the
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Stock Purchase Agreement.
"Joint Concentration Account" shall mean a segregated account
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established for the benefit of Orthovita, Assignor and Assignee and maintained
at the Lockbox Bank pursuant to the terms of the Lockbox Agreement and this
Agreement. The Joint Concentration Account shall be the account into which the
Lockbox Bank sweeps the funds held in the Lockbox Account.
"Knowledge" shall mean, with respect to Assignor and/or Orthovita, as
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applicable, the actual knowledge of an officer or representative of such Person
relating to a particular matter. Notwithstanding the foregoing, an officer or
representative of Assignor, Orthovita or any affiliate thereof charged with
responsibility for the aspect of the business relevant or related to the matter
at issue shall be deemed to have knowledge of a particular matter if, in the
prudent exercise of his or her duties and responsibilities in the ordinary
course of business, such officer or representative should have known of such
matter.
"Letter of Intent" shall mean the letter dated July 11, 2001 between
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▇▇▇▇ Capital Partners and Orthovita, as amended on September 4, 2001 and as the
same may be amended to the date hereof.
"License Agreement" shall mean any existing or future co-promotion,
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manufacturing, marketing or partnering agreements other than a Distribution
Agreement entered into by
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
10
Orthovita relating to the Products and/or the Proprietary Technology pursuant to
which Orthovita or any Affiliate of Orthovita grants a license to distribute the
Products in the Territories or for use of the Proprietary Technology.
"Licensees" shall mean, collectively, the licensees under the License
---------
Agreements; each a "Licensee".
--------
"License Party Audit" shall have the meaning set forth in Section
-------------------
5.12(d).
"Liens" shall mean all liens, encumbrances, security interests,
-----
mortgages or charges of any kind.
"Lockbox Account" shall mean collectively, any lockbox and segregated
---------------
lockbox account established and maintained at the Lockbox Bank pursuant to a
Lockbox Agreement and this Agreement. The Lockbox Account shall be the account
into which all payments made in respect of the sale of the Products are to be
remitted.
"Lockbox Agreement" shall mean any agreement entered into by a Lockbox
-----------------
Bank, Orthovita, Assignor and Assignee, in form and substance reasonably
satisfactory to the parties thereto, pursuant to which, among other things, the
Lockbox Account, the Joint Concentration Account, Assignee Concentration Account
and Assignor Concentration Account shall be established and maintained.
"Lockbox Bank" shall mean such bank or financial institution approved
------------
by each of Assignee and Assignor and a party to any Lockbox Agreement.
"Losses" shall mean collectively, any and all claims, damages, losses,
------
judgments, liabilities, costs and expenses (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) incurred as a result of a
Person not a party hereto bringing an action, suit or proceeding against a party
hereto.
"Material Adverse Change" shall mean, with respect to Assignor and/or
-----------------------
Orthovita, as applicable, a material adverse change in the business, operations,
assets or financial condition of the Assignor and/or Orthovita, in each case
taken as a whole, after the date hereof, other than losses incurred by Orthovita
in the ordinary course of business.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
11
"Material Adverse Effect" shall mean (i) a Material Adverse Change,
-----------------------
(ii) a materially adverse effect on the validity or enforceability of any of the
Transaction Documents (other than by virtue of a breach of a representation or
warranty of Assignee contained within any of the Transaction Documents), (iii) a
material adverse effect on the ability of the Assignor or Orthovita to perform
any of its material obligations under any of the Transaction Documents, (iv) a
material adverse effect on the right of Orthovita or Assignor to receive the
payments payable under all of its Distribution Agreements or License Agreements,
taken as a whole, or any other rights and remedies of Orthovita or Assignor
under its Distribution Agreements or License Agreements, taken as a whole, (v) a
material adverse effect on the right of Assignee to receive the Assigned
Interests or the Applicable Percentage of Net Sales or (vi) a material adverse
effect on the Assigned Interests taken as a whole, including, without
limitation, any material adverse effect on the ability of the Assignor to
manufacture, distribute and/or market the Products; provided, however, that any
-------- -------
order or other action taken by a regulatory body with respect to the Products,
including without limitation by the FDA and any foreign government equivalent,
having authority over Orthovita, its operations or the Products, including
without limitation a total or partial recall of any Product, has any of the
effects contemplated under clauses (i) through (vi) above, shall not constitute
a Material Adverse Effect.
"Material Contracts" shall mean any contract, agreement or other
------------------
arrangement to which either Assignor or Orthovita is a party or any of
Assignor's or Orthovita's respective assets or properties are bound or committed
(other than the Transaction Documents) for which breach, nonperformance,
cancellation or failure to renew would reasonably be expected to have a Material
Adverse Effect.
"North America" shall mean the United States, Canada and Mexico.
-------------
"Net Sales" shall mean, (A) for any period of determination, the
---------
aggregate sales revenues of the Products during such period, in finished
packaged form (x) as invoiced by Orthovita or any Affiliate of Orthovita,
Distributors, Licensees or others to end-users of the Products in the United
States, (y) as invoiced by Orthovita or any Affiliate of Orthovita to
Distributors or end-users in Canada and Mexico, and (z) the aggregate European
sales revenues of the Products as invoiced by Orthovita or any Affiliate of
Orthovita to Distributors, less (i) customary cash, trade discounts and rebates
actually granted or paid but only if and to the extent the same are in
accordance with sound business practices and not in excess of customary industry
standards, (ii) allowances and adjustments actually credited to customers for
Products that are spoiled, damaged, outdated, obsolete, returned or otherwise
recalled, but only if and to the extent the same are in accordance with sound
business practices and not in excess of
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
12
customary industry standards (but in no event shall such amount be greater than
*** percent of Net Sales in any year (excluding a significant recall of any
Product by a Government Authority in the Territories)), (iii) charges included
as part of the aggregate sales price for freight, postage, shipping, delivery,
service and insurance charges, to the extent invoiced, (iv) taxes, duties or
other governmental charges when included in the invoice, and (v) with respect to
Combination Products that contain or otherwise combine Products with one or more
other components, an amount equal to the aggregate sales of such Products during
such period, as invoiced to customers, Distributors or Licensees, as applicable,
multiplied by the Revenue Adjustment Factor, and (B) ***. Notwithstanding the
foregoing, if Orthovita or any Affiliate or Licensee of Orthovita commences
direct sales of the Products to end-users in any country or countries in Europe,
Orthovita, Assignor and Assignee shall agree on the method (if different than as
set forth above), on a country by country basis, for calculating Net Sales in
respect of such direct sales to end users.
"Notice of Election" shall have the meaning set forth in Section 5.05(b).
------------------
"Obligations" shall mean any and all obligations of Assignor or Orthovita
-----------
under this Agreement and the other Transaction Documents.
"Offered Interests" shall have the meaning set forth in Section 5.05(a).
-----------------
"Orthovita" shall have the meaning set forth in the first paragraph
---------
hereof.
"Orthovita Assignment Agreement" shall mean, collectively, the Assignment
------------------------------
Agreement, dated as of May 19, 1999, pursuant to which Orthovita assigned
certain Patents to Vita Licensing, Inc., as the same shall have been amended,
and the Assignment dated as of October 16, 2001 pursuant to which Orthovita
assigned certain non-registered Intellectual Property to Assignor.
"Orthovita Concentration Account" shall mean a segregated account
-------------------------------
established for the benefit of Orthovita and maintained at the Lockbox Bank
pursuant to the terms of the Lockbox Agreement and this Agreement. The
Orthovita Concentration Account shall be the account into which the funds held
in the Joint Concentration Account which are payable to Orthovita pursuant to
this Agreement are swept by the Lockbox Bank in accordance with the terms of
this Agreement and the Lockbox Agreement.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
13
"Orthovita Trademark Assignment Agreement" shall mean the Assignment
----------------------------------------
dated as of October 16, 2001, pursuant to which Orthovita assigned certain
Trademarks to Vita Licensing, as the same shall have been amended as of the
Closing Date.
"Other Interests" shall have the meaning set forth in Section 5.05(a).
---------------
"Owned Intellectual Property" shall have the meaning set forth in Section
---------------------------
3.12(d).
"Patent Office" shall mean the respective patent office (foreign or
-------------
domestic) for any Patent.
"Patents" shall mean, relating solely to the sales of the Products in the
-------
Territories and/or the Proprietary Technology and not any other products or
proprietary technologies of Assignor, Orthovita or its Affiliates, all patents,
patent applications and patent disclosures issued or filed in the Territories,
together with all reissues, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof relating to the Products and/or the
Proprietary Technology, composition of matter, formulation, or methods of
manufacture or use thereof that are issued or filed in the Territories,
including, without limitation, those identified in Schedule 3.12(a). For
----------------
avoidance of doubt, the term "Patents" does not include any patents, patent
applications and patent disclosures issued or filed in jurisdictions outside of
the Territories, nor does it include any reissues, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof relating to the
Products and/or the Proprietary Technology, composition of matter, formulation,
or methods of manufacture or use thereof that are issued or filed in
jurisdictions outside of the Territories.
"Person" means an individual, corporation, partnership, association,
------
trust or other entity or organization, but not including a government or
political subdivision or any agency or instrumentality of such government or
political subdivision.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the date
----------------
hereof by and between Vita Licensing and Assignee providing for, among other
things, the grant by Vita Licensing in favor of Assignee of its common stock in
Assignor.
"PMA" shall mean Pre-Marketing Application.
---
"Products" shall mean (i) VITOSS, CORTOSS and RHAKOSS, (ii) ***
--------
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
14
"Projected Net Sales" shall mean, with respect to any Fiscal Year during
-------------------
the Revenue Interest Period, the net sales of the Products to end-users in North
America and to Distributors for distribution in Europe projected by Orthovita
for such Fiscal Year, as set forth in Exhibit A hereto.
---------
"Proposed Transfer" shall have the meaning set forth in Section 5.05(a).
-----------------
"Proposed Transfer Notice" shall have the meaning set forth in Section
------------------------
5.07(d).
"Proprietary Technology" shall mean the proprietary technology set forth
----------------------
and described on Schedule A hereto.
----------
"Purchase Option Exercise Period" shall have the meaning set forth in
-------------------------------
Section 5.07(a).
"Purchase Option Event" shall mean any one of the following events:
---------------------
(i) any Change of Control;
(ii) ***;
(iii) a ruling, decision, finding, or other judicial action that
constitutes or causes a Material Adverse Effect, or any
judgments, liabilities, damages, losses, or claims resulting
from such proceedings, to the extent not covered by insurance
(or with respect to which issuer of such insurance policy or
policies disputes such coverage), exceeding on an aggregate
basis *** of the cash and cash equivalents and short term
investment account balances of Orthovita (on a consolidated
basis) as of the date such judgments, liabilities, damages,
losses or claims are paid or at any time after the 30th day on
which such may become outstanding;
(iv) the acceleration of the obligations of Orthovita or Assignor or
the exercise of default remedies by a secured lender under any
secured financing of indebtedness for borrowed money in excess
of *** between Orthovita or Assignor, as applicable, and a
third party lender; or
(v) a Termination Event shall have occurred.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
15
Notwithstanding clause (ii) of this definition of "Purchase Option Event" to the
contrary, in the event of a Transfer involving only Other Interests in
accordance with Section 5.05, then such Transfer under such clause (ii) above
shall not constitute a Purchase Option Event.
"Quarterly Report" shall mean, with respect to the relevant fiscal
----------------
quarter of Assignor, (i) a report showing all payments made by Assignor to
Assignee under this Agreement during such quarter and showing in reasonable
detail the basis for the calculation of such payments, (ii) a reconciliation of
such report referred to in clause (i) above to all information and data
deliverable to Orthovita by the parties to any Distribution Agreements and/or
License Agreements, together with relevant supporting documentation and (iii)
such additional information as Assignee may reasonably request.
"Reformulated Product" shall mean any improvement in VITOSS, CORTOSS or
--------------------
RHAKOSS or ***.
"Registered Intellectual Property" shall have the meaning set forth in
--------------------------------
Section 3.12(a).
"Regulatory Agency" shall mean a regulatory agency with responsibility
-----------------
for the approval of the marketing and sale of drugs in any country.
"Repurchase Event" shall have the meaning set forth in Section 5.07(e).
----------------
"Revenue Adjustment Factor" shall mean, with respect to any Combination
-------------------------
Product, a fraction the numerator of which is the invoice price of the related
Product, if sold separately, and the denominator of which is the sum of (x) the
invoice price of the related Product, if sold separately, and (y) the total
invoice price of any other components of such Combination Product, if sold
separately. If the Product or other components of the Combination Product are
not sold separately then the parties hereto will discuss and mutually agree on
the appropriate values of the active and other components of the Combination
Product.
"Revenue Interest Period" shall mean the period from and including
-----------------------
September 30, 2001 through and including December 31, 2016, unless earlier
terminated upon a repurchase of the Assigned Interests by the Assignor or
otherwise in accordance with the terms of this Agreement.
"Revenue Interests" shall mean, (a) with respect to any Distribution
-----------------
Agreements, all of Orthovita's or Assignor's rights to receive payments in
respect of sales of the Products in the Territories, whether to end-users or
Distributors, (b) with respect to License Agreements, all of
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
16
Orthovita's or Assignor's rights under such License Agreements, including,
without limitation, rights to receive payments in respect of sale of the
Products in the Territories and (c) otherwise, all of Orthovita's or Assignor's
rights, however derived, to receive payments in respect of sales of the Products
in the Territories.
"RHAKOSS" means bone replacements and spinal bone implants comprising a
-------
pre-formed resin composite.
"Royalty Interests" means the Assignor's right to receive payments in
-----------------
respect of Orthovita's sale of certain products, including, without limitation,
the Products, pursuant to the Vita SPC Patent License Agreement.
"Security Agreement" shall mean the Security Agreement dated as of the
------------------
date hereof by and between Assignor and Assignee providing for, among other
things, the grant by Assignor in favor of Assignee of a valid, continuing,
perfected lien on and security interest in, the Assigned Interests and the other
Collateral described therein.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated
------------------------
as of the date hereof, by and between Orthovita and the Assignee.
"Term" shall mean the term of this Agreement, which shall commence on the
----
date hereof and terminate on the earlier of (i) December 31, 2016 and (ii) the
consummation of a Repurchase Event under either Section 5.07(a) or 5.07(c).
"Termination Event" shall mean:
-----------------
(i) a Bankruptcy Event shall have occurred; or
(ii) if (A) any representation, warranty or certification made by
either Assignor or Orthovita in any of the Transaction Documents or in any
certificate at any time given by either Assignor or Orthovita in writing
pursuant hereto or thereto or in connection herewith or therewith shall be
inaccurate on the date as of which it was made or deemed made, and such
inaccuracy would, individually or in the aggregate with other inaccuracies on
the part of Assignor or Orthovita, as the case may be, reasonably be expected to
have a Material Adverse Effect or (B) there has occurred a breach of or default
under any term, covenant, or agreement under any Transaction Document by either
Assignor or Orthovita, which would, individually or in the aggregate with other
breaches on the part of Assignor or Orthovita, as the case may be, reasonably be
expected to have a Material Adverse Effect, and such false representation,
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
17
warranty or certification or breach or default, as the case may be, if capable
of cure, has not been cured within thirty (30) days following receipt by
Assignor or Orthovita, as applicable, from Assignee of notice of such false
representation, warranty or certification or breach or default, as the case may
be and requesting that the same be cured.
"Territories" shall mean North America and Europe, as such terms are
-----------
defined herein.
"Transaction Documents" shall mean, collectively, this Agreement, the
---------------------
Assignment Documents, the Security Agreement, the Pledge Agreement and any
Lockbox Agreement. For purposes of the representations and warranties contained
in Article III, the term Transaction Documents shall not include the Lockbox
Agreement and any Assignment Document that is not dated the date hereof and
executed by Assignor, Orthovita and/or Assignee and delivered on the Closing
Date until such documents are executed and delivered.
"Transfer" or "Transferred" shall mean any sale, conveyance, assignment,
-------- -----------
disposition or transfer, excluding any transfer pursuant to a Distribution
Agreement or License Agreement.
"Transfer Notice" shall have the meaning set forth in Section 5.05(a).
---------------
"Transferees" shall have the meaning set forth in Section 2.02(c).
-----------
"True-Up Amount" shall have the meaning set forth in Section 2.02(d)(ii).
--------------
"True-Up Date" for any fiscal quarter shall mean the 20th day following
------------
the end of each such fiscal quarter of Assignor, unless such date is not a
Business Day in which case the applicable date will be the immediately
succeeding Business Day.
"United States" shall mean the United States of America.
-------------
"UCC" shall mean the Uniform Commercial Code (or any similar or
---
equivalent legislation) as in effect in any applicable jurisdiction.
"Vita License Agreement" shall mean the Vita Licensing Inc. License to
----------------------
Orthovita, Inc. dated as of July 15, 2000, as amended to date, by and between
Vita Licensing and Orthovita.
"Vita Licensing Patent Assignment Agreement" shall mean the Assignment
------------------------------------------
between Vita Licensing and Assignor, dated as of October 16, 2001, pursuant to
which Vita Licensing
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
18
assigned certain Patents to Assignor, as the same shall have been amended as of
the Closing Date.
"Vita Licensing Trademark Assignment Agreement" shall mean the Assignment
---------------------------------------------
between Vita Licensing and Assignor, dated as of October 16, 2001, pursuant to
which Vita Licensing assigned certain Trademarks to Assignor, as the same shall
have been amended as of the Closing Date.
"Vita SPC Patent License Agreement" shall mean the agreement between Vita
---------------------------------
Licensing and Assignor, dated as of October 16 , 2001, providing for, among
other things, the payment to Assignor of the Royalty Interests.
"Vita SPC Trademark License Agreement" shall mean the agreement between
------------------------------------
Vita Licensing and Assignor, dated as of October 16, 2001, providing for the
licensing of certain trademarks by Assignor to Vita Licensing.
"VITOSS" means a resorbable cancellous calcium phosphate bone void
------
filler.
"Weighted Average Applicable Percentage" shall mean, with respect to any
--------------------------------------
Fiscal Year, the average Applicable Percentage for such Fiscal Year weighted on
the basis of the amount of Net Sales during such Fiscal Year against which such
Applicable Percentage was applied in calculating amounts payable pursuant to
Sections 2.02(d). For example, if Net Sales equaled $200 million during a
Fiscal Year during the Revenue Interest Period, the Weighted Average Applicable
Percentage would equal 2.63%, based on the following calculations:
1. (3.5%/1/ x $100 million) + (1.75% x $100 million) = $5.25 million.
2. $5.25 million/$200 million = 2.63%.
_________________
/1/ Assumes no adjustments to the Initial Applicable Percentage are required
under Section 2.02(e) or (f).
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
19
ARTICLE II
PURCHASE AND SALE OF ASSIGNED INTERESTS
Section 2.01 Purchase and Sale.
-----------------
Upon the terms and subject to the conditions set forth in this Agreement,
Assignor agrees to sell, assign, transfer and convey to Assignee, and Assignee
agrees to purchase from Assignor, free and clear of all Liens (except those
Liens created in favor of Assignee pursuant to the Security Agreement and any
other Transaction Document) and subject to the conditions set forth in Article
VI, all of Assignor's rights and interests in and to the Assigned Interests on
the Closing Date. Assignee's ownership interest in each of the Assigned
Interests so acquired shall vest immediately upon Assignor's receipt of the
payment for such Assigned Interests pursuant to Section 2.03.
Section 2.02 Payments in Respect of the Assigned Interest.
--------------------------------------------
(a) Assignee shall be entitled to receive the Advance Payments for the
calendar year ending December 31, 2003 and for each calendar year thereafter
during the Revenue Interest Period. During the calendar year ending December 31,
2003 and during each calendar year thereafter included in the Revenue Interest
Period, proceeds from the sale of Products in the Territories which are received
from time to time in the Lockbox Account of up to the total Advance Payment to
which Assignee is entitled hereunder for that particular year (the "Advance
-------
Payment Amounts") shall be swept from the Joint Concentration Account into the
---------------
Assignee Concentration Account on a daily basis pursuant to Section 5.10.
(b) During the Fiscal Year ending December 31, 2003 and during each Fiscal
Year thereafter included in the Revenue Interest Period, once Assignee has
received the Advance Payment due Assignee for the applicable Fiscal Year
pursuant to subsection 2.02(a) above, Orthovita and Assignor shall be entitled
to retain in full (and Assignee shall not be entitled to receive the Applicable
Percentage in respect of) Net Sales in an amount equal to (x) the quotient
obtained by dividing the Advance Payment for such Fiscal Year by the Weighted
Average Applicable Percentage applicable to Net Sales to date for such Fiscal
Year, minus (y) the Advance Payment for such Fiscal Year. After retention by
Assignor in full of Net Sales in the amount set forth in the preceding sentence,
Assignee shall thereafter be entitled to the Applicable Percentage of Net Sales
for the remainder of such Fiscal Year, subject to subsections (d), (e) and (f)
below.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
20
(c) Upon any sale of the Investor Shares (as such term is defined in the
Stock Purchase Agreement) other than to a Transferee (as hereinafter defined),
Assignor shall receive a credit to be applied against amounts payable to
Assignee under Section 2.02(d) in an amount equal to (I) the proceeds of such
sale until such time as the proceeds (or any portion thereof) of such sale,
together with the proceeds of all prior sales of Investor Shares, equal
$5,000,000 (five million dollars) less the amount of any underwriting fees,
discounts or commissions attributable to such sale of Investor Shares by the
Assignee or Transferee, as applicable, and (II) thereafter, 1/3 of the sales
price for such Investor Shares in excess of $5,000,000, if any, less 1/3 of the
underwriting fees, discounts or commissions attributable to the sale of the
Investor Shares by Assignee or a Transferee, as applicable, that generates
credits to Assignor pursuant to this clause (II) of this Subsection
2.02(c).__The provisions of this Subsection 2.02(c) shall also apply to sales of
Investor Shares by an Affiliate of Assignee or any other Person who purchases
Investor Shares from Assignee in a transaction that is not a bona fide
acquisition of such stock (such Affiliates or other Persons are referred to as
"Transferees"). Following termination of this Agreement, Assignee shall promptly
pay to Assignor (in lieu of any credit therefore as provided in this subsection
(c)) the amount of any outstanding credits and shall also pay to Assignor any
amounts described in the preceding clauses (I) and (II) arising from
dispositions of the Investor Shares following termination of this Agreement;
provided, however, the aggregate credits applied on behalf of Assignor or,
-------- -------
following termination of this Agreement, paid to Assignor, may not exceed the
aggregate amounts paid or payable to Assignee under this Agreement.
(d) Subject to the satisfaction of the provisions of subsections (a) and
(b) above, if applicable, Assignee shall be entitled to receive an amount equal
to the Applicable Percentage of Net Sales made during the Revenue Interest
Period, payable as follows:
(i) the Applicable Percentage of Net Sales which shall be swept
from the Joint Concentration Account into Assignee Concentration Account on a
daily basis (the "Daily Amount") pursuant to Section 5.10; and
------------
(ii) in the event that the aggregate of the Daily Amounts received
by Assignee during any period commencing on the first day of each Fiscal Year
and ending on the last day of a fiscal quarter, taking into account the Advance
Payments made in respect of such Fiscal Year, any credits against amounts
payable to Assignee as provided in Section 2.02(c) and any true-up payment
previously made under this Section 2.02(d)(ii) in respect of such Fiscal Year,
(x) is less than the Weighted Average Applicable Percentage of Net Sales for
such period, then on the applicable True-Up Date, Assignor shall pay to Assignee
an amount equal to such difference, or (y) is greater than the Weighted Average
Applicable Percentage of Net Sales for such period,
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
21
then on the applicable True-Up Date, Assignee shall pay to Assignor an amount
equal to such difference attributable to any payments previously made by
Assignor in respect of such Fiscal Year, and, if any excess amount then remains
attributable to the credits under Section 2.02(c), then Assignee shall pay to
Assignor an amount equal to such difference attributable to any payments
previously made by Assignor in respect of any previous Fiscal Years, and, if any
excess amount then still remains attributable to the credits under Section
2.02(c), then Assignee shall carryover any such remaining amounts payable to
Assignor under clause (y) to the next subsequent fiscal quarter or quarters
until such time as they are no longer outstanding/2/ (any amount payable
pursuant to the preceding clause (x) or clause (y), a "True-Up Amount").
--------------
Assignor shall, within five (5) Business Days after receipt of any amounts in
respect of any accounts previously written-off for which no Applicable
Percentage of Net Sales were paid to Assignee, remit to Assignee the Applicable
Percentage (such Applicable Percentage to be based upon the Applicable
Percentage at the time that such accounts were written-off) of any such
recoveries up to the amount by which prior payments to Assignee were reduced
pursuant to the second preceding sentence.
(e) If, for any Fiscal Year during the Revenue Interest Period, actual Net
Sales are less than *** of Projected Net Sales, then the Initial Applicable
Percentage for any such Fiscal Year shall be ***%.
(f) If, for any Fiscal Year during the Revenue Interest Period, actual Net
Sales are less than *** but greater than or equal to *** of Projected Net Sales,
then the Initial Applicable Percentage for any such Fiscal Year shall be ***%.
(g) If, for any Fiscal Year during the Revenue Interest Period, actual Net
Sales are greater than ***% of Projected Net Sales, then Assignee shall remit to
Assignor an amount equal to ***% of the product of (i) the excess of Net Sales
for such Fiscal Year over ***% of the Projected Net Sales and (ii) the Weighted
Average Applicable Percentage for such Fiscal Year.
_____________________________
/2/ By way of example, if during the first fiscal quarter of the first Fiscal
Year:
(a) Assignee received $500,000 under Section 2.02(d)(i);
(b) the Weighted Average Applicable Percentage of Net Sales equaled $1
million; and
(c) Assignor earned a credit of $1.1 million under Section 2.02(c),
then Assignee would owe Assignor $600,000, of which $100,000 would be carried
forward to the next fiscal quarter.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
22
(h) Any amounts payable pursuant to clauses (e), (f) or (g) of this
Section 2.02 shall be remitted by Assignor to Assignee (in the case of clauses
(e) or (f)) or by Assignee to Assignor (in the case of clause (g)) within sixty
(60) days after the end of the Fiscal Year.
(i) If, for any Fiscal Year during the Revenue Interest Period, (x) the
sum of (i) the aggregate Daily Amounts paid to Assignee, (ii) the aggregate
True-Up Amounts paid to Assignee, (iii) the aggregate Advance Payments paid to
Assignee and (iv) the aggregate amounts paid to Assignee pursuant to Sections
2.02(e) and (f) is less than (y) the sum of (i) the Weighted Average Applicable
Percentage of Net Sales and (ii) the aggregate amount paid to Assignor pursuant
to Sections 2.02(g), then Assignor shall pay Assignee an amount equal to the
excess of clause (y) over clause (x). If the amounts set forth the preceding
clause (x) exceed the amounts set forth in the preceding clause (y) then
Assignee shall pay Assignor an amount equal to such excess. Any amounts payable
pursuant to this subsection (i) shall be remitted within twenty (20) days
following the receipt of written notice, together with supporting documentation
with respect thereto (which notice shall be given no later than one hundred
twenty days (120) after the end of such Fiscal Year) that such payment is due
pursuant to this subsection.
(j) If Assignee receives Advance Payment Amounts for any Fiscal Year
pursuant to Section 2.02(a) that, in the aggregate, exceed the Weighted Average
Applicable Percentage of Net Sales for such Fiscal Year, then Assignee shall
rebate such excess amount to Assignor within sixty (60) days after the end of
such Fiscal Year, but only to the extent that Assignor does not notify Assignee
prior to such date that it is offsetting any amount due under this clause (j)
against amounts that Assignor owes to Assignee under clause (i) of this Section
2.02.
(k) Any payments to be made by Assignor to Assignee hereunder or under any
other Transaction Document shall be made by wire transfer of immediately
available funds.
(l) Within thirty (30) Business Days following delivery to Assignee by
Assignor of the Quarterly Report for the fourth fiscal quarter of each Fiscal
Year during the Revenue Interest Period, to the extent that either Assignee or
Assignor has determined that there is a discrepancy as to the amounts paid to
Assignee hereunder for such Fiscal Year, then the Person who has made such
determination may notify the other in writing of such discrepancy indicating in
reasonable detail its reasons for such determination (the "Discrepancy Notice").
-------------------
In the event that either Assignee or Assignor delivers to the other party a
Discrepancy Notice, Assignee and Assignor shall meet within ten (10) Business
Days (or such other time as mutually agreed by the parties) after the receiving
party has received a Discrepancy Notice to resolve in good faith such
discrepancy. If the discrepancy has been resolved and, as a result thereof, it
is determined that a
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
23
payment is owing by Assignee to Assignor or by Assignor to Assignee, then the
party owing such payment shall promptly pay such payment to the other party. If,
within forty-five (45) days after receipt of the Discrepancy Notice, Assignor
and Assignee cannot resolve any such discrepancies, then Assignee and Assignor
shall promptly instruct their respective firms of independent certified public
accountants to select, within five (5) Business Days thereafter, a third
nationally recognized accounting firm (the "Independent Accountants"). After
-----------------------
offering Assignor and its representatives and Assignee and its representatives
the opportunity to present their positions as to the disputed items, which
opportunity shall not extend for more than ten (10) calendar days after the
Independent Accountants have been selected, the Independent Accountants shall
review the disputed matters and the materials submitted by Assignor and Assignee
and, as promptly as practicable, deliver to Assignor and Assignee a statement in
writing setting forth its determination of the proper treatment of the
discrepancies as to which there was disagreement, and that determination will be
final and binding upon the parties hereto without any further right of appeal.
All charges of that accounting firm incurred in making that determination will
be borne one-half by Assignee and one-half by Assignor.
Section 2.03 Purchase Price.
--------------
In full consideration for the assignment by the Assignor of the Assigned
Interests, and subject to the terms and conditions set forth herein, Assignee
shall pay to Assignor $5.0 million (five million dollars) for the Assigned
Interests acquired pursuant to Section 2.01 (the "Closing Purchase Price
----------------------
Payment"). The Closing Purchase Price Payment shall be paid by wire transfer of
-------
immediately available funds to the account designated by Assignor (the
"Assignor's Account") upon the Closing.
-------------------
Section 2.04 No Assumed Obligations.
----------------------
Notwithstanding any provision in this Agreement or any other writing to the
contrary, Assignee is acquiring only the Assigned Interests and is not assuming
any liability or obligation of Assignor or Orthovita of whatever nature, whether
presently in existence or arising or asserted hereafter, whether under any
Distribution Agreement, License Agreement and any other Transaction Document or
otherwise. All such liabilities and obligations shall be retained by and remain
obligations and liabilities of Assignor or Orthovita (the "Excluded Liabilities
--------------------
and Obligations").
---------------
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASSIGNOR AND ORTHOVITA
Assignor and Orthovita hereby jointly and severally represent and warrant
to Assignee as of the date hereof and as of the Closing Date the following:
Section 3.01 Organization.
------------
Orthovita, Vita Licensing and Assignor are corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and have all corporate powers and all licenses,
authorizations, consents and approvals required to carry on their respective
businesses as now conducted and as proposed to be conducted in connection with
the transaction contemplated hereby.
Section 3.02 Corporate Authorization.
-----------------------
Each of Assignor, Vita Licensing and Orthovita has all necessary power and
authority to enter into, execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to perform all of the
obligations to be performed by it hereunder and thereunder and to consummate the
transactions contemplated hereunder and thereunder. This Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by each
of Assignor and Orthovita (to the extent a party thereto) and each of this
Agreement and each other Transaction Document to which each of Assignor and
Orthovita is a party constitutes the valid and binding obligation of Assignor
and Orthovita, enforceable against Assignor and Orthovita in accordance with
their respective terms subject, as to enforcement of remedies, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or general equitable principles.
Section 3.03 Governmental Authorization.
--------------------------
The execution and delivery by each of Assignor and Orthovita of this
Agreement and the other Transaction Documents to which it is a party, and the
performance by Assignor or Orthovita of its respective obligations hereunder and
thereunder, does not require any notice to, action or consent by, or in respect
of, or filing with, any Government Authority, except as set forth in Schedule
--------
3.03 hereto.
----
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
25
SECTION 3.04 Ownership.
---------
(a) Prior to the date hereof, subject to the terms of the Assignment
Documents, each of Orthovita and Vita Licensing has Transferred to Assignor all
of its rights, title and interest in and to the Intellectual Property, the
Proprietary Technology, and, subject to the terms of the Vita SPC Patent License
Agreement, Vita Licensing has agreed to pay the Royalty Interests to Assignor.
(b) Assignor, immediately prior to the assignment of the Assigned
Interests, owns, and is the sole holder of, all the Royalty Interests; and
except as set forth on Schedule 3.04, Assignor and/or Orthovita own, are the
-------------
sole holder of, and/or have and hold a valid, enforceable and subsisting license
to, all of those other assets that are required to produce or receive any
payments from any Distributor or payor under and pursuant to, and subject to the
terms of each of the Distribution Agreements, in each case free and clear of any
and all Liens, except those Liens created in favor of Assignee pursuant to the
Security Agreement and any other Transaction Document. Neither Orthovita nor
Assignor has transferred, sold, or otherwise disposed of, or agreed to transfer,
sell, or otherwise dispose of any portion of the Revenue Interests other than as
contemplated by this Agreement, the Assignment, the Vita License Agreement, the
Vita SPC Patent License Agreement or the applicable Distribution Agreement. No
Person other than Orthovita, Vita Licensing or Assignor has any right to receive
the payments payable under any Distribution Agreement other than (a) in respect
of the Assigned Interests, Assignee from and after the Closing Date and (b) as
set forth on Schedule 3.04. Assignor has the full right to sell, transfer,
-------------
convey and assign to Assignee all of Assignor's rights and interests in and to
the Assigned Interests being sold, transferred, conveyed and assigned to
Assignee pursuant to this Agreement without any requirement to obtain the
consent of any Person. By the delivery to Assignee of the executed Assignment,
Assignor shall transfer, convey and assign to Assignee all of Assignor's rights
and interests in and to the Assigned Interests being sold, transferred, conveyed
and assigned to Assignee pursuant to this Agreement, free and clear of any
Liens, except those Liens created in favor of Assignee pursuant to the Security
Agreement and any other Transaction Document. At the Closing, upon payment of
the Closing Purchase Price Payment by Assignee to Assignor, and upon the
delivery of the Assignment to Assignee by Assignor, Assignee shall have acquired
good and valid rights and interests of Assignor in and to the Assigned Interests
being sold, transferred, conveyed and assigned to Assignee pursuant to this
Agreement, free and clear of any and all Liens, except those Liens created in
favor of Assignee pursuant to the Security Agreement and any other Transaction
Document and other than as set forth on Schedule 3.04.
-------------
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
26
SECTION 3.05 Financial Statements.
--------------------
The Financial Statements are complete and accurate in all material
respects, were prepared in conformity with GAAP and present fairly in all
material respects the financial position and the financial results of Orthovita
and its subsidiaries as of the dates and for the periods covered thereby. There
has been no Material Adverse Change since December 31, 2000.
SECTION 3.06 No Undisclosed Liabilities.
--------------------------
Except for those liabilities (a) reflected in the Financial Statements, and
(b) incurred by Orthovita or any of its subsidiaries in the ordinary course of
business since June 30, 2001, or (c) that may be incurred under this Agreement
or under any of the Transaction Documents, there are no material liabilities of
Orthovita and any of its subsidiaries or Assignor separately of any kind
whatsoever, whether accrued, contingent, absolute, determined or determinable,
and there is no condition, situation or set of circumstances which would
reasonably be expected to result in such a material liability.
SECTION 3.07 Solvency.
--------
None of Assignor, Vita Licensing nor Orthovita is Insolvent. Assuming
consummation of the transactions contemplated by this Agreement, (a) the present
fair saleable value of each of Assignor's and Orthovita's assets is greater than
the amount required to pay its debts as they become due, (b) neither Assignor
nor Orthovita has unreasonably small capital with which to engage in its
business, and (c) neither Assignor nor Orthovita has incurred, or has present
plans to or intends to, incur, debts or liabilities (other than debts or
liabilities incurred pursuant hereto and pursuant to the Transaction Documents)
beyond its ability to pay such debts or liabilities as they become absolute and
matured.
SECTION 3.08 Litigation.
----------
(a) There is no (a) action, suit, arbitration proceeding, claim,
investigation or other proceeding pending or, to the Knowledge of each of
Assignor and Orthovita, threatened against either Assignor or Orthovita or (b)
governmental inquiry pending or, to the Knowledge of each of Assignor and
Orthovita, threatened against either Assignor or Orthovita, in each case with
respect to clauses (a) and (b) above, which, if adversely determined, would
question the validity of, or could materially and adversely affect or prevent
the consummation of, the transactions contemplated by this Agreement or any of
the other Transaction Documents or would reasonably be expected to have a
Material Adverse Effect. There is no action, suit, claim, proceeding or
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
27
investigation pending or, to the Knowledge of each of Assignor and Orthovita,
threatened against any other Person relating to the Products, any Existing
Distribution Agreement, any Existing License Agreement, the Intellectual
Property, the Revenue Interests or the Assigned Interests.
SECTION 3.09 Compliance with Laws.
--------------------
Neither Assignor nor Orthovita (a) is in violation of, has violated, or to
the Knowledge of either Assignor or Orthovita, is under investigation with
respect to, and, (b) to the Knowledge of either Assignor or Orthovita, has been
threatened to be charged with or been given notice of any violation of, with
respect to clauses (a) and (b) above, any law, rule, ordinance or regulation,
judgment, order or decree entered by any Government Authority applicable to
either Assignor or Orthovita, the Assigned Interests, the Revenue Interests, any
Existing Distribution Agreement or any Existing License Agreement which would
reasonably be expected to have a Material Adverse Effect.
SECTION 3.10 Conflicts.
---------
(a) Neither the execution and delivery of this Agreement or any other
Transaction Document nor the performance or consummation of the transactions
contemplated hereby or thereby will: (i) contravene, conflict with, result in a
breach or violation of, constitute a default under, or accelerate the
performance provided by, in any material respect any provisions of: (A) any law,
rule or regulation of any Government Authority, or any judgment, order, writ,
decree, permit or license of any Government Authority, to which Assignor or
Orthovita or any of their respective assets or properties may be subject or
bound; or (B) any contract, agreement, commitment or instrument to which either
Assignor or Orthovita is a party or by which Assignor or Orthovita or any of
their respective assets or properties is bound or committed; (ii) contravene,
conflict with, result in a breach or violation of, constitute a default under,
or accelerate the performance provided by, in any respects any provisions of the
certificate of incorporation or by-laws (or other organizational or
constitutional documents) of Assignor or Orthovita; (iii) except for the filing
of the UCC-1 financing statements required hereunder or as set forth in Schedule
--------
3.10(a) hereto, require any notification to, filing with, or consent of, any
-------
Person (including, without limitation, any party to any Existing Distribution
Agreement, any Existing License Agreement or any licensor of any Intellectual
Property to Assignor or Orthovita, as applicable) or Government Authority; (iv)
constitute a breach of or default under any Existing Distribution Agreement or
any Existing License Agreement or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Assignor, Orthovita
or any other Person or to a loss of any benefit relating to the Revenue
Interests or Assigned Interests; or
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
28
(v) result in the creation or imposition of any Lien on (A) the assets or
properties of Assignor or Orthovita or (B) the Assigned Interests, Revenue
Interests, any of the Existing Distribution Agreements, any Existing License
Agreement, or any other Collateral, other than, with respect to clauses (A) and
(B) above, pursuant to the Security Agreement.
(b) Neither Assignor nor Orthovita has granted, and nor does there exist,
any Lien on the Revenue Interests, any Existing Distribution Agreements, any
Existing License Agreement, the Assigned Interests or any other Collateral other
than pursuant to the Security Agreement.
SECTION 3.11 Material Contracts.
------------------
Neither Assignor nor Orthovita is in breach of or in default under any
Material Contract, including, without limitation, any Distribution Agreement or
any License Agreement to which Orthovita is a party, except for that which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of Orthovita and Assignor, nothing has
occurred and no condition exists that would permit any other party thereto to
terminate any Material Contract to which either Assignor or Orthovita is a
party, and neither Assignor nor Orthovita has received any notice or threat of
termination of any such Material Contract. To the knowledge of Assignor and
Orthovita, no other party to a Material Contract to which either Assignor or
Orthovita is a party is in breach of or in default under such Material Contract.
All Material Contracts to which either Assignor or Orthovita is a party are
valid and binding and are in full force and effect.
SECTION 3.12 Intellectual Property.
---------------------
(a) Schedule 3.12(a) sets forth an accurate and complete list of all (1)
----------------
North American and European Patents and North American and European Patent
applications and (2) trade names, common law trademarks and service marks,
registrations and applications for registration with the U.S. Patent and
Trademark Office of service marks and trademarks and (3) copyright registrations
("Registered Intellectual Property"), which are necessary for, or actually used
--------------------------------
in, the development, manufacture, commercialization, marketing or other use of
the Products by Assignor, Orthovita or their licensee(s), except as otherwise
disclosed therein and, which are owned by, licensed to, licensed by or otherwise
used by Assignor or Orthovita. For each listed Patent and Registered
Intellectual Property, Assignor has identified (i) the owner, (ii) the countries
in which such Patent or Registered Intellectual Property is patented or
registered or in which an application for patent or registration is pending,
(iii) the application number, (iv) the registration or patent number, and (v)
the expiration date thereof, as applicable,
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
29
absent any patent term extensions and the date on which any applicable
maintenance fee is due or payable. ***.
(b) ***.
(c) ***.
(d) ***.
(e) ***.
(f) ***
(g) ***
(h) ***.
(i) ***.
(j) ***.
(k) ***
(l) ***.
(m) ***.
SECTION 3.13 Regulatory Approval.
(a) ***.
(b) ***
(c) ***.
SECTION 3.14 Transfer of Intellectual Property Rights.
----------------------------------------
Neither Assignor nor Orthovita is transferring to Assignee any interest in
any Patents, other patents or other Intellectual Property of either Assignor or
Orthovita.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
30
SECTION 3.15 Subordination.
-------------
***.
SECTION 3.16 Place of Business.
-----------------
Assignor's principal place of business and chief executive office are set
forth on Schedule 3.16. Orthovita's principal place of business and chief
-------------
executive office are set forth on Schedule 3.16.
-------------
SECTION 3.17 Broker's Fees.
-------------
Neither Assignor nor Orthovita has taken any action which would entitle any
Person to any commission or broker's fee in connection with the transactions
contemplated by this Agreement.
SECTION 3.18 Other Information.
-----------------
No written statement, information, report or materials prepared by or on
behalf of either Assignor or Orthovita and furnished to Assignee by or on behalf
of either Assignor or Orthovita in connection with this Agreement or any
Transaction Document or any transaction contemplated hereby or thereby, no
written representation, warranty or statement made by either Assignor or
Orthovita in any Transaction Document, and no schedule or exhibit hereto, in
each case with respect to any of the foregoing contains any untrue statement of
a material fact or omits any statement of material fact necessary in order to
make the statements made therein in light of the circumstances under which they
were made not misleading.
SECTION 3.19 Distribution Agreements and License Agreements.
----------------------------------------------
The Existing Distribution Agreements and Existing License Agreements are in
full force and effect and there has been no correspondence or other written
communication sent by or on behalf of Assignor or Orthovita to, or received by
or on behalf of Assignor or Orthovita from, any Distributor or Licensee, the
subject matter of which would reasonably be expected to have a Material Adverse
Effect.
(a) With respect to the Existing Distribution Agreements and Existing
License Agreements:
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
31
(i) Except for that which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect, each such Existing Distribution Agreement and
Existing License Agreement, as applicable, is in full force
and effect and has not been impaired, waived, altered or
modified in any respect, whether by way of any sublicense,
consent or otherwise and no licensee has granted a
sublicense under any Existing Distribution Agreement or any
Existing License Agreement.
(ii) Except for that which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect, the Distributor or Licensee under each such Existing
Distribution Agreement or Existing License Agreement, as
applicable, has not been released, in whole or in part, from
any of its obligations under such Existing Distribution
Agreement or Existing License Agreement.
(iii) Neither Orthovita nor Assignor has received (A) any notice
of any Distributor's or any Licensee's intention to
terminate such Existing Distribution Agreement or Existing
License Agreement, as applicable, in whole or in part or (B)
any notice requesting any amendment, alteration or
modification of such Existing Distribution Agreement,
Existing License Agreement or any sublicense or assignment
thereunder.
(iv) To the Knowledge of Orthovita and Assignor, nothing has
occurred and no condition exists that would materially and
adversely impact the right of either Orthovita or Assignor
to receive any payments payable under the Existing
Distribution Agreement or Existing License Agreement. None
of Assignor, Orthovita or, the Knowledge of Orthovita and
Assignor, any Distributor or Licensee, as applicable, has
taken any action or omitted to take any action, that would
materially and adversely impact the right of Assignee to
receive the Assigned Interests or the Applicable Percentage
of the Net Sales.
(v) All payments required to be made as of the Closing Date
under the terms of each Existing Distribution Agreement and
Existing License Agreement have been made. To the Knowledge
of Orthovita and
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
32
Assignor, no payment required to be made under the terms of
any Existing Distribution Agreement or Existing License
Agreement, as applicable, has been subject to any claim
pursuant to any right of rescission, set-off, counterclaim
or defense. The operation of any of the terms of any
Existing Distribution Agreement or Existing License
Agreement, or the exercise of any rights thereunder, will
not render such Existing Distribution Agreement or Existing
License Agreement, as applicable, unenforceable, in whole or
in part.
(vi) Except for that which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect, such Existing Distribution Agreement or Existing
License Agreement, as applicable, has not been satisfied in
full, discharged, canceled, terminated, subordinated or
rescinded, in whole or in part. Such Distribution Agreement
or Existing License Agreement, as applicable, is the entire
agreement between Orthovita and the Distributor or Licensee,
as applicable, party thereto relating to the subject matter
thereof and constitutes the only document, agreement or
instrument between Orthovita and such Distributor or
Licensee, as applicable, that relates to the sales of the
related Products.
(vii) Except for that which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect, such Existing Distribution Agreement or Existing
License Agreement, as applicable, is the legal, valid and
binding obligation of Orthovita and the Distributor or
Licensee, as applicable, party thereto, enforceable against
Orthovita and such Distributor or Licensee, as applicable,
in accordance with its terms, subject, as to enforcement of
remedies, to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and general equitable principles. The execution,
delivery and performance of such Existing Distribution
Agreement or Existing License Agreement was and is within
the corporate powers of Orthovita and, to the Knowledge of
Orthovita and Assignor, the Distributor or Licensee, as
applicable, party thereto. Such Existing Distribution
Agreement or Existing License Agreement was duly authorized
by all necessary action on the part of, and validly executed
and delivered by, Orthovita and, to the Knowledge of
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
33
Orthovita and Assignor, the Distributor or Licensee, as
applicable, party thereto. There is no breach or default, or
event which upon notice or the passage of time, or both,
could give rise to any breach or default, in the performance
of such Existing Distribution Agreement or Existing License
Agreement by Orthovita or, to the Knowledge of Orthovita and
Assignor, the Distributor or Licensee, as applicable, party
thereto.
(viii) Except for that which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect, the representations and warranties made in each
Existing Distribution Agreement or Existing License
Agreement by Assignor were as of the date made true and
correct in all material respects.
Section 3.20 Insurance.
---------
There is in full force and effect insurance policies maintained by
Orthovita with an insurance company rated not less than *** by ***, with
coverages and in amounts customary for companies of comparable size and
condition similarly situated in the same industry as Orthovita, including
without limitation product liability insurance, directors and officers insurance
and insurance against litigation liability, subject only to such exclusions and
deductible items as are usual and customary in insurance policies of such type.
A copy of Orthovita's insurance policy or insurance policies is attached hereto
as Schedule 3.20.
-------------
Section 3.21 Organizational Documents of Assignor.
------------------------------------
Attached as Exhibits G and H are true and complete copies, each certified
by a senior officer of Assignor, of the Certificate of Incorporation and By-Laws
of Assignor, respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ASSIGNEE
Assignee represents and warrants to each of Assignor and Orthovita as of
the date hereof the following:
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
34
Section 4.01 Organization.
------------
Assignee is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware, and has all partnership powers
and all licenses, authorizations, consents and approvals required to carry on
its business as now conducted.
Section 4.02 Authorization.
-------------
Assignee has all necessary power and authority to enter into, execute and
deliver this Agreement and to perform all of the obligations to be performed by
it hereunder. This Agreement has been duly authorized, executed and delivered
by Assignee and constitutes its valid and binding obligation of Assignee,
enforceable against Assignee in accordance with its terms, subject, as to
enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and general equitable
principles.
Section 4.03 Broker's Fees.
-------------
Assignee has not taken any action which would entitle any Person to any
commission or broker's fee in connection with the transactions contemplated by
this Agreement.
Section 4.04 Conflicts.
---------
Neither the execution and delivery of this Agreement or the other
Transaction Documents nor the performance or consummation of the transactions
contemplated hereby or thereby will: (i) contravene, conflict with, result in a
breach or violation of, constitute a default under, or accelerate the
performance provided by, in any material respects any provisions of: (A) any
law, rule or regulation of any Government Authority, or any judgment, order,
writ, decree, permit or license of any Government Authority, to which Assignee
or any of its assets or properties may be subject or bound; or (B) any material
contract, agreement, commitment or instrument to which Assignee is a party or by
which Assignee or any of its assets or properties is bound or committed; (ii)
contravene, conflict with, result in a breach or violation of, constitute a
default under, or accelerate the performance provided by, in any respects any
provisions of organizational or constitutional documents of Assignee; or (iii)
require any notification to, filing with, or consent of, any Person or
Government Authority.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
35
Section 4.05 Consents.
--------
The execution and delivery by Assignee of this Agreement and the other
Transaction Documents to which it is a party, and the performance by Assignee of
its obligations hereunder and thereunder, does not require any notice to, action
or consent by, or in respect of, or filing with, any Governmental Authority or
Person.
Section 4.06 No Short Position.
-----------------
Assignee has no short position in Orthovita securities as of the Closing
Date.
ARTICLE V
COVENANTS
During the Term, each party hereto (as the case may be) agrees that:
Section 5.01 Consents and Waivers.
--------------------
Each of Assignor and Orthovita shall use commercially reasonable efforts to
obtain any required consents, acknowledgements, certificates or waivers so that
the transactions contemplated by this Agreement or any other Transaction
Document may be consummated and shall not result in any default or breach or
termination of any of the Distribution Agreements or License Agreements.
Section 5.02 Access; Books and Records.
-------------------------
(a) Promptly after receipt by either Assignor or Orthovita of notice of
any action, claim, investigation, proceeding (commenced or threatened),
certificate, offer, proposal, material correspondence or other material written
communication relating to the transactions contemplated by this Agreement, any
other Transaction Document, the Revenue Interests, any Distribution Agreement or
any License Agreement_relating to the sale of the Products in the Territories,
which, in the case of an action, claim, investigation or proceeding, if
adversely determined, would reasonably be expected to have a Material Adverse
Effect, then, Assignor and/or Orthovita shall inform Assignee of the receipt of
such notice and the substance of such action, claim, investigation, proceeding,
certificate, offer, proposal, correspondence or other
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
36
written communication and, if in writing shall furnish Assignee with a copy of
such notice and any related materials with respect to such action, claim,
investigation, proceeding, certificate, offer, proposal, correspondence or other
written communication.
(b) Each of Assignor and Orthovita shall keep and maintain, or cause to be
kept and maintained, at all times accurate and complete books and records.
Orthovita and Assignor shall keep and maintain, or cause to be kept and
maintained, at all times full and accurate books of account and records adequate
to correctly reflect all payments paid and/or payable with respect to Revenue
Interests and Assigned Interests and all deposits made into the applicable
Deposit Accounts.
(c) Assignee and any of Assignee's Consultants shall have the right, from
time to time, to visit Orthovita's and/or Assignor's offices and properties
where Orthovita and/or Assignor keeps and maintains its books and records
relating or pertaining to the Revenue Interests, the Assigned Interests and the
other Collateral for purposes of conducting an audit of such books and records,
and to inspect, copy and audit such books and records, during normal business
hours, and, upon five (5) Business Days written notice given by Assignee to
Orthovita and/or Assignor, Orthovita and/or Assignor will provide Assignee and
any of Assignee's Consultants reasonable access to such books and records, and
shall permit Assignee and any Assignee's Consultants to discuss the business,
operations, properties and financial and other condition of Orthovita and/or
Assignor or any of their Affiliates relating or pertaining to the Revenue
Interests, the Assigned Interests and the other Collateral with officers of such
parties, and with their independent certified public accountants (to the extent
such independent certified accountants agree to discuss such matters with
Assignee). Assignee's visits to Orthovita's or Assignor's offices pursuant to
this subsection (c) shall occur not more than once for each company per fiscal
quarter; provided, however, that Assignee may so visit more frequently to
-------- -------
the extent that there has occurred an event a reasonably foreseeable consequence
of which is a Material Adverse Effect and Assignee's visit or visits to
Orthovita's or Assignor's offices in connection therewith are for purposes
related to such event. To the extent that Assignee elects to conduct audits of
both Orthovita and Assignor during the same fiscal quarter under this subsection
(c), Assignee shall use commercially reasonable efforts to conduct any such
audits simultaneously.
(d) In the event any audit of the books and records of Orthovita or
Assignor relating to the Revenue Interests, Assigned Interests, and the other
Collateral by Assignee and/or any of Assignee's Consultants reveals that the
amounts paid to Assignee hereunder for the period of such audit have been
understated by more than the greater of *** or *** of the amounts
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
37
determined to be due for the period subject to such audit, then the Audit Costs
in respect of such audit shall be borne by Orthovita or Assignor; and in all
other cases, such Audit Costs shall be borne by Assignee.
(e) Orthovita and/or Assignor has furnished to Assignee copies of all
Distribution Agreements and License Agreements to which either is currently a
Party. Orthovita and/or Assignor shall furnish or cause to be furnished, to
Assignee, copies of all Distribution Agreements or License Agreements to which
Orthovita or Assignor becomes a party, within ten (10) Business Days after the
execution of each such agreement.
(f) Provided that Assignee agrees to maintain the confidentiality of
materials described in this Section 5.02(f) and so long as the disclosure of
such materials would not compromise any of Orthovita's rights or protections
with respect to a Regulatory Agency, Orthovita shall: (i) within five (5)
business days of receipt thereof, provide Assignee with copies of the following
regulatory documentation that is either generated or received by Orthovita from
a Regulatory Agency in the Territories with respect to the Products: ***.
Section 5.03 Material Contracts.
------------------
Each of Assignor and Orthovita shall use its best commercially
practicable efforts to comply with all material terms and conditions of and
fulfill all of its obligations under all the Material Contracts including,
without limitation, any Distribution Agreement or any License Agreement to which
Orthovita is a party.
Section 5.04 Confidentiality; Public Announcement.
------------------------------------
(a) All information furnished by Assignee to either Assignor or
Orthovita or by either Assignor or Orthovita to Assignee, including the
Confidential Information, in connection with this Agreement and any other
Transaction Document and the transactions contemplated hereby and thereby, as
well as the terms, conditions and provisions of this Agreement and any other
Transaction Document, shall be kept confidential by Assignor, Orthovita and
Assignee, and shall be used by Assignor, Orthovita and Assignee only in
connection with this Agreement and any other Transaction Document and the
transactions contemplated hereby and thereby, except to the extent that such
information (i) is already known by the party to whom the information is
disclosed or is already in the public domain at the time the information is
disclosed, (ii) thereafter becomes lawfully obtainable from other sources, (iii)
is required to be disclosed in any document to be filed with any Government
Authority, or (iv) is required to be disclosed under securities laws, rules and
regulations applicable to Assignor, Orthovita or Assignee, as the
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
38
case may be, or pursuant to the rules and regulations of the Nasdaq Stock Market
or any other stock exchange or stock market on which securities of Orthovita or
Assignor may be listed for trading. Notwithstanding the foregoing, Assignor,
Orthovita and Assignee may disclose such information to their partners,
directors, employees, managers, officers, investors, bankers, advisors, trustees
and representatives on a need-to-know basis, provided that such Persons shall be
--------
informed of the confidential nature of such information and shall be obligated
to keep such information confidential pursuant to the terms of this Section
5.04(a). Each of Assignor and Orthovita will consult with Assignee, and Assignee
will consult Assignor and Orthovita, on the form, content and timing of any such
disclosures of Confidential Information including, without limitation, any
disclosures made pursuant to applicable securities laws or made to investment or
other analysts.
(b) Except as required by law or the rules and regulations of any
securities exchange or trading system or the FDA or any Government Authority
with similar regulatory authority, or except with the prior written consent of
the other party (which consent shall not be unreasonably withheld), neither
party shall issue any press release or make any other public disclosure with
respect to the transactions contemplated by this Agreement or any other
Transaction Document. Assignor and Assignee shall jointly prepare a press
release for dissemination promptly following the Closing Date.
(c) Orthovita shall consult with Assignee and Assignee shall have
adequate opportunity to review and comment with respect to public disclosures or
filings to be made to the Securities and Exchange Commission or any other
Government Authority relating to the Transaction Documents or any terms thereof.
Section 5.05 Right of First Refusal.
----------------------
(a) If Orthovita or any Affiliate of Orthovita at any time during the
Term proposes to Transfer (each, a "Proposed Transfer") any of the Revenue
-----------------
Interests (other than: (i) as part of a transaction in which material rights in
the Products other than or in addition to Revenue Interests (including, without
limitation, the Transfer of Patents, trademarks and Proprietary Technology) are
Transferred; or (ii) a licensing of rights to distribute RHAKOSS or use the
Proprietary Technology related to RHAKOSS) (the "Other Interests"), then
---------------
Orthovita shall, at least twenty (20) days prior to the closing of such Proposed
Transfer, give written notice (the "Transfer Notice") to Assignee setting forth
---------------
(i) the Other Interests that are to be Transferred pursuant to such Proposed
Transfer (the "Offered Interests"), (ii) the anticipated date of the closing of
-----------------
such Proposed Transfer, (iii) the names and addresses of the proposed
transferees, and (iv) the
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
39
material terms of such Proposed Transfer, including the cash and/or other
consideration to be received in respect of such Proposed Transfer.
Notwithstanding anything contained herein to the contrary, each of Assignor and
Orthovita shall be permitted, from time to time, to enter into agreements and
transactions relating to the Proprietary Technology, including, without
limitation, License Agreements, Distribution Agreements and accounts receivable
financing, the granting of any security interest subordinate to Assignee's or an
agreement to effect a Change in Control, none of which shall constitute a
Proposed Transfer.
(b) Upon the receipt of any Transfer Notice, Assignee will have the
option, but not the obligation, to purchase all, but not less than all, of all
the Offered Interests, on the same terms as are specified in the Transfer
Notice, provided, that Assignee will have the right to substitute cash in the
--------
amount of the Fair Market Value of any non-cash consideration proposed to be
received from the proposed transferee(s). Within twenty (20) days after
Assignee's receipt of the Transfer Notice, Assignee will give a written notice
(a "Notice of Election") to Orthovita stating whether it elects to exercise such
------------------
option.
(c) Failure by Assignee to give a Notice of Election within such time
period specified in subsection (b) of this Section 5.05 will be deemed an
election by Assignee not to exercise its option to purchase all the Offered
Interests. The closing of the purchase and sale of the Offered Interests to
Assignee will take place as soon as is reasonably practicable on such date and
at such time and place, in each case as Assignee may reasonably determine but
not later than twenty (20) days following Assignor's receipt of the Notice of
Election. If Assignee does not elect to purchase all of the Offered Interests
hereunder, Orthovita will thereafter be free for a period of one hundred five
(105) days after expiration of the twenty (20) day period referred to subsection
(b) of this Section 5.05 to consummate the Proposed Transfer described in the
Transfer Notice to the transferee(s) specified therein, at the price and on
substantially identical terms set forth therein. However, if such Proposed
Transfer is not consummated within such 105-day period, Orthovita will not
Transfer any of the Offered Interests as have not been purchased within such
period without again complying with all of the provisions of this Section 5.05.
Section 5.06 Quarterly Reports.
-----------------
Orthovita shall, promptly after the end of each fiscal quarter of
Orthovita (but in no event later than (x) forty give (45) days following the end
of such quarter, or (y) 60 days following the end of such quarter if the
Quarterly Report includes information provided by Licensees), produce and
deliver to Assignee a Quarterly Report for such quarter, together with a
certificate of a senior officer of Orthovita, certifying that to the Knowledge
of each such officer
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
40
(i) such Quarterly Report is a true and complete copy and (ii) any statements
and any data and information therein prepared by Orthovita are true, correct and
accurate in all material respects.
Section 5.07 Purchase Options.
----------------
(a) In the event that a Purchase Option Event shall occur during the
Term, the Assignee shall have the right, but not the obligation (the "Assignee
--------
Option Repurchase"), exercisable within *** days of its receipt of written
-----------------
notice from the Assignor of the Purchase Option Event (the "Purchase Option
---------------
Exercise Period"), to require the Assignor to repurchase from the Assignee the
---------------
Assigned Interests for a repurchase price equal to an amount such that the
amount of such repurchase price, together with all amounts paid to Assignee in
respect of the Assigned Interests (including, without limitation, amounts paid
under Section 5.07(d), Advance Payment Amounts, credits earned by the Assignor
pursuant to Section 2.02(c) and all amounts payable in respect of Net Sales) and
not repaid by Assignee to Assignor, discounted annually at the Applicable
Discount Rate to the date or dates on which the Aggregate Purchase Price or
installments thereof were paid to Assignor, equals the Aggregate Purchase Price
(the "Assignee Option Repurchase Price"); provided, however, that if the event
--------------------------------
constituting a exercised the Assignor Option Repurchase, the Purchase Option
Exercise Period shall be *** days from the day of receipt by the Assignee of
notice of Assignor's election to exercise the Assignor Option Repurchase. If
each of Assignee and Assignor exercise the Assignee Option Repurchase and the
Assignor Option Repurchase, respectively, within *** days of each other, the
repurchase price shall equal the average of the Assignor Option Repurchase Price
and the Assignee Option Repurchase Price. If the applicable repurchase price
payable under this Section 5.07(a) is equal to the Assignee Option Repurchase
Price, then Assignor shall, within *** days following the Assignor's receipt of
the Assignee's repurchase election notice, repurchase from the Assignee the
Assigned Interests at the Assignee Option Repurchase Price the payment of which
shall be made by wire transfer, in immediately available funds, to the
Assignee's Account designated by the Assignee in such election notice. If the
applicable repurchase price payable under this Section 5.07(a) is equal to the
average of the Assignee Option Repurchase Price and the Assignor Option
Repurchase Price, then the Assignor shall within *** days following the
consummation of the Purchase Option Event, repurchase from the Assignee the
Assigned Interests at a price equal to the average of the Assignee Option
Repurchase Price and the Assignor Option Repurchase Option.
(b) ***
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
41
(c) In the event that a Call Option Event shall occur, then Assignor
shall have the option ("Assignor Option Repurchase"), to repurchase the Assigned
--------------------------
Interests for a repurchase price ("Assignor Option Repurchase Price") equal to
--------------------------------
to *** less any amounts received by Assignee pursuant to Section 5.07(d),
Advance Payment Amounts for the Fiscal Year in which the Call Option Event
occurs, and any outstanding credits earned pursuant to Section 2.02(c);
provided, however, that if the event constituting a Call Option Event also
constitutes a Purchase Option Event, and each of Assignee and Assignor exercise
the Assignee Option Repurchase and the Assignor Option Repurchase, respectively,
within *** days of each other, the repurchase price shall equal the average of
the Assignor Option Repurchase Price and the Assignee Option Repurchase Price;
provided, further, that if (i) the Call Option Event that results in the
Assignor exercising the Assignor Option Repurchase occurs during the Purchase
Option Exercise Period of a separate, prior Purchase Option Event that did not
also constitute the Call Option Event at issue, and (ii) Assignee exercises its
Assignee Option Repurchase in respect thereof within *** days of receipt of
notice of the exercise by Assignor of the Assignor Option Repurchase, then,
notwithstanding anything contained in Section 5.07(a) to the contrary, the
repurchase price shall equal the greater of the Assignee Option Repurchase Price
and the Assignor Option Repurchase Price. In order to exercise the Assignor
Option Repurchase, Assignor must notify Assignee of its election to so
repurchase the Assigned Interests not less than *** days prior to the date of
the Call Option Event. Assignor shall, within *** days following the
consummation of the Call Option Event, repurchase from the Assignee the Assigned
Interests at the Assignor Option Repurchase Price, the Assignee Option
Repurchase Price or the average of the Assignee Option Repurchase Price and the
Assignor Option Repurchase Price, as applicable, payment of which shall be made
by wire transfer of immediately available funds to Assignee's Account designated
by Assignee.
(d) In the event Assignor or Orthovita licenses a substantial
majority of their respective rights to distribute RHAKOSS or use the Proprietary
Technology related to RHAKOSS (other than a license for the use of the
Proprietary Technology related to RHAKOSS outside the Field of Use) in either
Europe or North America, or Transfers all or a substantial majority of any of
their respective rights in RHAKOSS in either Europe or North America, or enters
into a co-promotion arrangement that constitutes a Transfer or license of a
substantial majority of any of their respective rights in RHAKOSS in either
Europe or North America, (x) Assignor shall have the option (the "Assignor
RHAKOSS Repurchase Option") to repurchase Assignee's right to receive payments
hereunder in respect of Net Sales of RHAKOSS for a repurchase price equal to ***
and (y) Assignee shall have the option (the "Assignee RHAKOSS Repurchase Option)
to require the Assignor to repurchase Assignee's right to receive payments
hereunder in respect of Net Sales of RHAKOSS for a repurchase price equal to
***. Orthovita
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
42
or Assignor, as applicable, shall provide Assignee with at least 20 days prior
written notice of a proposed Transfer of all or a substantial majority of its
interest in RHAKOSS in *** (the "Proposed Transfer Notice," which notice shall
be deemed "Confidential Information" if such proposed Transfer has not been
publicly disclosed by Orthovita). In order to exercise the Assignee RHAKOSS
Repurchase Option, Assignee must deliver notice of such exercise to Orthovita
within *** Business Days after receipt of the Proposed Transfer Notice.
(e) In connection with the consummation of an Assignee Option
Repurchase, Assignor Option Repurchase, Assignor RHAKOSS Repurchase Option or
Assignee RHAKOSS Repurchase Option pursuant to subparagraphs (a), (c) or (d)
above (a "Repurchase Event"), Assignee agrees that it will (i) promptly execute
----------------
and deliver to Assignor such UCC termination statements and other documents as
may be necessary to release Assignee's Lien on the Collateral (provided that, in
the case of a Repurchase Event under Section 5.07(d), the Collateral released
will only relate to RHAKOSS and sales thereof) and otherwise give effect to such
Repurchase Event and (ii) take such other action or provide such other
assistance as may be necessary to give effect to the Repurchase Event.
(f) Assignee's failure to exercise the Assignee Option Repurchase
under Section 5.07(a) and/or (b) upon the occurrence of a Purchase Option Event
or an event described in Section 5.07(b) shall not preclude Assignee from
exercising the Assignee Option Repurchase under Section 5.07(a) and/or (b) upon
the occurrence of a subsequent Purchase Option Event or a subsequent event
described in Section 5.07(b).
Section 5.08 Security Agreements.
-------------------
(a) Assignor shall at all times until the Obligations of Assignor are
paid and performed in full grant in favor of Assignee a valid, continuing, first
perfected lien on and security interest in the Royalty Interests, the Assigned
Interests, the Intellectual Property and the other Collateral described in the
Security Agreement.
(b) Assignor shall not grant a security interest in (x) the Assigned
Interests or Royalty Interests to any other party that in any way conflicts with
Assignee's security interest pursuant to Section 5.08(a)(i), the Security
Agreement or any of Assignee's rights under the Security Agreement including,
without limitation, the exercise of remedies thereunder or (y) except as
provided in Section 5.08(c), the other Collateral described in the Security
Agreement.
(c) Assignor and Assignee agree that, in the event Assignor grants to
a lender a security interest in or rights to any portion of collections from the
License Agreements and the
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
43
Distribution Agreements which includes such collections with respect to sales of
the Products in the Territories, Assignee agrees, and Assignor shall, under the
terms of its agreements with such lender, cause such lender to agree, that each
of Assignee's and such lender's right to enforce collections under such
agreements shall be shared on a pari passu basis based upon the rights granted
to Assignee under the Security Agreement and the right granted by Assignor to
such lender.
Section 5.09 Best Efforts; Further Assurance.
-------------------------------
(a) Subject to the terms and conditions of this Agreement, each party
hereto will use its best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary under applicable laws and
regulations to consummate the transactions contemplated by this Agreement and
any other Transaction Document. Assignee, Assignor and Orthovita agree to
execute and deliver such other documents, certificates, agreements and other
writings (including any financing statement filings requested by Assignee) and
to take such other actions as may be reasonably necessary in order to consummate
or implement expeditiously the transactions contemplated by this Agreement and
any other Transaction Document and to vest in Assignee good, valid and
marketable rights and interests in and to the Assigned Interests free and clear
of all Liens, except those Liens created in favor of Assignee pursuant to the
Security Agreement and any other Transaction Document.
(b) Each of the parties hereto shall execute and deliver such
additional documents, certificates and instruments, and to perform such
additional acts, as may be reasonably requested and necessary or appropriate to
carry out and effectuate all of the provisions of this Agreement and any other
Transaction Document and to consummate all of the transactions contemplated by
this Agreement and any other Transaction Document.
(c) Orthovita, Assignor and Assignee hereto shall cooperate and
provide assistance as reasonably requested by the other party in connection with
any litigation, arbitration or other proceeding (whether threatened, existing,
initiated, or contemplated prior to, on or after the date hereof) to which any
party hereto or any of its officers, directors, shareholders, agents or
employees is or may become a party or is or may become otherwise directly or
indirectly affected or as to which any such Persons have a direct or indirect
interests, in each case relating to this Agreement, any other Transaction
Document, the Assigned Interests or any other Collateral, or the transactions
described herein or therein.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
44
Section 5.10 Remittance to Lockbox Account.
-----------------------------
(a) Within sixty (60) days after the date of this Agreement, the
parties hereto shall enter into a Lockbox Agreement in form and substance
reasonably satisfactory to the parties hereto and the Lockbox Bank, which
Lockbox Agreement will provide for, among other things, the establishment and
maintenance of a Lockbox Account, a Joint Concentration Account, an Assignor
Concentration Account and an Assignee Concentration Account and an Orthovita
Concentration Account in accordance with the terms herein and therein. Any
Assignee Concentration Account shall be held solely for the benefit of Assignee,
but shall be subject to the terms and conditions of this Agreement, the Security
Agreement and the other Transaction Documents. Funds deposited into the Lockbox
Account shall be swept by the Lockbox Bank on a daily basis into the Joint
Concentration Account and immediately subsequent thereto, the Advance Payment
Amounts and the Daily Amount shall be swept into Assignee Concentration Account
and the Royalty Interests (less the Advance Payment Amounts and the Daily
Amount) shall be swept into the Assignor Concentration Account. Assignee shall
have immediate and full access to any funds held in the Assignee Concentration
Account not subject to any conditions or restrictions whatsoever. After the
Advance Payment Amounts and the Daily Amount is swept into the Assignee
Concentration Account and the amount of the Royalty Interests (less the Advance
Payment Amounts and the Daily Amount) is swept into the Assignor Concentration
Account, the amounts remaining in the Joint Concentration Account shall then be
swept, at the direction of Orthovita, into the Orthovita Concentration Account.
Each of Assignor and Orthovita shall have immediate and full access to any funds
held in the Assignor Concentration Account and the Orthovita Concentration
Account, respectively, not subject to any conditions or restrictions whatsoever.
(b) Upon execution of the Lockbox Agreement, Assignee shall receive
an opinion of counsel of Assignor as to the perfection of Assignee's security
interest in the Pledged Deposit Accounts (as defined in the Security Agreement).
(c) Orthovita shall pay for all fees, expenses and charges of the
Lockbox Bank by debiting the Orthovita Concentration Account.
(d) Each Distribution Agreement and License Agreement for sales of
the Products in the Territories entered into by Orthovita shall, within 60 days
after the date of Closing, be amended to contain a provision providing for all
payments in respect of sales of the Products and in respect of royalties
received from Licensees to be remitted directly by the applicable party into the
Lockbox Account and Assignor and Orthovita shall cause such payments to be
remitted
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
45
directly by the applicable party into the Lockbox Account and Assignor and
Orthovita shall cause such payments to be remitted directly by the applicable
party into the Lockbox Account. Without in any way limiting the foregoing,
commencing on the Closing Date and thereafter, any and all payments in respect
of sales of the Products received by Assignor or Orthovita shall be deposited
into the Lockbox Account within five (5) Business Days of Assignor's or
Orthovita's receipt thereof.
(e) With respect to any Distribution Agreement or License Agreement
entered into by Assignor or Orthovita from and after the date hereof Assignor or
Orthovita shall (i) at the time of the execution and delivery of such agreement,
instruct any party thereto under such agreement to remit to the Lockbox Account
when due all applicable payments in respect of sales of the Products in the
Territories and in respect of royalties received from Licensees that are due and
payable to Assignor or Orthovita in respect of or derived from such agreement
during the Term and (ii) deliver to Assignee evidence of such instruction and of
such applicable party's agreement thereto.
(f) Neither Assignor nor Orthovita shall have any right to terminate
the Lockbox Bank during the Term without Assignee's prior written consent. Any
such consent, if Assignee desires to give, shall be subject to the satisfaction
of each of the following conditions to the satisfaction of Assignee:
(i) the successor Lockbox Bank shall be reasonably
acceptable to Assignee;
(ii) Assignee, Assignor, Orthovita and the successor
Lockbox Bank shall have entered into a lockbox
agreement substantially in the form of the Lockbox
Agreement initially entered into;
(iii) all funds and items in the accounts subject to the
Lockbox Agreement to be terminated shall be
transferred to the new accounts held at the successor
Lockbox Bank prior to the termination of the then
existing Lockbox Bank; and
(iv) Assignee shall have received evidence that all of the
applicable parties making payments in respect of
sales of the Products have been instructed to remit
all future payments in respect of sales of the
Products to the new accounts held at the successor
Lockbox Bank.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
46
Section 5.11 Additional Covenants of Assignor and Orthovita.
----------------------------------------------
(a) In the event that either Assignor or Orthovita becomes aware that
any Intellectual Property licensed by it to a Licensee or Distributor, as
applicable, under any of the Distribution Agreements or License Agreements
infringes or violates any third party Intellectual Property, Assignor shall
promptly use its best commercially practicable efforts to attempt to secure the
right to use such Intellectual Property on behalf of itself and the affected
Licensee or Distributor and shall pay all costs and amounts associated with
obtaining any such license, without any charge to the Licensee or Distributor or
any reduction in the Assigned Interests.
(b) Orthovita shall use its best commercially practicable efforts to
duly perform and observe all of Orthovita's covenants and obligations under each
Distribution Agreement and License Agreement in all material respects. Upon the
occurrence of a material breach of any of the Distribution Agreements or License
Agreements by any other party thereto, which is not cured as provided therein,
Orthovita thereto shall use its best commercially practicable efforts to seek to
enforce all of its rights and remedies thereunder.
(c) Neither Assignor nor Orthovita shall, without the prior written
consent of Assignee, which consent shall not be unreasonably withheld:
(i) Forgive, release or compromise any amount owed to
Assignor and relating to the Assigned Interests,
except that Assignor shall not be obligated to obtain
the consent of Assignee with respect to any action on
the part of Assignor that impacts the Assigned
Interests of Assignee in an amount not to exceed
$25,000;
(ii) Waive, amend, cancel or terminate, exercise or fail to
exercise, any of its material rights constituting or
relating to the Revenue Interests in a manner which
would reasonably be expected to materially adversely
affect the Assigned Interests;
(iii) Amend, modify, restate, cancel, supplement, terminate
or waive any provision of any Distribution Agreement
or License Agreement, or grant any consent thereunder,
or agree to do any of the foregoing, including,
without limitation, entering into any agreement with
the Distributor or Licensee, as the case may be, under
the provisions of such Distribution Agreement or
License Agreement in each case
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
47
which would reasonably be expected to have a Material
Adverse Effect; or
(iv) Create, incur, assume or suffer to exist any Lien, or
exercise any right of rescission, offset, counterclaim
or defense, upon or with respect to the Assigned
Interests or the other Collateral, or agreeing to do
or suffering to exist any of the foregoing, except for
any Lien or agreements in favor of Assignee granted
under or pursuant to this Agreement and the other
Transaction Documents and except for ***.
(d) Assignor shall promptly upon receipt thereof provide to Assignee
copies of any material reports or other material information prepared by any
Distributor or Licensee it has received that has not been previously provided to
Assignee by either Assignor, Orthovita or any other Person.
(e) Either Assignor or Orthovita shall provide Assignee with written
notice as promptly as practicable (and in any event within five (5) Business
Days) after becoming aware of any of the following:
(i) the occurrence of a Bankruptcy Event;
(ii) any breach or default by either Assignor or Orthovita
of any material covenant, agreement or other provision
of this Agreement or any other Transaction Document;
(iii) any representation or warranty made or deemed made by
either Assignor or Orthovita in any of the Transaction
Documents to which it is a party or in any certificate
delivered to Assignee pursuant hereto shall prove to
be untrue, inaccurate or incomplete in any material
respect on the date as of which made or deemed made;
(iv) the occurrence of a Purchase Option Event (other than
a Termination Event);
(v) the occurrence of a Call Option Event;
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
48
(vi) any sublicense by a Licensee or Distributor, as the
case may be, of any rights licensed pursuant to any
Distribution Agreement or License Agreement; or
(vii) the resignation, death or removal of any Independent
Director of Assignor.
(f) Promptly (but in no event later than five (5) Business Days)
after (i) receiving written or oral notice from a Distributor or Licensee, as
the case may be, (A) terminating or expressing any intention to terminate the
related Distribution Agreement or License Agreement, (B) alleging any breach of
or default under such Distribution Agreement or License Agreement by Orthovita
or (C) asserting the existence of any facts, circumstances or events which alone
or together with other facts, circumstances or events would reasonably be
expected (with or without the giving of notice or passage of time or both) to
give rise to a breach of or default under or right to terminate such
Distribution Agreement or License Agreement or (ii) either Assignor or Orthovita
otherwise having Knowledge of any fact, circumstance or event which alone or
together with other facts, circumstances or events would reasonably be expected
(with or without the giving of notice or passage of time or both) to give rise
to a material breach of or default under such Distribution Agreement or License
Agreement by Orthovita or a right to terminate such Distribution Agreement or
License Agreement by such Distributor or Licensee, as the case may be, in each
case, either Assignor or Orthovita shall give a written notice to Assignee
describing in reasonable detail the relevant breach, default or termination
event, including a copy of any written notice received from such Distributor or
Licensee, as the case may be, and, in the case of any breach or default or
alleged breach or default by Orthovita, describing any corrective action
Orthovita proposes to take.
(g) Assignor or Orthovita shall, at their sole expense, either
directly or by causing the Licensee or Distributor, as the case may be, to do
so, take any and all actions and prepare, execute, deliver and file any and all
agreements, documents or instruments which are necessary or, in the reasonable
opinion of Orthovita or Assignor, as the case may be, desirable to (A)
diligently maintain the applicable licensed Intellectual Property and the
Patents and (B) diligently defend such licensed Intellectual Property and such
Patents against infringement or interference by any other Persons, and against
any claims of invalidity or unenforceability, in any jurisdiction (including,
without limitation, by bringing any legal action for infringement or defending
any counterclaim of invalidity or action of a third party for declaratory
judgment of non-infringement or non-interference). Orthovita shall not, and
shall use commercially reasonable efforts to cause the applicable Licensee not
to, disclaim or abandon, or fail to take any
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
49
action necessary or desirable to prevent the disclaimer or abandonment of, the
applicable Patents or other Intellectual Property.
(h) Orthovita shall use its best commercially practicable efforts to
secure and maintain, or, where a Distributor or Licensee, as the case may be, is
required to do so under any Distribution Agreement or License Agreement, use
commercially reasonable efforts to assist such Distributor or Licensee, as the
case may be, in securing and maintaining, all regulatory and other governmental
approvals, clearances, registrations and permits which may be required to
manufacture, market and/or sell any and all of the Products in the Territories.
(i) Orthovita shall, to the extent reasonably required by the
applicable Licensee, timely produce and deliver to the applicable Distributor
invoices for payments owing Assignor or Orthovita under the respective
Distribution Agreement.
(j) ***.
(k) Orthovita and Assignor shall, in good faith, devote sufficient
resources to the development of the Products in order to meet the Projected Net
Sales, including using substantially all of the Closing Purchase Price Payment
and the Common Stock Purchase Price for (i) working capital purposes relating
to, (ii) marketing programs in support of and (iii) clinical development leading
to regulatory approvals for the distribution of each of RHAKOSS, VITOSS and
CORTOSS in the Territories. ***
(l) ***.
(m) ***.
(n) Orthovita and Assignor shall use its best efforts to comply with
all manufacturing guidelines and processes required or suggested by the FDA.
(o) During the Revenue Interest Period, Orthovita shall maintain
insurance policies with insurance companies rated not less than *** by *** with
coverages and in amounts each party believes to be customary for companies of
comparable size and condition similarly situated in the same industry as
Orthovita including without limitation, product liability insurance and
directors and officers insurance.
(p) Neither Assignor nor Orthovita will Transfer all or any part of
its interests in the Products (other than pursuant to any Distribution
Agreements, License Agreements or pursuant
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
50
to Section 5.05) to a third party purchaser or licensee, as applicable, unless
such third party purchaser or licensee, as applicable, assumes in writing all of
the obligations of Assignor or Orthovita, as applicable, hereunder, including
the obligation to make all payments in respect of the Assigned Interests to
Assignee pursuant to a written assumption, in a form reasonably satisfactory to
Assignee; provided, however, for the avoidance of doubt, in no event shall a
party to a Distribution Agreement or License Agreement be required to assume the
Obligations of Orthovita and Assignor shall remain liable for all such
Obligations.
(q) During the Revenue Interest Period, neither Orthovita nor
Assignor will amend or permit to be amended, Orthovita shall not terminate, and
Assignor shall not waive any rights under (i) Articles Eleventh, Twelfth and
Thirteenth of the Certificate of Incorporation or (ii) the Vita SPC Patent
License Agreement (in each case, to the extent any amendment thereto or waiver
thereunder would adversely affect Assignee or its rights under this Agreement or
any other Transaction Document, provided, however, that Orthovita or Assignor
may amend or permit to be amended the definition of "Products" in the Vita SPC
Patent License Agreement to delete therefrom the Products that cease to be
Products within the meaning of this Agreement due to the Assigned Interests
relating to that Product being repurchased from Assignee pursuant to the terms
of this Agreement) without the prior written consent of Assignee, which consent
shall be granted or withheld in Assignee's sole discretion.
(r) Except as provided in Section 5.08(c), during the Revenue
--------------------------------------
Interest Period, Assignor will not pledge or otherwise assign or transfer any of
the Collateral without the prior written consent of Assignee, which consent
shall be granted or withheld in Assignee's sole discretion.
(s) Orthovita shall cause each Distributor or Licensee under any
Distribution Agreement or License Agreement, as applicable, to provide, promptly
following the end of each fiscal quarter, all information with respect to Net
Sales (including all components of information required to calculate Net Sales)
under each such agreement for inclusion in the Quarterly Report for such
quarter, and Orthovita shall cause such obligation to be included in every
Distribution Agreement and License Agreement it enters into.
(t) ***
(u) Assignor shall not engage in any business other than the
transactions contemplated in this Agreement and the Transaction Documents and
activities incidental thereto.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
51
(v) Assignor shall not issue, incur, assume, guarantee or otherwise
become liable, directly or indirectly (i) for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, (ii) for the
deferred purchase price of property or services (including trade obligations),
(iii) in respect of any acceptance facilities, (iv) in respect of any interest
rate or currency exchange agreement.
Section 5.12 Future Agreements.
-----------------
(a) Orthovita shall provide Assignee, at least one (1) week prior to
the execution of a Distribution Agreement by Orthovita and any Distributor that
varies in any substantive and material respect from Distribution Agreements or
forms thereof previously supplied to Assignee, a copy of such form of
Distribution Agreement for review by Assignee.
(b) If Orthovita, at any time and from time to time during the Term
of this Agreement, proposes to materially change the form or forms of
Distribution Agreement or License Agreement it utilizes, or proposes in
connection with any transaction or transactions with a Distributor or Licensee
to materially vary the terms of the related Distribution Agreement or License
Agreement from those contained in the prevailing form thereof, then Orthovita
shall promptly provide to Assignee such revised form of Distribution Agreement
or Assignment or, at least three (3) Business Days prior to the execution and
delivery of any Distribution Agreement or License Agreement that includes a
material deviation from the terms of the prevailing form thereof, give written
notice to Assignee indicating that Orthovita proposes to enter into such
agreement and the anticipated date of execution of such proposed agreement.
(c) In the event that any payments under any Distribution Agreement
or License Agreement are calculated upon a basis that is materially different
than the basis used under the Distribution Agreements in existence at such time,
***.
(d) To the extent Orthovita has the right to perform or cause to be
performed inspections or audits under any of the License Agreements regarding
payments payable and/or paid to Orthovita thereunder (each, a "License Party
-------------
Audit"), Orthovita shall, at the reasonable request of Assignee, cause such
-----
License Party Audit to be promptly performed (it being understood that it shall
not be a reasonable request if, in the good faith belief of Orthovita, the
requested License Party Audit would impair Orthovita's commercial relationship
with the applicable Licensee). In conducting a License Party Audit, Orthovita
may engage its then retained nationally recognized independent public accounting
firm, or, if Orthovita elects otherwise, such other nationally recognized
independent public accounting firm reasonably acceptable to Assignee. Promptly
after completion of any License Party Audit (whether or not
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
52
requested by Assignee), Orthovita shall promptly deliver to Assignee an Audit
Report in respect of such License Party Audit. With respect to any License
Agreement under which Orthovita has a right to perform or cause to be performed
a License Party Audit, in the event Assignee requests Orthovita to perform a
License Party Audit and such License Party Audit is in fact performed by or on
behalf of Orthovita, then if the results thereof reveal that the amounts paid to
Orthovita in respect of North American and European sales of any licensed
Product under such License Agreement for the period of such License Party Audit
have been understated by more than the greater of *** or ***of the amounts
payable to Orthovita with respect to North American and European sales of any
licensed Product and determined to be due for the applicable period of such
License Party Audit, then the Audit Costs incurred by Orthovita in respect of
such License Party Audit shall be borne by Orthovita. In all other cases the
Audit Costs incurred by Orthovita in respect of a License Party Audit shall be
borne by Assignee.
Section 5.13 Licensing Agreement.
-------------------
Notwithstanding anything contained herein to the contrary, Orthovita
shall be permitted to enter into License Agreements; provided, however, that any
such agreement shall not constitute a sale of all or substantially all of the
assets relating to the Proprietary Technology.
Section 5.14 Guarantee.
---------
(a) The Guarantee. Orthovita hereby unconditionally and irrevocably
-------------
guarantees the full and prompt payment of all amounts when due which may be
owing by Assignor under this Agreement and the other Transaction Documents and
the full and prompt performance of all of the Obligations of Assignor under this
Agreement and the other Transaction Documents (collectively, the "Guaranteed
----------
Obligations"). Orthovita hereby agrees that (i) if Assignor shall fail to pay
-----------
when due or perform any of the Guaranteed Obligations, Orthovita will promptly
pay or perform the same, without any demand or notice whatsoever and (ii) this
is a guarantee of payment and performance, and not of collection only.
(b) Obligations Unconditional. The obligations of Orthovita under
-------------------------
this Section 5.14 are absolute, irrevocable and unconditional, irrespective of
the value, genuineness, validity, regularity or enforceability of the
Obligations of Assignor under this Agreement or any other Transaction Document
or any other agreement or instruments referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or Orthovita
(except fulfillment of the Obligations in full). Without limiting
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
53
the generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of Orthovita
hereunder which shall remain absolute, irrevocable and unconditional under any
and all circumstances as described above:
(i) at any time or from time to time, without notice to Orthovita,
the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance
or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or any other Transaction Document referred to
herein or therein shall be done or omitted;
(iii) any of the Guaranteed Obligations shall be amended in any
respect, or any right under this Agreement or any other
Transaction Document shall be amended or waived in any
respect or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any Lien or security interest granted to, or in favor of,
Assignee as security for any of the Guaranteed Obligations
shall fail to have the priority contemplated in the Security
Agreement.
Orthovita hereby expressly waives diligence, presentment, demand of
payments, protest and all other notices whatsoever, and any requirement that
Assignee exhaust any right, power, remedy or proceed against Assignor under this
Agreement or any other Transaction Document, or against any other Person under
any other guarantee of, or security for, any of the Guaranteed Obligations.
Orthovita waives any and all notice of the creation, renewal, extension, waiver,
termination or accrual of any of the Guaranteed Obligations and notice of or
proof of reliance by Assignee under this guarantee or acceptance of this
guarantee, and the Guaranteed Obligations, and any of them, shall be
conclusively be deemed to have been created, contracted or incurred in reliance
upon this guarantee, and all dealings by the Assignee shall be conclusively
presumed to have been had or consummated in reliance under this guarantee. This
guarantee shall be construed as a continuing, absolute, irrevocable and
unconditional guarantee of payment without regard to any right of offset with
respect to the Guaranteed Obligations at any time or from time held by Assignee
and the obligations and liabilities of Orthovita hereunder shall not be
conditioned or contingent upon the pursuit by Assignee at any time of any right
or remedy against Assignor or against any other Person which may be or become
liable in respect of all or
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
54
any part of the Guaranteed Obligations or against any collateral security or
guarantee therefor or right of offset with respect thereto. This guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon Orthovita and its successors and assigns, and shall
inure to the benefit of Assignee, and its successors and assigns,
notwithstanding that from time to time during the term of this Agreement there
may be no Guaranteed Obligations outstanding.
(c) Reinstatement. The obligations of Orthovita under this Section 5.14
-------------
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of Assignor in respect of the Guaranteed Obligations is
rescinded or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise. Orthovita agrees that it will indemnify Assignee on
demand for all reasonable costs and expenses (including reasonable fees of
counsel) incurred by Assignee in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law, other than any
costs or expenses resulting from the gross negligence or bad faith of such
Person.
(d) Subrogation; Subordination. Orthovita hereby agrees that until the
--------------------------
indefeasible payment and satisfaction in full of all Guaranteed Obligations and
the termination of this Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 5.14(a),
whether by subrogation or otherwise, against Assignor or any security for any of
the Guaranteed Obligations. The payment of any amounts due with respect to any
indebtedness of Assignor now or hereafter owing to Orthovita by reason of any
payment by Orthovita under the guarantee in this Section 5.14 is hereby
subordinated to the prior indefeasible payment in full of the Guaranteed
Obligations. Orthovita agrees that it will not demand, ▇▇▇ for or otherwise
attempt to collect any such indebtedness of Assignor to Orthovita until the
Obligations shall have been indefeasibly paid in full. If, notwithstanding the
foregoing sentence, Orthovita shall prior to the indefeasible payment in full of
the Guaranteed Obligations collect, enforce or receive any amounts in respect of
such obligations, such amounts shall be collected, enforced and received by
Orthovita as trustee for Assignee and be paid over to Assignee on account of the
Guaranteed Obligations without affecting in any manner the liability of
Orthovita under the other provisions of the guarantee contained herein.
(e) Remedies. Orthovita agrees that, upon the occurrence of a Termination
--------
Event, the obligations of Assignor under this Agreement may be declared to be
forthwith due and payable
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
55
for purposes of Section 5.14 , notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Assignor and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by Assignor)
shall forthwith become due and payable by Orthovita for purposes of Section
5.14.
(f) Instrument for the Payment of Money. Orthovita hereby acknowledges
-----------------------------------
that the guarantee in this Section 5.14 constitutes an instrument for the
payment of money, and consents and agrees that Assignee, at its sole option, in
the event of a dispute by Orthovita in the payment of any moneys due hereunder,
shall have the right to bring a motion-action under New York CPLR Section 3213.
(g) Continuing Guarantee. The guarantee in this Section 5.14 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
(h) General Limitation on Guaranteed Obligations. In any action or
--------------------------------------------
proceeding involving any state corporate law, or any state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of Orthovita under Section 5.14(a) would
otherwise be held or determined to be void, voidable, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under Section 5.14(a), then, notwithstanding any other
provision to the contrary, the amount of such liability shall, without any
further action by Orthovita, Assignee or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
Section 5.15 Financial Statements.
--------------------
Orthovita shall maintain, and cause Assignor to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
Orthovita shall deliver to Assignee the following financial statements:
(a) Within sixty (60) days after the end of each fiscal quarter, copies of
(i) the unaudited consolidated financial statements of Orthovita and its
subsidiaries for the prior fiscal quarter and (ii) the unaudited financial
statements of Assignor for the prior fiscal quarter; and
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
56
(b) Within ninety (90) days after the end of each Fiscal Year, copies of
(i) the audited consolidated financial statements of Orthovita and its
subsidiaries for the prior Fiscal Year and (ii) the audited financial statements
of Assignor for the prior Fiscal Year.
Section 5.16 Special Purpose Entity
----------------------
(a) During the term of this Agreement, each of Orthovita and Assignor
shall observe the applicable legal requirements for the recognition of each as a
legal entity separate and apart from each other and from its Affiliates,
including as follows:
(i) each of Orthovita and Assignor shall maintain business records
and books of account separate from each other and from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, neither
Orthovita nor Assignor shall commingle its assets and funds with those of its
Affiliates;
(iii) each of Orthovita and Assignor shall at all times hold itself
out to the public under its own name as a legal entity separate and distinct
from its Affiliates; and
(iv) all transactions and dealings between Orthovita and its
Affiliates, including Assignor, and all transactions and dealings between
Assignor and its Affiliates, will be conducted on an arm's-length basis.
(v) Assignor is not and shall not be involved in the day-to-day or
other management of any of its Affiliates;
(vi) Orthovita's financial statements shall reflect its separate
legal existence from any of its Affiliates;
(vii) each of Orthovita and Assignor shall maintain records and
books of account and shall not commingle such records and books of account with
the records and books of account of any Person; and
(viii) each of Orthovita and the Assignor shall act solely in its own
name and through duly authorized agents in the conduct of its business, and
shall conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
57
(b) at all times, except in the case of a temporary vacancy, which shall
promptly be filled, Assignor shall have at least director who qualifies as an
"Independent Director" as such term is defined in Assignor's Certificate of
Incorporation.
Section 5.17 No Short Selling or Trading While in the Possession of
------------------------------------------------------
Material Non-Public Information
-------------------------------
(a) Assignee agrees and acknowledges that, pursuant to the obligations of
Orthovita and Assignor under this Agreement and the other Transaction Documents,
it is entitled to receive Confidential Information relating to Orthovita,
Assignor and the Products. Assignee agrees to treat all such Confidential
Information in accordance with the provisions of Section 5.04 of this Agreement,
and to take or abstain from taking certain other actions hereinafter set forth
in Section 5.17(b).
(b) Assignee shall not trade or cause or encourage any third party to
trade, and shall instruct its partners, directors, officers, managers,
principals, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, bankers and financial advisors)
(collectively "Representatives"), not to trade, and Assignee shall otherwise use
its commercially reasonable efforts to assure that none of its Representatives
will trade (or cause or encourage any third party to trade), in any securities
of Orthovita (or securities convertible into or exercisable for securities of
Orthovita) while in possession of any material non-public information including,
without limitation, the Confidential Information that may be disclosed by
Orthovita or Assignor hereunder or under any of the other Transaction Documents.
Section 5.18 Notification of Significant Discounts and Write-Offs
----------------------------------------------------
(a) Assignor shall promptly notify Assignee of cash, trade discounts and
rebates greater than or equal to 5% granted or paid to (i) any individual
customer that during the preceding calendar year accounted for gross sales of
the Products in the Territories of not less than $2.5 million or (ii) any
customers that during the preceding calendar year collectively accounted for
gross sales of the Products in the Territories of not less than $10 million,
which notification shall identify the customer and provide a description of the
terms of any such payment, trade discount or rebate.
(b) Assignor shall promptly notify Assignee of (i) any individual write-off
of uncollected accounts representing greater than $100,000 of gross sales of the
Products in the Territories, and (ii) if in any Fiscal Year aggregate write-offs
of uncollected accounts in respect
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
58
of gross sales of the Products in the Territories exceed 2.5% of the prior
Fiscal Year's gross sales.
Section 5.19 Financial Covenants.
-------------------
(a) Orthovita (on a consolidated basis) shall at all times maintain cash
and cash equivalents equal to or greater than the product of (i) 1.5 and (ii)
total operating losses for the preceding fiscal quarter as set forth in the most
recent Report on Form 10-Q filed with the Commission, net of any non-cash
charges including, but without limitation, depreciation. If Orthovita has a
letter of intent or commitment letter pursuant to which a financial institution
or underwriter reasonably acceptable to Assignee has agreed, or stated its
intention (subject only to conventional conditions), to provide or obtain
financing for Orthovita in an amount such that upon consummation of such
financing Orthovita will comply with the cash and cash equivalents requirement
of the preceding sentence, Orthovita shall have thirty days from the date of
non-compliance with the preceding sentence to consummate such transaction and
restore compliance with the preceding sentence.
(b) Orthovita (on a consolidated basis) shall maintain total shareholders
equity not less than the total shareholders equity of Orthovita as of September
30, 2001, as reflected in the consolidated balance sheet filed with the
Commission with the Company's Report on Form 10-Q for the period ending
September 30, 2001. For purposes of this subsection (b), shareholders equity
shall be calculated in the manner calculated in the 10-Q report referred to in
the preceding sentence or otherwise in accordance with GAAP, provided that the
Aggregate Purchase Price shall be deemed an asset and not a liability.
ARTICLE VI
THE CLOSING; CONDITIONS TO CLOSING AND FUNDING
Section 6.01 Closings.
--------
(a) Closing.
-------
Subject to the closing conditions set forth in Sections 6.02 and 6.03,
the closing of the purchase and sale of the Assigned Interests (the "Closing")
-------
shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, New York, New York
USA, on the Closing Date. If all conditions are determined to be satisfied (or
any of such conditions are duly waived) at the Closing (whether or not delayed),
the Closing shall be consummated.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
59
Section 6.02 Conditions Applicable to Assignee.
---------------------------------
The obligations of Assignee to effect the Closing and the payment of
the Closing Purchase Price Payment shall be subject to the satisfaction of each
of the following conditions, any of which may be waived by Assignee in its sole
discretion:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Assignor and Orthovita set forth in this Agreement and the
other Transaction Documents shall be true, correct and complete in all material
respects both on the date of this Agreement and as of the Closing Date (with the
same force and effect as if such representations and warranties were made anew
at and as of the Closing Date, except to the extent that any such
representations or warranties which by its terms is made as of a specified date,
in which case such representations or warranties shall have been true, correct
and complete in all material respects as of such specified date).
(b) No Adverse Circumstances. There shall not have occurred or be
------------------------
continuing any event or circumstance (including any development with respect to
the efficacy of the Products or the licensed Intellectual Property or the use or
expected future use of the same as opposed to competing products) which would
reasonably be expected to have a Material Adverse Effect.
(c) Litigation. No action, suit, litigation, proceeding or
----------
investigation shall have been instituted, be pending or threatened (i)
challenging or seeking to make illegal, to delay or otherwise directly or
indirectly to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in connection with
the transactions contemplated by this Agreement, or (ii) seeking to restrain or
prohibit Assignee's acquisition or future receipt of the Assigned Interests.
There shall not have been in effect any injunction, order, judgment or decree
restricting, preventing or enjoining the consummation of the transactions
contemplated by this Agreement.
(d) Officer's Certificates.
----------------------
(i) Assignee shall have received at the Closing a
certificate of the executive officer of Assignor pursuant to which such officer
certifies that the conditions set forth in Sections 6.02(a), (b), (c), (n), (o)
and (p) have been satisfied in all respects as of the Closing Date.
(ii) Assignee shall have received at the Closing a
certificate of the executive officer of Orthovita pursuant to which such officer
certifies that the conditions set forth in
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
60
Sections 6.02(a), (b), (c), (m), (o) and (p) have been satisfied in all respects
as of the Closing Date.
(e) Legal Opinions.
--------------
(i) Assignee shall have received an opinion of ▇▇▇▇▇▇,
▇▇▇▇▇ & Bockius LLP, counsel to Assignor, dated the
Closing Date, in form and substance satisfactory to
Assignee and its counsel, to the effect set forth in
Exhibit E(i).
------------
(ii) Assignee shall have received an opinion of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, patent counsel to Assignor, dated the
Closing Date, in form and substance satisfactory to
Assignee and its counsel, to the effect set forth in
Exhibit E(ii), covering, but not limited to, the
-------------
Assignor's right to practice the basic Patents owned
by Assignor; the completed right to use search; and
title to all of the patents, including, but not
limited to, the `872 patent.
(iii) Assignee shall have received an infringement opinion
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, patent counsel to Assignor,
dated the Closing Date, in form and substance
satisfactory to Assignee and its counsel, to the
effect set forth in Exhibit E(iii).
---------------
(f) Assignment. An Assignment shall have been executed and delivered
----------
by Assignor to Assignee and Assignee shall have received the same.
(g) Security Agreement. The Security Agreement shall have been duly
------------------
and delivered by all the parties thereto and shall be in form of Exhibit D
---------
hereto, together with proper financing statements (including Form UCC-1s) fully
executed for filing under the UCC and/or any other applicable law, rule, statute
or regulation relating to the perfection of a security interest in filing
offices in the jurisdictions listed on Schedule 6.02(g).
----------------
(h) [RESERVED]
----------
(i) Pledge Agreement. The Pledge Agreement shall have been duly
----------------
executed and delivered by all the parties thereto and shall be in form of
Exhibit I hereto, together with proper financing statements (including Form UCC-
---------
1s) fully executed for filing under the UCC and/or any other applicable law,
rule, statute or regulation relating to the perfection of a security interest in
filing offices in the jurisdictions listed on Schedule 6.02(g).
----------------
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
61
(j) Stock Purchase Agreement. The Stock Purchase Agreement shall
------------------------
have been duly executed and delivered by all the parties thereto and shall be in
the form of Exhibit F hereto.
---------
(k) Assignment Documents. Each Assignment Document shall have been
--------------------
duly executed and delivered by all the parties thereto and shall be in forms of
Exhibits ▇-▇ hereto.
------------
(l) License Agreements. The Vita SPC Patent License Agreement and
------------------
the Vita SPC Trademark License Agreement shall have been duly executed and
delivered by all the parties thereto.
(m) Corporate Documents of Orthovita. Assignee shall have received
--------------------------------
on the Closing Date, a certificate, dated the Closing Date, of a senior officer
of Orthovita (the statements made in which shall be true and correct on and as
of the Closing Date): (i) attaching copies, certified by such officer as true
and complete, of Orthovita's certificate of incorporation and by-laws or other
organizational documents (together with any and all amendments thereto)
certified by the appropriate Government Authority (other than the By-laws) as
being true, correct and complete copies; (ii) attaching copies, certified by
such officer as true and complete, of resolutions of the board of directors of
Orthovita authorizing and approving the execution, delivery and performance by
Orthovita of this Agreement, the other Transaction Documents and the
transactions contemplated herein and therein; (iii) setting forth the incumbency
of the officer or officers of Orthovita who have executed and delivered this
Agreement and the other Transaction Documents including therein a signature
specimen of each such officer or officers; and (iv) attaching copies, certified
by such officer as true and complete, of certificates of the appropriate
Government Authority of the jurisdiction of formation, stating that Orthovita is
in good standing under the laws of such jurisdiction or, if any such certificate
is not available from a Government Authority, a statement by such officer
containing an equivalent confirmation.
(n) Corporate Documents of Assignor. Assignee shall have received
-------------------------------
on the Closing Date, a certificate, dated the Closing Date, of a senior officer
of Assignor (the statements made in which shall be true and correct on and as of
the Closing Date): (i) attaching copies, certified by such officer as true and
complete, of Assignor's certificate of formation or other organizational
documents (together with any and all amendments thereto) certified by the
appropriate Government Authority as being true, correct and complete copies;
(ii) attaching copies, certified by such officer as true and complete, of
resolutions of the board of directors of Assignor authorizing and approving the
execution, delivery and performance by Assignor of this Agreement, the other
Transaction Documents and the transactions contemplated herein and therein;
(iii) setting forth the incumbency of the officer or officers of Assignor who
have
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
62
executed and delivered this Agreement and the other Transaction Documents
including therein a signature specimen of each such officer or officers; and
(iv) attaching copies, certified by such officer as true and complete, of
certificates of the appropriate Government Authority of the jurisdiction of
formation, stating that Assignor is in good standing under the laws of such
jurisdiction or, if any such certificate is not available from a Government
Authority, a statement by such officer containing an equivalent confirmation.
(o) Termination Event. There shall not have occurred a Termination
-----------------
Event or a Purchase Option Event.
(p) Covenants. Each of Assignor and Orthovita shall have complied in
---------
all material respects with their respective covenants as set forth in this
Agreement and each other Transaction Document.
Section 6.03 Conditions Applicable to Assignor.
---------------------------------
The obligations of each of Assignor and Orthovita to effect the
Closing shall be subject to the satisfaction of each of the following
conditions, any of which may be waived by Assignor and Orthovita in their sole
discretion:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Assignee set forth in this Agreement shall have been true,
correct and complete in all material respects both on the date of this Agreement
and as of the Closing Date (with the same force and effect as if such
representations and warranties were made anew at and as of the Closing Date,
except to the extent that any such representations or warranties which by its
terms is made as of a specified date, in which case such representations or
warranties shall have been true, correct and complete in all respects on and as
of such specified date).
(b) Litigation. No action, suit, litigation, proceeding or
----------
investigation shall have been formally instituted, be pending or threatened (i)
challenging or seeking to make illegal, to delay or otherwise directly or
indirectly to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in connection with
the transactions contemplated by this Agreement, or (ii) seeking to restrain or
prohibit Assignee's acquisition or future receipt of the Assigned Interests.
(c) Officer's Certificate. Assignor shall have received at the
---------------------
Closing a certificate of an officer or member of the general partner of Assignee
certifying that the conditions set forth in Sections 6.03(a) and (b) have been
satisfied, in all respects as of the Closing Date.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
63
(d) Full Payment. The Closing Purchase Price Payment due at Closing
------------
shall have been tendered by Assignee to Assignor by wire transfer of immediately
available funds to Assignor's Account identified to Assignee on or prior to the
Closing.
(e) Stock Purchase Agreement. The Stock Purchase Agreement shall
------------------------
duly executed and delivered by all the parties thereto and shall be in the form
of Exhibit F hereto.
---------
(f) Security Agreement. The Security Agreement shall have been duly
------------------
executed and delivered by all the parties thereto and shall be in the form of
Exhibit D hereto.
---------
(g) Pledge Agreement. The Pledge Agreement shall have been duly
----------------
delivered by all the parties thereto and shall be in the form of Exhibit I
---------
hereto.
(h) Covenants. Assignee shall have complied in all material respects
---------
with its covenants as set forth in this Agreement and each other Transaction
Document.
Section 6.04 Termination Event.
-----------------
If any Termination Event shall have occurred and be continuing,
Assignee may exercise any rights and remedies available to it, including,
without limitation, those rights and remedies available hereunder, under any
Transaction Document and/or at law or in equity.
ARTICLE VII
TERMINATION
Section 7.01 Termination Date.
----------------
This Agreement shall terminate on December 31, 2016; provided,
--------
however, that if any payments are required to be made by one of the parties
-------
hereunder after that date, this Agreement shall remain in full force and effect
until any and all such payments have been made in full, and solely for that
purpose. In addition, this Agreement shall sooner terminate if Assignee or
Assignor shall have exercised its right under Sections 5.07(a) or (c),
respectively, with the termination date in that event being the date on which
Assignor completes the repurchase of the Assigned Interests and pays in full in
cash the (i) Assignee Repurchase Price, (ii) Assignor Option Repurchase Price,
or (iii) average of the Assignee Repurchase Price and the Assignor Repurchase
Price, as the case may be, in accordance with the terms therein.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
64
Section 7.02 Effect of Termination.
---------------------
In the event of the termination of this Agreement pursuant to Section
7.01, this Agreement shall forthwith become void and have no effect without any
liability on the part of any party hereto or its Affiliates, directors, officers
or stockholders other than the provisions of this Section 7.02 and Sections
5.04, 8.01, and 8.06 hereof, and as provided in Section 2.02(c) hereof. Nothing
contained in this Section 7.02 shall relieve any party from liability for any
breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Survival.
--------
(a) All representations and warranties made herein and in any other
Transaction Document, any certificates or in any other writing delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the Closing and shall continue to survive until
the date that is the first anniversary of the last day of the Term.
Notwithstanding anything in this Agreement or implied by law to the contrary,
all the agreements contained in Sections 5.04, 8.02, 8.03, 8.06, 8.11 and 8.15,
and in the last sentence of Section 2.02(c), shall survive indefinitely
following the execution and delivery of this Agreement and the Closing and the
termination of this Agreement.
(b) Any investigation or other examination that may have been made or
may be made at any time by or on behalf of the party to whom representations and
warranties are made shall not limit, diminish or in any way affect the
representations and warranties in this Agreement and the other Transaction
Documents, and the parties may rely on the representations and warranties in
this Agreement and the other Transaction Documents irrespective of any
information obtained by them by any investigation, examination or otherwise.
Section 8.02 Specific Performance.
--------------------
Each of the parties hereto acknowledges that the other party will have
no adequate remedy at law if it fails to perform any of its obligations under
this Agreement or any of the other Transaction Documents. In such event, each of
the parties agrees that the other party shall have the right, in addition to any
other rights it may have (whether at law or in equity), to specific performance
of this Agreement.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
65
Section 8.03 Notices.
-------
All notices, consents, waivers and communications hereunder given by any
party to the other shall be in writing (including facsimile transmission) and
delivered personally, by telegraph, telecopy, telex or facsimile, by a
recognized overnight courier, or by dispatching the same by certified or
registered mail, return receipt requested, with postage prepaid, in each case
addressed:
if to Assignee to:
c/o ▇▇▇▇ Capital Management, L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇ Capital Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
1290 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to Assignor to:
Vita Special Purpose Corp.
Corporation Trust Center
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
66
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to Orthovita to:
Orthovita, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if or to such other address or addresses as Assignee, Assignor or Orthovita may
from time to time designate by notice as provided herein, except that notices of
changes of address shall be effective only upon receipt. All such notices
consents, waivers and communications shall: (a) when posted by certified or
registered mail, postage prepaid, return receipt requested, be effective three
(3) Business Days after dispatch, unless such communication is sent trans-
Atlantic, in which case shall be deemed effective five (5) Business Days after
dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective
as of (i) the date of transmission, if
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
67
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Business
Day, or (ii) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than 6:30
p.m. (New York City time) on any Business Day, or (c) when delivered by a
recognized overnight courier or in person, be effective upon receipt when hand
delivered.
Section 8.04 Schedules.
---------
Prior to each of Assignor and Orthovita making any representation or
warranty under this Agreement, each of Assignor and Orthovita shall update its
disclosure schedules with respect to all such representations and warranties
made by either Assignor or Orthovita under this Agreement. In determining the
accuracy of the representations and warranties of each of Assignor and
Orthovita, the representations and warranties of each of Assignor and Orthovita
shall be evaluated taking into account the updated disclosure schedules;
provided, however, that if the matters described in such updated schedule has
-------- -------
had, or could be reasonably expected to have, a Material Adverse Effect, then
Assignee shall have the option not to consummate such Closing.
Section 8.05 Successors and Assigns.
----------------------
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither Assignor nor Orthovita shall be entitled to assign any of its
obligations and rights hereunder or any other Transaction Documents without the
prior written consent of Assignee, other than any assignment to a successor
entity in connection with a Change of Control, in which case no such consent
shall be required. ***
Section 8.06 Indemnification.
---------------
(a) Each of Assignor and Orthovita hereby jointly and severally
indemnifies and holds Assignee and its Affiliates and any of their respective
partners, directors, managers, officers, employees and agents (each as "Assignee
--------
Indemnified Party") harmless from and against any and all Losses incurred or
-----------------
suffered by any Assignee Indemnified Party arising out of any breach of any
representation, warranty or certification made by either Assignor or Orthovita
in any of the Transaction Documents or certificates given by Assignor in writing
pursuant hereto or thereto or any breach of or default under any covenant or
agreement by either Assignor or
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
68
Orthovita pursuant to this Agreement or any Transaction Document, including any
failure by either Assignor or Orthovita to satisfy any of the Excluded
Liabilities and Obligations.
(b) Assignee hereby indemnifies and holds Assignor, Orthovita, their
Affiliates and any of their partners, directors, managers, officers, employees
and agents (each a "Assignor Indemnified Party") harmless from and against any
--------------------------
and all Losses incurred or suffered by an Assignor Indemnified Party arising out
of any breach of any representation, warranty or certification made by Assignee
in any of the Transaction Documents or certificates given by Assignee in writing
pursuant hereto or thereto or any breach of or default under any covenant or
agreement by Assignee pursuant to this Agreement or any Transaction Document.
(c) If any claim, demand, action or proceeding (including any
investigation by any Government Authority) shall be brought or alleged against
an indemnified party in respect of which indemnity is to be sought against an
indemnifying party pursuant to the preceding paragraphs, the indemnified party
shall, promptly after receipt of notice of the commencement of any such claim,
demand, action or proceeding, notify the indemnifying party in writing of the
commencement of such claim, demand, action or proceeding, enclosing a copy of
all papers served, if any; provided, that, the omission to so notify such
-------- ----
indemnifying party will not relieve the indemnifying party from any liability
that it may have to any indemnified party under the foregoing provisions of this
Section 8.06 unless, and only to the extent that, such omission results in the
forfeiture of , or have a material adverse effect on the exercise or prosecution
of, substantive rights or defenses by the indemnifying party. In case any such
action is brought against an indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 8.06 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. In any
such proceeding, an indemnified party shall have the right to retain its own
counsel, but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
(ii) the indemnifying party has assumed the defense of such proceeding and has
failed within a reasonable time to retain counsel reasonably satisfactory to
such indemnified party or (iii) the named parties to any such proceeding
(including any impleaded parties) include both the
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
69
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential conflicts
of interests between them based on the advice of such counsel. It is agreed that
the indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate law firm (in addition to local counsel where
necessary) for all such indemnified parties. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any Loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
Section 8.07 Expenses.
--------
Each party hereto will pay all of its own fees and expenses in connection
with entering into and consummating the transactions contemplated by this
Agreement.
Section 8.08 Independent Nature of Relationship.
----------------------------------
(a) The relationship between Assignor and Assignee is solely that of
seller and purchaser, and the relationship between Orthovita and Assignee is
solely that of independent contracting parties, and neither Orthovita and
Assignee, on the one hand, nor Assignor, on the other, has any fiduciary or
other special relationship with the other or any of their respective Affiliates.
Nothing contained herein or in any other Transaction Document shall be deemed to
constitute Orthovita and Assignee, or Assignor and Assignee, as a partnership,
an association, a joint venture or other kind of entity or legal form, nor shall
the Lockbox Account or Lockbox Agreement be deemed to constitute Orthovita and
Assignee, or Assignor and Assignee, a partnership, an association, a joint
venture or other kind of entity or legal form.
(b) No officer or employee of Assignee will be located at the premises of
Assignor, Orthovita or any of their Affiliates, except in connection with an
audit performed pursuant to Section 5.02. No officer or employee of Assignee
shall engage in any commercial activity with Assignor, Orthovita or any of their
Affiliates other than as contemplated herein and in the other Transaction
Documents.
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
70
(c) Assignor, Orthovita and/or any of its Affiliates shall not at any time
obligate Assignee, or impose on Assignee any obligation, in any manner or
respect to any Person not a party hereto other than obligations of Assignee's
partners, directors, employees, managers, officers, investors, bankers,
advisors, trustees or representatives under Sections 5.04 and 5.17.
Section 8.09 Entire Agreement.
----------------
This Agreement, together with the Exhibits and Schedules hereto (which are
incorporated herein by reference), and the other Transaction Documents
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements (including the Letter of
Intent), understandings and negotiations, both written and oral, between the
parties with respect to the subject matter of this Agreement. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by either party hereto. None of this Agreement, nor
any provision hereof, is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
Section 8.10 Amendments; No Waivers.
----------------------
(a) This Agreement or any term or provision hereof may not be amended,
changed or modified except with the written consent of the parties hereto. No
waiver of any right hereunder shall be effective unless such waiver is signed in
writing by the party against whom such waiver is sought to be enforced.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.11 Interpretation.
--------------
When a reference is made in this Agreement to Articles, Sections, Schedules
or Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit
to this Agreement unless otherwise indicated. The words "include," "includes"
and "including" when used herein shall be deemed in each case to be followed by
the words "without limitation." Neither party hereto shall be or be deemed to be
the drafter of this Agreement for the purposes of construing this Agreement
against one party or the other.
[***] We are seeking confidential treatment on these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
71
Section 8.12 Headings and Captions.
---------------------
The headings and captions in this Agreement are for convenience and
reference purposes only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
Section 8.13 Counterparts; Effectiveness.
---------------------------
This Agreement may be executed in two or more counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument. This Agreement shall become effective when each party hereto
shall have received a counterpart hereof signed by the other party hereto.
Section 8.14 Severability.
------------
If any provision of this Agreement is held to be invalid or unenforceable,
the remaining provisions shall nevertheless be given full force and effect.
Section 8.15 Force Majeure.
-------------
(a) If either party to this Contract shall fail to perform any obligation
hereby imposed upon it, and such failure is caused by acts of God, strikes,
lockouts or other industrial disturbances, sabotage, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, floods,
fires, civil disturbances, explosions, the order of any court or governmental
authority, or any other act or omission occasioned by any cause beyond the
control of the party invoking this Section 8.15, and being such that by the
exercise of due diligence such party could not have prevented such failure, that
failure shall not (x) constitute a Material Adverse Effect until the earlier of
(i) 120 days following the occurrence of such event enumerated above, and (ii)
the date by which such party, in the exercise of reasonable diligence, would
have restored its ability to carry out its obligations hereunder, nor (y) give
rise to any cause of action based on breach of the obligation of such party
hereunder, but such party shall use reasonable diligence to put itself again in
a position to carry out its obligations hereunder. Nothing contained herein
shall be construed to require either party to settle a strike or lockout or
other industrial disturbance by acceding against its judgment to the demands of
opposing parties.
(b) No such circumstance or occurrence affecting the performance of this
Agreement by any party shall continue to relieve the party affected thereby from
liability or to hold in abeyance a cause of action, after the expiration of a
reasonable period of time within which by
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
72
the use of due diligence such party could have remedied the situation preventing
its performance, nor shall any such circumstance or occurrence relieve any party
from its obligation to make payment of amounts then due hereunder nor shall any
such circumstance or occurrence affected thereby from liability or hold in
abeyance a cause of action unless such party shall give notice of such
circumstance or occurrence in writing with reasonable promptness; and like
notice shall be given upon termination of such circumstance or occurrence.
Section 8.16 Governing Law; Jurisdiction.
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(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇. BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO
AND ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH PARTY HERETO
HEREBY FURTHER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
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NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF ANY OF THE COURTS REFERRED TO IN SUBSECTION (b) ABOVE OF THIS SECTION
8.15 IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO
SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUIT, ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY
OTHER TRANSACTION
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
73
DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS ON THE OTHER PARTY IN
ANY OTHER MANNER PERMITTED BY LAW.
Section 8.17 Intentionally omitted.
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Section 8.18 Waiver of Jury Trial.
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EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT.
[***] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
ASSIGNOR: VITA SPECIAL PURPOSE CORP.
By:___________________________________________
Name:
Title:
ORTHOVITA: ORTHOVITA, INC
By:___________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
ASSIGNEE: ▇▇▇▇ CAPITAL ROYALTY ACQUISITION FUND, L.P.
By: ▇▇▇▇ Capital Management, LLC,
its General Partner
By: ____________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, M.D.
Title: Managing Member
[SIGNATURE PAGE TO REVENUE INTERESTS ASSIGNMENT AGREEMENT]
Exhibit A
Projected Net Sales
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***