Exhibit 10.6.1

Pursuant to 17 CFR 240.24b-2, confidential information has been omitted in
places marked “* * *” and has been filed separately with the Securities and
Exchange Commission pursuant to a Confidential Treatment Application filed with
the Commission.

REVENUE INTERESTS PURCHASE AGREEMENT

Dated as of October 5, 2012

between

AxoGen, Inc.

and

PDL BioPharma, Inc.

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Table of Contents

 

 

     Page  

ARTICLE I DEFINITIONS

     1   

ARTICLE II PURCHASE OF INTERESTS

     13   

Section 2.01    Purchase

     13   

Section 2.02    Payments by the Company

     14   

Section 2.03    Closing; Payment Purchase Price; Closing Deliveries

     14   

Section 2.04    No Assumed Obligations

     15   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY

     15   

Section 3.01    Organization

     15   

Section 3.02    Authorization

     15   

Section 3.03    Governmental Authorization

     15   

Section 3.04    Ownership

     16   

Section 3.05    Financial Statements

     17   

Section 3.06    No Undisclosed Liabilities

     17   

Section 3.07    Solvency

     17   

Section 3.08    Litigation

     17   

Section 3.09    Compliance with Laws

     17   

Section 3.10    Conflicts

     18   

Section 3.11    Subordination

     18   

Section 3.12    Intellectual Property

     18   

Section 3.13    Regulatory Approval

     20   

Section 3.14    Material Contracts

     21   

Section 3.15    Place of Business

     21   

Section 3.16    Broker’s Fees

     21   

Section 3.17    Other Information

     22   

Section 3.18    Insurance

     22   

Section 3.19    Taxes

     22   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER

     22   

Section 4.01    Organization

     22   

Section 4.02    Authorization

     23   

Section 4.03    Broker’s Fees

     23   

Section 4.04    Conflicts

     23   

ARTICLE V COVENANTS

     23   

 

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Table of Contents

(continued)

 

 

     Page  

Section 5.01    Consents and Waivers

     23   

Section 5.02    Access; Information

     24   

Section 5.03    Material Contracts

     25   

Section 5.04    Confidentiality; Public Announcement

     25   

Section 5.05    Guarantee and Collateral Agreement

     26   

Section 5.06    Efforts; Further Assurance

     26   

Section 5.07    Change of Control; Put Option

     27   

Section 5.08    Remittance to Deposit Account

     28   

Section 5.09    Intellectual Property

     30   

Section 5.10    Negative Covenants

     31   

Section 5.11    Insurance

     31   

Section 5.12    Notice

     32   

Section 5.13    Use of Proceeds

     32   

Section 5.14    Taxes

     32   

Section 5.15    Board Designee

     32   

Section 5.16    Rights to Future Stock Issuances

     33   

ARTICLE VI TERMINATION

     34   

Section 6.01    Termination Date

     34   

Section 6.02    Effect of Termination

     34   

ARTICLE VII MISCELLANEOUS

     35   

Section 7.01    Survival

     35   

Section 7.02    Specific Performance; Limitations on Damages

     35   

Section 7.03    Notices

     35   

Section 7.04    Successors and Assigns

     36   

Section 7.05    Indemnification

     36   

Section 7.06    No Implied Representations and Warranties

     38   

Section 7.07    Independent Nature of Relationship

     38   

Section 7.08    Federal Tax

     39   

Section 7.09    Entire Agreement

     39   

Section 7.10    Amendments; No Waivers

     39   

 

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Table of Contents

(continued)

 

 

     Page  

Section 7.11    Interpretation

     39   

Section 7.12    Headings and Captions

     40   

Section 7.13    Counterparts; Effectiveness

     40   

Section 7.14    Severability

     40   

Section 7.15    Expenses

     40   

Section 7.16    Governing Law; Jurisdiction

     40   

Section 7.17    Waiver of Jury Trial

     41   

 

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EXHIBITS

 

Exhibit A   –    Form of Guarantee and Collateral Agreement Exhibit B   –   
Form of Assignment of Interests Exhibit C   –    Form of Deposit Agreement
Exhibit D      Form of Legal Opinion

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REVENUE INTERESTS PURCHASE AGREEMENT

This REVENUE INTERESTS PURCHASE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this “Agreement”) is made and entered into as of
October 5, 2012, by and between AxoGen, Inc., a Minnesota corporation (the
“Company”), and PDL BioPharma, Inc., a Delaware corporation (“Purchaser”).

WHEREAS, the Company wishes to obtain financing in respect of the
commercialization of the Product (as hereinafter defined) and to sell, assign,
convey and transfer to Purchaser in consideration for its payment of the
Purchase Price (as hereinafter defined), and Purchaser wishes to purchase from
the Company, the Assigned Interests (as hereinafter defined), all upon and
subject to the terms and conditions hereinafter set forth;

WHEREAS, the Company and Purchaser entered into that certain Interim Royalty
Purchase Agreement, dated August 14, 2012 (“Interim Royalty Purchase
Agreement”), pursuant to which, Purchaser paid $1,750,000.00 (the “Interim
Payment”) for the acquisition of certain of the Company’s revenue rights; and

WHEREAS, the parties desire for this Agreement to amend, restate and replace the
Interim Royalty Purchase Agreement in its entirety.

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.

The following terms, as used herein, shall have the following meanings:

“2013 Annual Meeting” shall have the meaning set forth in Section 5.15.

“Accounts” shall mean, collectively, the Deposit Account, the Joint
Concentration Account, the Company Concentration Account and the Purchaser
Concentration Account, each established and maintained pursuant to the Deposit
Agreement.

“Affiliate” shall mean any Person that controls, is controlled by, or is under
common control with another Person. For purposes of this definition, “control”
shall mean (i) in the case of corporate entities, direct or indirect ownership
of at least fifty percent (50%) of the stock or shares having the right to vote
for the election of directors, and (ii) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
non-corporate entities.

“Aggregate Deposit Funds” shall mean any and all financial assets, funds,
monies, checks or other items deposited into the Deposit Account.

“Agreement” shall have the meaning set forth in the first paragraph hereof.

 

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“Applicable Percentage” shall mean * * *.

“Assigned Interests” shall mean the following amounts of the Company’s Net
Revenues:

(a) from the Closing Date until September 30, 2014, an amount equal to the
product of the Applicable Percentage multiplied by the Company’s Net Revenues;

(b) for each of the following twenty-four (24) Fiscal Quarters, the greater of
(i) an amount equal to the Applicable Percentage of the Company’s Net Revenues
for such Fiscal Quarter or (ii) the following amounts:

 

  (i) for the quarter ending December 31, 2014, * * *;

 

  (ii) for the quarter ending March 31, 2015* * *;

 

  (iii) for the quarter ending June 30, 2015, * * *;

 

  (iv) for the quarter ending September 30, 2015, * * *;

 

  (v) for the quarter ending December 31, 2015, * * *;

 

  (vi) for the quarter ending March 31, 2016, * * *;

 

  (vii) for the quarter ending June 30, 2016, * * *;

 

  (viii) for the quarter ending September 30, 2016, * * *;

 

  (ix) for the quarter ending December 31, 2016, * * *;

 

  (x) for the quarter ending March 31, 2017, * * *;

 

  (xi) for the quarter ending June 30, 2017, * * *;

 

  (xii) for the quarter ending September 30, 2017, * * *;

 

  (xiii) for the quarter ending December 31, 2017, * * *;

 

  (xiv) for the quarter ending March 31, 2018, * * *;

 

  (xv) for the quarter ending June 30, 2018, * * *;

 

  (xvi) for the quarter ending September 30, 2018, * * *;

 

  (xvii) for the quarter ending December 31, 2018, * * *;

 

  (xviii) for the quarter ending March 31, 2019, * * *;

 

  (xix) for the quarter ending June 30, 2019, * * *;

 

  (xx) for the quarter ending September 30, 2019, * * *;

 

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  (xxi) for the quarter ending December 31, 2019, * * *;

 

  (xxii) for the quarter ending March 31, 2020, * * *;

 

  (xxiii) for the quarter ending June 30, 2020, * * *; and

 

  (xxiv) for the quarter ending September 30, 2020, * * *.

“Assigned Interests Collateral” shall mean the property included in the
definition of “Collateral” in the Guarantee and Collateral Agreement.

“Assignment of Interests” shall mean the Assignment of Interests pursuant to
which the Company shall assign to Purchaser all of its rights and interests in
and to the Assigned Interests purchased hereunder, which Assignment of Interests
shall be substantially in the form of Exhibit B.

“Audit Costs” shall mean, with respect to any audit of the books and records of
the Company with respect to amounts payable or paid under this Agreement, the
reasonable out-of-pocket cost of such audit, including all fees, costs and
expenses incurred in connection therewith.

“Bankruptcy Event” shall mean the occurrence of any of the following:

(a) the Company shall commence any case, proceeding or other action (i) 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 debts, or (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any portion of its
assets, or the Company shall make a general assignment for the benefit of its
creditors;

(b) there shall be commenced against the Company any case, proceeding or other
action of a nature referred to in clause (a) above which remains undismissed,
undischarged or unbonded for a period of sixty (60) days;

(c) there shall be commenced against the Company any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against (i) all or any substantial portion of its assets and/or
(ii) the Product or any substantial portion of the Intellectual Property related
to the Product, 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 sixty (60) days from the entry thereof;

(d) the failure of the Company to take action to object to any of the acts set
forth in clause (b) or (c) above within ten (10) days of the Company receiving
written notice of such act; or

(e) the Company shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its respective debts as they become due.

 

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“BLA” shall mean a biologics license application and all amendments and
supplements thereto, submitted to the FDA with respect to Avance® Nerve Graft.

“Board” shall mean the Board of Directors of the Company.

“Business Day” shall mean any day other than a Saturday, a Sunday, any day which
is a legal holiday under the laws of the State of New York, or any day on which
banking institutions located in the State of New York are required by law or
other governmental action to close.

“Call Closing Date” shall have the meaning set forth in Section 5.07(c).

“Call Option” shall have the meaning set forth in Section 5.07(c).

“Change of Control” shall mean:

(a) the acquisition by any Person or group (within the meaning of Sections
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of
beneficial ownership of any capital stock of the Company, if after such
acquisition, such Person or group would be the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors;

(b) a merger or consolidation of the Company, with any other Person, other than
a merger or consolidation which would result in the Company’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 fifty percent (50%) of the combined voting power of
the Company’s voting securities or such surviving entity’s voting securities
outstanding immediately after such merger or consolidation;

(c) during any period of two (2) consecutive years, measured from the first
Business Day after the Purchaser Designee appointed pursuant to Section 5.15
hereof takes office, individuals who at the beginning of such period constitute
the board of directors of the Company (together with any new directors (other
than a director designated by a Person who has entered into an agreement with
the Company to effect a transaction described in clause (a) or (b) of this
definition of “Change of Control”), whose election by such board of directors or
nomination for election by the Company’s stockholders, as applicable, was
approved by a vote of a majority of the directors then still in office who
either 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 the Company then in
office, provided that for purposes of determining a Change of Control pursuant
to this clause (c), the directorship held by the Purchaser Designee shall be
disregarded.

(d) the bona fide sale, lease, transfer, exclusive license or other disposition,
in a single transaction or series of related transactions, by the Company or any
of its Subsidiaries of all or substantially all the assets of the Company and
its Subsidiaries, taken as a whole, or the sale or disposition (whether by
merger or otherwise) of one or more Subsidiaries of the Company if substantially
all of the assets of the Company and its Subsidiaries, taken as a whole, are
held

 

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by such Subsidiary or Subsidiaries, except where such sale, lease, transfer,
exclusive license or other disposition is to a wholly owned (direct or indirect)
Subsidiary of the Company.

“Change of Control Payment” shall mean the sum of (i) an amount that, when paid
to Purchaser, would generate an IRR to Purchaser of * * * on all payments made
by Purchaser pursuant to the Interim Royalty Purchase Agreement and Section 2.03
of this Agreement as of the date of the Change of Control Payment, taking into
account the amount and timing of all payments made by the Company to Purchaser
(and retained by Purchaser) pursuant to Sections 2.02 and 5.08 of this Agreement
and, if applicable, the Interim Royalty Purchase Agreement, prior to and as of
the date of payment of the Change of Control Payment, plus (ii) any Delinquent
Assigned Interests Payment owed (it being understood and agreed that in
calculating the Change of Control Payment, in no event shall Purchaser be
required to repay any amounts previously paid to Purchaser pursuant to Sections
2.02 and 5.08 of this Agreement if such payments exceed the IRR required
pursuant to this definition).

“Closing” shall have the meaning set forth in Section 2.03(a).

“Closing Date” shall have the meaning set forth in Section 2.03(a).

“Company” shall have the meaning set forth in the first paragraph hereof.

“Company Concentration Account” shall mean a segregated account established and
maintained at the Deposit Bank pursuant to the terms of the Deposit Agreement
and this Agreement. The Company Concentration Account shall be the account into
which the funds remaining in the Joint Concentration Account after payment
therefrom of the amounts payable to Purchaser pursuant to this Agreement are
swept in accordance with the terms of this Agreement and the Deposit Agreement.

“Company Indemnified Party” shall have the meaning set forth in Section 7.05(b).

“Confidential Information” shall mean, as it relates to the Company and its
Affiliates and the Product, the Intellectual Property, 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, or such other information that either party
identifies to the other as confidential or the nature of which or the
circumstances of the disclosure of which would reasonably indicate that such
information is confidential. Notwithstanding the foregoing definition,
Confidential Information shall not include information that (a) is already in
the public domain at the time the information is disclosed, (b) thereafter
becomes lawfully obtainable from other sources who, to the knowledge of the
recipient, have no obligation of confidentiality, (c) can be shown to have been
independently developed by the recipient or its representatives without
reference to any Confidential Information of the other party, or (d) is required
to be disclosed under securities laws, rules and regulations applicable to the
Company or its Affiliates or the Purchaser or its Affiliates, as the case may
be, or pursuant to the rules and regulations of any securities exchange

 

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or trading system or pursuant to any other laws, rules or regulations of any
Governmental Authority having jurisdiction over the Company and its Affiliates
or Purchaser and its Affiliates.

“Controlled” or “Control” shall mean, with respect to Intellectual Property, the
right, possession of the right, whether directly or indirectly, and whether by
ownership, license or otherwise, to grant a license, sublicense or other right
to or under such Intellectual Property without violating the terms of any
agreement with a third party related to such Intellectual Property.

“Daily Amount” shall have the meaning set forth in Section 2.02(b).

“Default” shall mean the occurrence of any event or circumstance that would,
with the giving of notice, lapse of time, or both, be an Event of Default.

“Delinquent Assigned Interests Payment” shall mean, with respect to any Assigned
Interests Payment and, if owed by the Company to Purchaser, any payment due
under Section 5.08(g)(iii) that is not paid when due shall, in each case, be an
amount equal to the product of the amount so owed multiplied by the lower of
(i) the highest rate permitted by applicable law, and (ii) one and one-half
percent (1.5%) per month, compounded monthly.

“Deposit Account” shall mean collectively, any deposit and segregated deposit
account established and maintained at the Deposit Bank pursuant to a Deposit
Agreement and this Agreement. The Deposit Account shall be the account into
which all payments made to the Company in respect of the sale of the Product are
to be remitted.

“Deposit Agreement” shall mean the agreement entered into by a Deposit Bank, the
Company and Purchaser, substantially in the form of Exhibit C attached hereto,
pursuant to which, among other things, the Deposit Account, the Joint
Concentration Account, the Purchaser Concentration Account and the Company
Concentration Account shall be established and maintained.

“Deposit Bank” shall mean Silicon Valley Bank or such other bank or financial
institution approved by each of Purchaser and the Company and a party to any
Deposit Agreement (it being understood that the parties intend to engage a new
bank within 120 days of the date hereof).

“Dispute” shall have the meaning set forth in Section 3.12(e).

“Event of Default” shall mean the occurrence of any Put Option Event (other than
pursuant to clause of (a) of said definition) and any material breach by the
Company of the Transaction Documents, whether or not constituting a Put Option
Event.

“Excluded Liabilities and Obligations” shall have the meaning set forth in
Section 2.04.

“Existing Agent” shall mean Midcap Financial SBIC LP, in its capacity as agent
for the lenders under the Existing Credit Agreement.

“Existing Credit Agreement” shall mean that certain Loan and Security Agreement,
dated as of September 30, 2011 among the Company, its Subsidiary, the Existing
Agent and the

 

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lenders party thereto, as amended, restated, supplemented or otherwise modified
from time to time.

“FDA” shall mean the United States Food and Drug Administration or any successor
federal agency thereto.

“Financial Statements” shall mean (a) the audited consolidated balance sheets of
the Company and its Subsidiary as of December 31, 2012 and 2011, and the related
audited consolidated statements of operations, cash flows and shareholders’
equity for the Fiscal Years then ended and (b) the unaudited consolidated
balance sheet of the Company and its Subsidiary as of June 30, 2012, and the
related unaudited consolidated statements of operations, cash flows and
shareholders’ equity for the three (3) and six (6) month period then ended.

“Fiscal Quarter” shall mean each three (3) month period commencing
January 1, April 1, July 1 or October 1, provided however that (a) the first
Fiscal Quarter of the Term shall extend from the Closing Date to the end of the
first full Fiscal Quarter thereafter, and (b) the last Fiscal Quarter of the
Term shall end upon the expiration of this Agreement.

“Fiscal Year” shall mean the calendar year.

“GAAP” shall mean generally accepted accounting principles in the United States
in effect from time to time.

“Governmental Authority” shall mean any government, court, regulatory or
administrative agency or commission, or other governmental authority, agency or
instrumentality, whether foreign, federal, state or local (domestic or foreign),
including the United States Patent and Trademark Office, the FDA, or the United
States National Institutes of Health.

“Gross Product Revenues” means, for any period of determination, the sum of the
following for such period: (a) the amounts invoiced and recognized as revenue in
accordance with GAAP by the Company, its Subsidiaries or any of their Affiliates
with respect to the sale of Product to a Third Party by the Company, its
Subsidiaries or any of their Affiliates, (b) the amounts invoiced and recognized
as revenue in accordance with GAAP by the Company, its Subsidiaries or any of
their Affiliates from a Third Party with respect to the sale, distribution or
other use of the Product by such Third Party in connection with any marketing,
royalty, manufacturing, co-promotion, co-development, equity investment, cost
sharing or other strategic arrangements, and (c) any collections in respect of
write-offs or allowances for bad debts in respect of items described in the
preceding clauses (a) and (b). For purposes of prevention of duplication, “Gross
Product Revenue” shall not include amounts invoiced by distributors, wholesalers
or other Persons acting in similar capacities.

“Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral
Agreement between the Company and Purchaser providing for, among other things,
the grant by the Company in favor of Purchaser of a valid continuing, perfected
lien on and security interest in, the Assigned Interests and the other Assigned
Interests Collateral described therein, which Guarantee and Collateral Agreement
shall be substantially in the form of Exhibit A.

 

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“Intellectual Property” shall mean all proprietary information; technical data;
laboratory notebooks; clinical data; priority rights; trade secrets; know-how;
confidential information; inventions (whether patentable or unpatentable and
whether or not reduced to practice or claimed in a pending patent application)
and improvements thereto; Patents; registered or unregistered trademarks, trade
names, service marks, including all goodwill associated therewith; registered
and unregistered copyrights and all applications thereof; in each case that are
owned, Controlled by, generated by, issued to, licensed to, licensed by or
hereafter acquired by or licensed by the Company, in each case relating to, or
otherwise relevant or desirable, now or in the future, for the manufacture and
sale of the Product.

“Interim Payment” shall have the meaning set forth in the Recitals.

“Interim Royalty Purchase Agreement” shall have the meaning set forth in the
Recitals.

“IRR” shall mean the internal rate of return utilizing the same methodology
utilized by the XIRR function in Microsoft Excel.

“Joint Concentration Account” shall mean a segregated account, subject to a
control agreement in favor of Purchaser, established for the benefit of the
Company and Purchaser and maintained at the Deposit Bank pursuant to the terms
of the Deposit Agreement and this Agreement. The Joint Concentration Account
shall be the account into which the Deposit Bank sweeps the funds held in the
Deposit Account.

“Knowledge” shall mean the actual knowledge, or that which would or should have
been known after reasonable inquiry, of any officer, director or employee of the
Company or its Subsidiaries relating to a particular matter.

“License Agreement” shall mean any existing or future license,
commercialization, co-promotion, collaboration, distribution, marketing or
partnering agreement entered into before or during the Revenue Interest Period
by the Company or any of its Affiliates relating to the Product and/or under the
Intellectual Property.

“Licensees” shall mean, collectively, the licensees, sublicensees or
distributors under the License Agreements; each a “Licensee”.

“Liens” shall mean any lien, hypothecation, charge, instrument, license,
preference, priority, security agreement, security interest, interest, mortgage,
deed of trust, option, privilege, pledge, liability, covenant, order, tax, right
of recovery, trust or deemed trust (whether contractual, statutory or otherwise
arising) or any encumbrance, right or claim of any other person of any kind
whatsoever whether choate or inchoate, filed or unfiled, noticed or unnoticed,
recorded or unrecorded, contingent or non-contingent, material or non-material,
known or unknown, including, without limitation, any conditional sale or other
title retention agreement, any lease having the same financial effect as any of
the foregoing, and the filing of, or agreement to give, any financing statement
under the UCC.

“Losses” shall mean collectively, any and all claims, damages, losses,
judgments, awards, penalties, liabilities, costs and expenses (including
reasonable expenses of investigation and reasonable attorneys’ fees and expenses
incurred in connection with investigating, preparing for or defending any
action, suit or proceeding).

 

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“Major Countries” shall mean the United States.

“Material Adverse Change” shall mean, with respect to the Company and its
Subsidiaries, any event, change, circumstance, occurrence, effect or state of
facts that has caused or is reasonably likely to cause a material adverse change
on the business, operations, assets, condition (financial or otherwise), results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole.

“Material Adverse Effect” shall mean (a) the effect of a Material Adverse
Change, (b) a material adverse effect on the validity or enforceability of any
of the Transaction Documents, (c) material adverse effect on the ability of the
Company to perform any of its obligations under the Transaction Documents,
(d) the inability or failure of Company to make payment of the Assigned
Interests or any other amounts in violation of this Agreement, and (e) any
material adverse effect on the Product or the ability of the Company to
distribute, market and/or sell the Product.

“Material Contract” shall mean: (a) any marketing agreement, co-promotion
agreement or partnering agreement related to the manufacture, sale or
distribution of the Product in any of the Major Countries; or (b) any agreement
relating to any Material Patent, including any license, assignment, or agreement
related to Control of such Material Patent.

“Net Revenues” shall mean, for any period of determination, the difference of

(a) Gross Product Revenues for such period, less

(b) the sum, with respect to the items described in clauses (i) and (ii) of the
definition of Gross Product Revenues, of

(i) cash, trade discounts and rebates actually granted or paid Third Parties in
accordance with customary industry standards,

(ii) allowances and adjustments actually credited to customers for Product that
is 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 customary industry standards,

(iii) charges for freight, postage, shipping, delivery, service and insurance
charges, to the extent invoiced,

(iv) taxes, duties or other governmental charges to the extent invoiced,

(v) write-offs or allowances for bad debts,

(vi) rebates and chargebacks and other price reduction programs granted to
managed care entities, Governmental Authorities, group purchasing organizations
or pharmaceutical benefit management companies, and

(vii) other payments required by law to be made under Medicaid, Medicare or
other government special medical assistance programs.

 

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Net Revenues shall be determined in accordance with GAAP as applied by the
Company and its Subsidiary on the date of this Agreement.

“New Securities” shall mean, collectively, equity securities of the Company,
whether or not currently authorized, as well as rights, options, or warrants to
purchase such equity securities, or securities of any type whatsoever that are,
or may become, convertible or exchangeable into or exercisable for such equity
securities.

“Obligations” shall mean any and all obligations of the Company under the
Transaction Documents.

“Offer Notice” shall have the meaning set forth in Section 5.16(a).

“Patents” shall mean all patents, patent rights, patent applications, patent
disclosures and invention disclosures issued or filed, together with all
reissues, divisions, continuations, continuations-in-part, revisions, term
extensions, substitutes, supplementary protection certificates and
reexaminations, including the inventions claimed in any of the foregoing and any
priority rights arising therefrom, covering or related to the manufacture, use
and sale of the Product that are issued or filed as of the date hereof or during
the Revenue Interest Period, including, without limitation, those identified in
Schedule 3.12 in each case, which are owned, Controlled by, issued to, licensed
to or licensed by the Company, its Subsidiary or any of its Affiliates.

“Person” shall mean an individual, corporation, partnership, limited liability
company, 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.

“Product” shall mean Avance® Nerve Graft, AXOGUARD® Nerve Protector and
AXOGUARD® Nerve Connector, regardless of the purpose for which such products are
marketed or sold, and any and all future iterations of such products developed
or licensed by the Company as a solution to repair or protect nerves as marketed
in any jurisdiction.

“Purchase Price” shall mean $20,800,000 less the Interim Payment and any
additional amounts due and payable under the Interim Royalty Purchase Agreement
as of the Closing Date.

“Purchaser” shall have the meaning set forth in the first paragraph hereof.

“Purchaser Concentration Account” shall mean a segregated account established
for the benefit of Purchaser and maintained at a bank specified in writing by
Purchaser pursuant to the terms of the Deposit Agreement and this Agreement. The
Purchaser Concentration Account shall be the account into which the funds held
in the Joint Concentration Account which are payable to Purchaser pursuant to
this Agreement are swept by the Deposit Bank in accordance with the terms of
this Agreement and the Deposit Agreement.

“Purchaser Designee” shall have the meaning set forth in Section 5.15(a).

“Purchaser Indemnified Party” shall have the meaning set forth in
Section 7.05(a).

“Put Option” shall have the meaning set forth in Section 5.07(b).

 

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“Put Option Closing Date” shall have the meaning set forth in Section 5.07(b).

“Put Option Event” shall mean any one of the following events:

(a) the anniversary of four (4) years from the Closing Date;

(b) any Bankruptcy Event;

(c) occurrence of a Material Adverse Effect;

(d) any Transfer by the Company of its interests in the Revenue Interests or
substantially all of its interest in the Product; or

(e) any material breach of any representation or warranty made by the Company in
this Agreement or any material breach of or default under any covenant or
agreement by the Company pursuant to a Transaction Document, which breach is not
cured within thirty (30) days after the earlier of (1) written notice thereof
being delivered by Purchaser to the Company and (2) the date the Company becomes
aware of such material breach.

“Put Price” shall mean the sum of (i) an amount that, when paid to Purchaser,
would generate an IRR to Purchaser of * * * on all payments made by Purchaser
pursuant to the Interim Royalty Purchase Agreement and Section 2.03 of this
Agreement as of the date of payment of the Put Price, taking into account the
amount and timing of all payments made by the Company to Purchaser (and retained
by Purchaser) pursuant to Sections 2.02 and 5.08 of this Agreement and, if
applicable, the Interim Royalty Purchase Agreement, prior to and as of the date
of payment of the Put Price, plus (ii) any Delinquent Assigned Interests Payment
owed (it being understood and agreed that in calculating the Put Price, in no
event shall Purchaser be required to repay any amounts previously paid to
Purchaser pursuant to Sections 2.02 and 5.08 of this Agreement if such payments
exceed the IRR required pursuant to this definition).

“Quarterly Report” shall mean, with respect to the relevant Fiscal Quarter of
the Company, (a) a report showing Gross Profit Revenues for such quarter and the
adjustments and other reconciliations used to arrive at Net Revenues for such
quarter, reconciled, in each case, to the most applicable line item in the
Company’s consolidated statements of operations as most recently filed or to be
filed with the Securities and Exchange Commission or furnished to Purchaser
pursuant to Section 5.02(h) and (b) a reconciliation of all payments made by the
Company to Purchaser pursuant to this Agreement during such quarter, including
all amounts deposited into the Purchaser Concentration Account during such
quarter.

“Regulatory Agency” shall mean a Governmental Authority with responsibility for
the approval of the marketing and sale of pharmaceuticals in the United States
or other regulation of pharmaceuticals.

“Regulatory Approval” shall mean all approvals (including, without limitation,
where applicable, pricing and reimbursement approval and schedule
classifications), product and/or establishment licenses, registrations or
authorizations of any Governmental Authority necessary for the manufacture, use,
storage, import, export, transport, offer for sale, or sale of the Product in a
regulatory jurisdiction.

 

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“Revenue Interest Period” shall mean the period from and including the Closing
Date through the earliest of:

(a) expiration of eight (8) complete years following the Closing Date;

(b) payment of the Put Price; or

(c) payment of the Change of Control Payment.

“Revenue Interests” shall mean all of the Company’s interest in the Gross
Product Revenues.

“Secretary’s Certificate” shall mean the duly executed Secretary’s and Officer’s
Certificate, dated as of the Closing Date, in form and substance reasonably
satisfactory to Purchaser, (W) attaching certified copies of the Company’s
organizational documents (together with any and all amendments thereto);
(X) attaching certified copies of the resolutions adopted by the board of
directors of the Company authorizing and approving the execution, delivery and
performance by the Company of the Agreement and the Assignment of Interests and
the transactions contemplated herein and therein; (Y) setting forth the
incumbency of the officer or officers of the Company who have executed and
delivered the Agreement and the Assignment of Interests; and (Z) attaching
copies, certified by such officer as true and complete, of a certificate of the
appropriate Governmental Authority of the Company’s jurisdiction of formation,
stating that the Company is in good standing under the laws of the State of
Minnesota.

“Subsidiary” shall mean, with respect to any Person, any other Person controlled
by such first Person, directly or indirectly, through one or more
intermediaries.

“Tax” or “Taxes” shall mean any federal, state, local or foreign tax, levy,
impost, duty, assessment, fee, deduction or withholding or other charge,
including all excise, sales, use, value added, transfer, stamp, documentary,
filing, recordation and other fees imposed by any taxing authority (and
interest, fines, penalties and additions related thereto).

“Tax Return” shall mean any report, return, form (including elections,
declarations, statements, amendments, claims for refund, schedules, information
returns or attachments thereto) or other information supplied or required to be
supplied to a Governmental Authority with respect to Taxes.

“Term” shall have the meaning set forth in Section 6.01.

“Term Sheet” shall mean the Term Sheet between the Company and Purchaser, dated
July 26, 2012.

“Third Party” shall mean any Person other than the Company.

“Transaction Documents” shall mean, collectively, this Agreement, the Assignment
of Interests, the Guarantee and Collateral Agreement, the UCC Financing
Statements, the Deposit Agreement, the Secretary’s Certificate and any related
ancillary documents or agreements.

 

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“Transfer” shall mean any sale, conveyance, assignment, disposition, pledge,
hypothecation or transfer.

“True-Up Amount” shall have the meaning set forth in Section 5.08(g)(i).

“True-Up Statement” shall have the meaning set forth in Section 5.08(g)(i).

“UCC” shall mean the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

“UCC Financing Statements” shall mean the UCC-1 financing statements, in form
and substance reasonably satisfactory to Purchaser, that shall be filed at or
promptly following the Closing, as well as any additional UCC-1 financing
statements or amendments thereto as reasonably requested from time to time, to
perfect Purchaser’s security interest in the Assigned Interests Collateral.

“United States” shall mean the United States of America.

“Year-to-Date Assigned Interests” shall have the meaning set forth in
Section 5.08(g)(i).

“Year-to-Date Net Revenues” shall have the meaning set forth in
Section 5.08(g)(i).

ARTICLE II

PURCHASE OF INTERESTS

Section 2.01 Purchase.

(a) Upon the terms and subject to the conditions set forth in this Agreement,
the Company agrees to sell, assign, transfer and convey to Purchaser, and
Purchaser agrees to purchase from the Company, free and clear of all Liens
(except those Liens created in favor of Purchaser pursuant to the Guarantee and
Collateral Agreement, the Assignment of Interests and any other Transaction
Document), all of the Company’s rights and interests in and to the Assigned
Interests on the Closing Date. Purchaser’s ownership interest in each of the
Assigned Interests so acquired shall vest immediately upon the Company’s receipt
of payment for such Assigned Interests pursuant to Section 2.03(a).

(b) The Company and Purchaser intend and agree that the sale, assignment and
transfer of the Assigned Interests under this Agreement is a true sale by the
Company to Purchaser that provides Purchaser with the full benefits of ownership
of the Assigned Interests. The Company waives any right to contest or otherwise
assert that this Agreement is other than a true sale by the Company to Purchaser
in any bankruptcy or insolvency proceeding relating to the Company.

(c) The Company hereby consents to Purchaser recording and filing, at
Purchaser’s sole cost and expense, the UCC Financing Statements and other
financing statements in the appropriate filing offices under the UCC (and
continuation statements with respect to such financing statements when
applicable) meeting the requirements of applicable law in such manner and in
such jurisdictions as are necessary or appropriate to perfect the purchase by
Purchaser of the Assigned Interests.

 

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Section 2.02 Payments by the Company.

(a) Payments in Respect of the Assigned Interests. In connection with the
assignment of the Assigned Interest, Purchaser shall be entitled to receive
(i) the Assigned Interests in respect of Net Revenues earned during the Revenue
Interest Period and (ii) any Delinquent Assigned Interests Payment, as and when
due.

(b) Interim Payments into Deposit Accounts. Subject to Section 5.08(a), within
120 days of the date hereof, the Applicable Percentage of the Aggregate Deposit
Funds in each Fiscal Year shall be swept from the Deposit Account into the
Purchaser Concentration Account on a daily basis (the “Daily Amount”) pursuant
to Section 5.08. Prior to the establishment of Purchaser Concentration Account
as contemplated by Section 5.08(a), the Company shall promptly pay to Purchaser
upon demand the aggregate Daily Amount.

(c) Payment Procedure. Other than payments made pursuant to the Deposit
Agreement, any payments to be made by the Company to Purchaser hereunder or
under any other Transaction Document shall be made by wire transfer of
immediately available funds.

Section 2.03 Closing; Payment Purchase Price; Closing Deliveries.

(a) Closing. The closing of the purchase of the Assigned Interests pursuant to
this Agreement (the “Closing”) will take place concurrently with the execution
of this Agreement on the date hereof (the “Closing Date”) and will be held at
the offices of PDL.

(b) Payment of Purchase Price. At the Closing, Purchaser shall pay to the
Company the Purchase Price by wire transfer of immediately available funds to
the account designated by the Company prior to the date hereof.

(c) Closing Deliveries.

 

  (i) At the Closing, the Company will deliver to Purchaser:

A. its duly executed counterpart to each of the Transaction Documents to which
the Company is a party;

B. a duly executed Secretary’s Certificate, dated as of the Closing Date;

C. a payoff letter in form and substance reasonably satisfactory to Purchaser
and duly executed and delivered by the Company and the Existing Agent which
provides for the payment in full of the obligations owing under the Existing
Credit Agreement and release of the liens thereunder;

D. copies of the UCC Financing Statements in respect of the Assigned Interests
Collateral in form for filing in each appropriate jurisdiction; and

E. a legal opinion reasonably satisfactory to Purchaser from Morgan, Lewis &
Bockius LLP addressing such matters with respect to the Transaction Documents as
set forth on Exhibit D hereto.

 

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  (ii) At the Closing, the Purchaser will deliver to the Company:

A. payment of the Purchase Price consistent with Section 2.03(b); and

B. its duly executed counterpart to each of the Transaction Documents to which
Purchaser is a party.

Section 2.04 No Assumed Obligations.

Notwithstanding any provision in this Agreement or any other writing to the
contrary, Purchaser is acquiring only the Assigned Interests and is not assuming
any liability or obligation of the Company or any of its Affiliates of whatever
nature, whether presently in existence or arising or asserted hereafter, whether
under any Transaction Document or otherwise. All such liabilities and
obligations shall be retained by and remain obligations and liabilities of the
Company or its Affiliates (the “Excluded Liabilities and Obligations”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF COMPANY

For purposes of all the representations and warranties contained in Article III,
the term “Product” shall mean Avance® Nerve Graft, AXOGUARD® Nerve Protector and
AXOGUARD® Nerve Connector as such products currently exist and are marketed in
any jurisdiction, and no broader definition shall be implied. The Company hereby
represents and warrants to Purchaser, as of the Closing Date, the following:

Section 3.01 Organization.

Each of the Company and its Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the States of Minnesota
and Delaware, respectively, and has all corporate powers and all licenses,
authorizations, consents and approvals required to carry on its respective
business as now conducted and as proposed to be conducted in connection with the
transactions contemplated by the Transaction Documents. Each of the Company and
its Subsidiary is duly qualified to do business as a foreign corporation and is
in good standing in every jurisdiction in which the failure to do so would have
a Material Adverse Effect. The Company has no direct or indirect Subsidiaries,
other than AxoGen Corporation, a Delaware corporation.

Section 3.02 Authorization.

The Company has all necessary power and authority to enter into, execute and
deliver the Transaction Documents and to perform all of the obligations to be
performed by it hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. The Transaction Documents have been duly
authorized, executed and delivered by the Company and each Transaction Document
constitutes the valid and binding obligation of the Company, enforceable against
the Company 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.

 

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The execution and delivery by the Company of the Transaction Documents, and the
performance by the Company 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, except for the filing of the UCC Financing
Statements.

Section 3.04 Ownership.

(a) The Company owns, Controls, or holds a valid license under, all of the
Intellectual Property and the Regulatory Approvals which it currently purports
to own related to the Product free and clear of all Liens, and no license or
covenant not to sue under any Intellectual Property has been granted to or
exists in any Third Party. Neither the Company nor its Subsidiary has granted,
nor does there exist, any Lien on the Revenue Interests, the Assigned Interests
or any other Collateral (except those Liens created in favor of Purchaser
pursuant to the Guarantee and Collateral Agreement, the Assignment of Interests
and any other Transaction Document).

(b) The Company, immediately prior to the purchase of the Assigned Interests,
owns, and is the sole holder of, all the Revenue Interests; and the Company
owns, and is the sole holder of, and/or has and holds a valid, enforceable and
subsisting license to, all of those other assets that are required to produce or
receive any payments from any Licensee or payor under and pursuant to, and
subject to the terms of any License Agreement, in each case free and clear of
any and all Liens, except those Liens created in favor of Purchaser pursuant to
the Guarantee and Collateral Agreement, the Assignment of Interests and any
other Transaction Document. The Company has not transferred, sold, or otherwise
disposed of, or agreed to transfer, sell, or otherwise dispose of any portion of
the Revenue Interests other than under the Interim Royalty Purchase Agreement or
as contemplated by this Agreement. No Person other than the Company has any
right to receive the payments payable under any License Agreement, other than
Purchaser’s rights with respect to the Assigned Interests, from and after the
Closing Date. The Company has the full right to sell, transfer, convey and
assign to Purchaser all of the Company’s rights and interests in and to the
Assigned Interests being sold, transferred, conveyed and assigned to Purchaser
pursuant to this Agreement without any requirement to obtain the consent of any
Person. By the delivery to Purchaser of the executed Assignment of Interests,
the Company shall transfer, convey and assign to Purchaser all of the Company’s
rights and interests in and to the Assigned Interests being sold, transferred,
conveyed and assigned to Purchaser pursuant to this Agreement, free and clear of
any Liens, except those Liens created in favor of Purchaser pursuant to the
Guarantee and Collateral Agreement, the Assignment of Interests and any other
Transaction Document. At the Closing, and upon the delivery of the Assignment of
Interests to Purchaser by the Company, Purchaser shall have acquired good and
valid rights and interests of the Company in and to the Assigned Interests being
sold, transferred, conveyed and assigned to Purchaser pursuant to this
Agreement, free and clear of any and all Liens, except those Liens created in
favor of Purchaser pursuant to the Guarantee and Collateral Agreement, the
Assignment of Interests and any other Transaction Document.

(c) As of the Closing Date and upon the Company’s execution and delivery of the
Guarantee and Collateral Agreement, Purchaser shall have valid, continuing,
first perfected lien on and security interest in the Revenue Interests, the
Assigned Interests and the other Assigned Interests Collateral described in the
Guarantee and Collateral Agreement.

 

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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 the Company and its
Subsidiary as of the dates and for the periods covered thereby.

Section 3.06 No Undisclosed Liabilities.

Except for those liabilities (a) specifically identified on the face of the
Financial Statements, (b) incurred by the Company in the ordinary course of
business since June 30, 2012, or (c) in connection with the Obligations under
the Transaction Documents, there are no material liabilities of the Company or
its Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined or determinable.

Section 3.07 Solvency.

The Company and its Subsidiary, taken as a whole, are not insolvent as defined
in any statute of the United States Bankruptcy Code or in the fraudulent
conveyance or fraudulent transfer statutes of the States of Delaware, Florida,
Minnesota or New York. Assuming consummation of the transactions contemplated by
the Transaction Documents, (a) the present fair saleable value of the Company’s
and its Subsidiary’s assets and the fair value of the Company’s and its
Subsidiary’s assets are each greater than the total amount of liabilities
(including contingent and unliquidated liabilities) of the Company and its
Subsidiary as such liabilities mature, (b) neither the Company nor its
Subsidiary has unreasonably small capital with which to engage in its respective
business, and (c) neither the Company nor its Subsidiary has incurred, nor does
either have present plans to or intend to incur, debts or liabilities beyond
their respective ability to pay such debts or liabilities as they become
absolute and matured.

Section 3.08 Litigation.

There is no (a) action, suit, arbitration proceeding, claim, investigation or
other proceeding pending or, to the Knowledge of the Company, threatened against
the Company or its Subsidiary or (b) any governmental inquiry pending or, to the
Knowledge of the Company, threatened against the Company or its Subsidiary, in
each case with respect to clauses (a) and (b) above, which, if adversely
determined, would question the validity of, or could adversely affect the
transactions contemplated by any of the Transaction Documents or could
reasonably be expected to have a Material Adverse Effect. There is no action,
suit, arbitration proceeding, claim, investigation or other proceeding pending
or, to the Knowledge of the Company, threatened against the Company, its
Subsidiary or any other Person relating to the Product, the Intellectual
Property, the Regulatory Approvals, the Revenue Interests or the Assigned
Interests.

Section 3.09 Compliance with Laws.

Neither the Company nor its Subsidiary (a) is in violation of, has violated, or
to the Knowledge of the Company, is under investigation with respect to, and,
(b) has been threatened to be charged with or been given notice of any violation
of any law, rule, ordinance or regulation of, or any judgment, order, writ,
decree, permit or license entered by any Governmental

 

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Authority applicable to the Company, the Assigned Interests or the Revenue
Interests which would reasonably be expected to have a Material Adverse Effect.

Section 3.10 Conflicts.

Neither the execution and delivery of any of this Agreement or the other
Transaction Documents to which the Company is a party nor the performance or
consummation of the transactions contemplated hereby or thereby will:
(a) 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: (i) any law, rule, ordinance or regulation of any
Governmental Authority, or any judgment, order, writ, decree, permit or license
of any Governmental Authority, to which the Company or its Subsidiary or any of
their respective assets or properties may be subject or bound; or (ii) any
contract, agreement, commitment or instrument to which the Company or its
Subsidiary is a party or by which the Company or its Subsidiary or any of their
respective assets or properties is bound or committed; (b) contravene, conflict
with, result in a breach or violation of, constitute a default under, or
accelerate the performance provided by, any provisions of the articles or
certificate of incorporation or bylaws (or other organizational or
constitutional documents) of the Company or its Subsidiary; (c) except for the
filing of the UCC Financing Statements required hereunder and filings with the
United States Patent and Trademark Office, require any notification to, filing
with, or consent of, any Person or Governmental Authority; (d) give rise to any
right of termination, cancellation or acceleration of any right or obligation of
the Company, its Subsidiary or any other Person or to a loss of any benefit
relating to the Revenue Interests or the Assigned Interests; or (e) other than
pursuant to the Guarantee and Collateral Agreement, the Assignment of Interests,
or any other Transaction Document, result in the creation or imposition of any
Lien on (i) the assets or properties of the Company or its Subsidiary or
(ii) the Assigned Interests, the Revenue Interests, or any other Assigned
Interests Collateral, except, in the case of the foregoing clauses (a), (c),
(d) or (e), for any such breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect.

Section 3.11 Subordination.

The claims and rights of Purchaser created by any Transaction Document in and to
the Assigned Interests, the Revenue Interests and any other Assigned Interests
Collateral are not and shall not be subordinated to any creditor of the Company
or any other Person.

Section 3.12 Intellectual Property.

(a) Schedule 3.12(a) sets forth an accurate, true and complete list of all
(i) Patents and utility models, (ii) trade names, registered trademarks,
registered service marks, and applications for trademark registration or service
mark registration, (iii) registered copyrights and (iv) domain name
registrations and websites, in each case with respect to clauses (i), (ii),
(iii) and (iv) above in this subsection (a) that the Company owns or licenses
and which are necessary to make, have made, use, sell, have sold, offer for
sale, import, develop, promote, market, distribute, manufacture, commercialize
or otherwise exploit the Product in the jurisdictions where the Product marketed
and sold. For each item of Intellectual Property listed on Schedule 3.12(a), the
Company has identified (x) the owner, (y) the countries in which such listed
item is patented or registered or in which an application for Patent or
registration is pending and (z) the application

 

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number, the Patent number or registration number. To the Company’s Knowledge,
except as disclosed therein, each Patent and trademark listed on Schedule
3.12(a) is valid, enforceable and subsisting and none has lapsed, expired, been
cancelled or become abandoned. The Patent applications listed in Schedule
3.12(a) have been prosecuted by competent patent counsel in a diligent manner.
After due inquiry, the Company has determined that there are no published
patents, patent applications, articles, prior art references, public uses,
undisclosed information (including best mode) or other grounds, factors or
circumstances that could adversely affect the validity or enforceability of any
of the Patents listed in Schedule 3.12(a). After due inquiry, the Company has
determined that all Persons relevant to the prosecution of any of the Material
Patents or applications related thereto have complied with the duty to disclose
information and/or the duty of candor, including obligations to the United
States Patent and Trademark Office specified under Rule 56. To the Company’s
Knowledge, each of the Material Patents and Material Patent applications
correctly identifies each and every inventor of the claims thereof as determined
in accordance with the laws of the jurisdiction in which such Material Patent is
issued or such Material Patent application is pending. To the Company’s
Knowledge, each Person who has or has had any rights in or to the Intellectual
Property listed on Schedule 3.12(a) that are owned by, or licensed to, the
Company, including, each inventor named on the Patents and Patent applications
listed in Schedule 3.12(a), has executed an agreement assigning his, her or its
entire right, title and interest in and to such Intellectual Property, and the
inventions embodied, described and/or claimed therein, to the purported owner
and no such Person has any contractual or other obligation that would preclude
or conflict with any such assignment or otherwise conflict with the obligations
of such Person to the applicable owner of each listed Intellectual Property. To
the Company’s Knowledge, all Persons having a claim to inventorship to any
pending or issued claim of the Patents are currently listed as inventors with
respect to such Patents, and that the Company has performed an appropriate
inquiry with respect to such inventorship.

(b) Except for Intellectual Property licensed to and owned by the Company and
set forth on Schedule 3.12(a), no other Intellectual Property is necessary to
make, have made, offer to sell, sell, have sold, use, import, distribute,
commercialize or market the Product in the Major Countries. The use,
manufacture, import, export, offer for sale, distribution, marketing and sale of
the Product does not infringe any patents that are owned by a Third Party in the
Major Countries.

(c) The Company has the full right, power and authority to grant all of the
rights and interests granted to Purchaser in this Agreement.

(d) To the Company’s Knowledge, there are no unpaid maintenance, annuity or
renewal fees currently overdue for any of the Patents that cover the
manufacture, use or sale of the Product or which cover compositions of matter
and/or processes which relate to the Product or alternatives thereto (“Material
Patents”).

(e) There is, and has been, no pending, decided or settled opposition,
interference proceeding, reexamination proceeding, cancellation proceeding,
injunction, claim, lawsuit, declaratory judgment, administrative post-grant
review proceeding, other administrative or judicial proceeding, hearing,
investigation, complaint, arbitration, mediation, International Trade Commission
investigation, decree, or any other filed claim (collectively referred to
hereinafter as “Disputes”) related to any of the Material Patents, nor, to the
Knowledge of the Company, has

 

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any such Dispute been threatened challenging the legality, validity,
enforceability or ownership of any Material Patents or which would give rise to
a credit against the revenues or royalties due to the Company for the
manufacture, sale, offer for sale, use, importation or exportation of the
Product and the Company has no notice of any facts that would form the basis for
such a Dispute. There are no Disputes by any Person or Third Party against the
Company, its Licensees or its licensor, and the Company has not received any
written notice or claim of any such Dispute as pertaining to the Product.
Neither the Company nor its licensor has sent any notice of any such Dispute to
a Third Party. The Company is not subject to any outstanding injunction,
judgment, order, decree, ruling, charge, settlement or other disposition of
Dispute which relates to the Product or the Patents.

(f) There is no pending or threatened action, suit, or proceeding, or any
investigation or claim by any Governmental Authority to which the Company is a
party (i) that would be the subject of a claim for indemnification by any Person
or Third Party under any agreement, or (ii) that the marketing, sale or
distribution of the Product worldwide by the Company or its by Licensees
pursuant to the related License Agreement, as applicable, does or will infringe
on any patent of any other Person, and there is no basis for any such action,
suit, proceeding, investigation or claim of the type described in clause (i) or
(ii) above. To the Company’s Knowledge, there are no pending published or
unpublished United States, international or foreign patent applications owned by
any other Person, which, if issued, would limit or prohibit, in any material
respect, the use of the Product or the licensed Intellectual Property relating
to the Product.

(g) The Company has taken all commercially reasonable measures and precautions
necessary to protect and maintain (i) the confidentiality of all Intellectual
Property that it owns and (ii) the value of all Intellectual Property related to
the Product, except where such failure to take action would not have a Material
Adverse Effect.

(h) No material trade secret of the Company has been published or disclosed to
any Person except pursuant to a written agreement requiring such Person to keep
such trade secret confidential, except where such disclosure would not have a
Material Adverse Effect.

(i) Each Product, or its manufacture or use, is covered by one or more claims of
an issued Patent in the United States.

Section 3.13 Regulatory Approval.

(a) The Company and its Subsidiary have made available to Purchaser any written
reports or other written communications received from a Governmental Authority
that would indicate that any Regulatory Agency (A) is not likely to approve the
BLA, (B) is likely to revise or revoke any current Regulatory Approval granted
by any Regulatory Agency with respect to the Product, or (C) is likely to pursue
any material compliance actions against the Company.

(b) The Company and its Subsidiary possess all Regulatory Approvals issued or
required by the appropriate Regulatory Agencies, which Regulatory Approvals are
necessary to conduct the current clinical trials relating to the Product, and
neither the Company nor its Subsidiary has received any notice of proceedings
relating to the revocation, suspension, termination or modification of any such
Regulatory Approvals.

 

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(c) The Company and its Subsidiary are in material compliance with, and has
materially complied with, all applicable federal, state, local and foreign laws,
rules, regulations, standards, orders and decrees governing its business,
including all regulations promulgated by each Regulatory Agency, the failure of
compliance with which could reasonably be expected to result in a Material
Adverse Effect; the Company and its Subsidiary have not received any notice
citing action or inaction by any of them that would constitute any material
non-compliance with any applicable federal, state, local and foreign laws,
rules, regulations, or standards, which could reasonably be expected to result
in a Material Adverse Effect; and to the Company’s Knowledge, no prospective
change in any applicable federal, state, local or foreign laws, rules,
regulations or standards has been adopted which, when made effective, could
reasonably be expected to result in a Material Adverse Effect.

(d) Preclinical and clinical trials conducted on behalf of the Company or its
Subsidiary relating to the Product were conducted in compliance with applicable
laws and, in all material respects, in accordance with experimental protocols,
procedures and controls pursuant to, where applicable, accepted professional and
scientific standards; the descriptions of the results of such trials provided to
Purchaser are accurate in all material respects. Neither the Company nor its
Subsidiary has received any notices or correspondence from any Regulatory Agency
or comparable authority requiring the termination, suspension, or material
modification or clinical hold of any clinical trials conducted by or on behalf
of the Company or its Subsidiary with respect to the Product, which termination,
suspension, material modification or clinical hold could reasonably be expected
to result in a Material Adverse Effect.

Section 3.14 Material Contracts.

Neither the Company nor its Subsidiary is in breach of or in default under any
Material Contract which default, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. To the Knowledge
of the Company, nothing has occurred and no condition exists that would permit
any other party thereto to terminate any Material Contract. Neither the Company
nor its Subsidiary has received any notice or, to the Knowledge of the Company,
any threat of termination of any such Material Contract. To the Knowledge of the
Company, no other party to a Material Contract is in breach of or in default
under such Material Contract. All Material Contracts are valid and binding on
the Company or its Subsidiary and, to the Knowledge of the Company, on each
other party thereto, and are in full force and effect. The Company is in
compliance with all obligations of the Amended and Restated Standard Exclusive
License Agreement with Sublicensing Terms between AxoGen Corporation and the
University of Florida Research Foundation dated February 21, 2006, and the
Patent License Agreement between AxoGen Corporation and the Board of Regents of
The University of Texas System dated July 19, 2005.

Section 3.15 Place of Business.

The Company’s principal place of business and chief executive office are set
forth on Schedule 3.15.

Section 3.16 Broker’s Fees.

 

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The Company and its Subsidiary have not taken any action that would entitle any
Person to any commission or broker’s fee in connection with this Agreement
except fees, commissions and expenses to be paid to JMP Securities LLC, all of
which will be paid by the Company.

Section 3.17 Other Information.

No written statement, information, report or materials prepared by or on behalf
of the Company or its Subsidiary and furnished to Purchaser by or on behalf of
the Company or its Subsidiary in connection with any Transaction Document or any
transaction contemplated hereby or thereby, no written representation, warranty
or statement made by the Company or its Subsidiary in any Transaction Document,
and no Schedule or Exhibit hereto or thereto, in each case taken in the
aggregate, 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 3.18 Insurance.

There are in full force and effect insurance policies maintained by the Company
with an insurance company rated not less than “A-” by A.M. Best Company, Inc.,
with coverages and in amounts customary for companies of comparable size and
condition similarly situated in the same industry as the Company, including
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. All
material insurable risks in respect of the business and assets of the Company
and its Subsidiary are covered by such insurance policies. The Company has named
Purchaser as an additional insured party with respect to its general liability
and product liability insurance policies. A schedule of the Company’s insurance
policy or insurance policies is attached hereto as Schedule 3.18.

Section 3.19 Taxes.

The Company has timely filed (taking into account all extensions of due dates)
all Tax returns required to be filed by, or on behalf of, it and has timely paid
all Taxes required to be paid with such returns. All Tax Returns filed by the
Company (or on its behalf) have been true, correct and complete in all material
respects. Except as set forth on Schedule 3.19, there is no outstanding or, to
the Company’s Knowledge, threatened action, claim or other examination or
proceeding with respect to Taxes of the Company or its assets (including with
respect to the Assigned Interests and the Revenue Interests). Except as set
forth on Schedule 3.19, there are no Taxes of the Company that form or could
form, individually or in the aggregate, the basis for a material encumbrance
(other than encumbrances for current taxes not yet past due) on any of its
assets (including the Assigned Interests and the Revenue Interests).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to the Company the following:

Section 4.01 Organization.

 

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Purchaser is a corporation duly incorporated and validly existing under the laws
of the State of Delaware.

Section 4.02 Authorization.

Purchaser has all necessary power and authority to enter into, execute and
deliver the Transaction Documents and to perform all of the obligations to be
performed by it hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. The Transaction Documents have been duly
authorized, executed and delivered by Purchaser and each Transaction Document
constitutes the valid and binding obligation of Purchaser, enforceable against
Purchaser 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 4.03 Broker’s Fees.

Purchaser has not taken any action that would entitle any Person to any
commission or broker’s fee in connection with the transactions contemplated by
the Transaction Documents.

Section 4.04 Conflicts.

Neither the execution and delivery of this Agreement or any other Transaction
Document to which Purchaser is a party nor the performance or consummation of
the transactions contemplated hereby or thereby will: (a) 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: (i) any law, rule or regulation of any Governmental Authority, or any
judgment, order, writ, decree, permit or license of any Governmental Authority,
to which Purchaser or any of its assets or properties may be subject or bound;
or (ii) any contract, agreement, commitment or instrument to which Purchaser is
a party or by which Purchaser or any of its assets or properties is bound or
committed; (b) contravene, conflict with, result in a breach or violation of,
constitute a default under, or accelerate the performance provided by, any
provisions of the organizational or constitutional documents of Purchaser; or
(c) require any notification to, filing with, or consent of, any Person or
Governmental Authority, except, in the case of the foregoing clauses (a) or (c),
for any such breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to perform any of its obligations under the Transaction Documents.

ARTICLE V

COVENANTS

From the date hereof through and including the end of the Revenue Interest
Period, the following covenants shall apply:

Section 5.01 Consents and Waivers.

The Company shall use its commercially reasonable efforts to obtain and maintain
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 Material Contracts.

 

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Section 5.02 Access; Information.

(a) License Notices. Subject to any applicable confidentiality restrictions, the
Company shall promptly provide Purchaser with copies of any material written
notices received or given by the Company under any Material Contract, and to the
extent the Company is barred from providing Purchaser with copies of such
notices due to any applicable confidentiality restrictions, the Company shall
(i) inform Purchaser of the existence of such notice accompanied by a written
description of the substance contained in such notice and (ii) promptly seek the
removal or waiver of any such confidentiality restrictions so as to permit a
free exchange of information with the Purchaser regarding the substance of such
notice. The Company shall promptly notify Purchaser of any breaches or alleged
breaches under any Material Contracts and of any other events with respect to
any Material Contract or the subject matter thereof which could reasonably be
expected to have a Material Adverse Effect.

(b) Litigation or Investigations. The Company shall promptly notify Purchaser of
(i) any action, demand, suit, claim, cause of action, proceeding or
investigation pending or, to the best knowledge of the Company, threatened by or
against the Company, or (ii) proceeding or inquiry of any Governmental Authority
pending or, to the best knowledge of the Company, threatened against the
Company, related to any Material Contract, the Product, the Patents or any
Transaction Document.

(c) Maintenance of Books and Records. The Company shall keep and maintain, or
cause to be kept and maintained, at all times accurate and complete books and
records. During the Term, the Company 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
the Revenue Interests and Assigned Interests and all deposits made into the
applicable deposit accounts.

(d) Inspection Rights. Purchaser and any of Purchaser’s representatives shall
have the right, once a year (and at any other time a Default or Event of Default
shall have occurred or be continuing), to visit the Company and its
Subsidiaries’ offices and properties where the Company and its Subsidiaries keep
and maintain their books and records relating or pertaining to the Revenue
Interests, the Assigned Interests and the other Assigned Interests 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 Purchaser to the Company
(provided one (1) Business Day’s notice shall be required if a Default or Event
of Default shall have occurred and be continuing), the Company will provide
Purchaser and any of Purchaser’s representatives reasonable access to such books
and records, and shall permit Purchaser and any of Purchaser’s representatives
to discuss the business, operations, properties and financial and other
condition of the Company or any of its Affiliates including, but not limited to,
matters relating or pertaining to the Revenue Interests, the Assigned Interests
and any the other Assigned Interests Collateral with officers of such parties,
and with their independent certified public accountants.

(e) Audit Costs. In the event any audit of the books and records of the Company
and its Subsidiaries relating to the Revenue Interests, Assigned Interests, and
the other Assigned Interests Collateral by Purchaser and/or any of Purchaser’s
representatives reveals that the amounts paid to Purchaser hereunder for the
period of such audit have been understated by more

 

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than five percent (5%) of the amounts determined to be due for the period
subject to such audit, then the Audit Costs in respect of such audit shall be
borne by the Company; and in all other cases, such Audit Costs shall be borne by
Purchaser.

(f) Quarterly Reports. During the Term, the Company shall, promptly after the
end of each Fiscal Quarter of the Company (but in no event later than forty-five
(45) days following the end of such quarter), produce and deliver to Purchaser a
Quarterly Report for such quarter, together with a certificate of the Company,
certifying that to the best Knowledge of the Company (i) such Quarterly Report
is a true and complete copy and (ii) any statements and any data and information
therein prepared by the Company are true, correct and accurate in all material
respects.

(g) GAAP Accounting. The Company shall maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP.

(h) Periodic Reports. In the event that the Company is not subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, the
Company shall deliver to Purchaser the following financial statements:

(i) Within forty-five (45) days after the end of each Fiscal Quarter, copies of
the unaudited consolidated financial statements of the Company and its
Subsidiaries for such Fiscal Quarter; and

(ii) Within forty-five (45) days after the end of each Fiscal Year, copies of
the audited consolidated financial statements of the Company and its
Subsidiaries for such Fiscal Year.

Section 5.03 Material Contracts.

The Company shall comply with all material terms and conditions of and fulfill
all of its obligations under all the Material Contracts. The Company shall not
amend, modify or supplement any Material Contract in a manner which would
adversely affect Purchaser or issue any waivers, consents, or other approvals
under any Material Contract in a manner which would adversely affect Purchaser
without the prior written consent of Purchaser. Upon the occurrence of a
material breach of any Material Contract by any Third Party thereto, which is
not cured pursuant to the express terms as provided therein (disregarding any
rights of waiver or extensions of time or other rights or consents that are
excisable at the discretion of the Company), the Company shall, in its
discretion but in accordance with its sound business judgment, use its
commercially reasonable efforts to enforce its rights and remedies thereunder.

Section 5.04 Confidentiality; Public Announcement.

(a) All Confidential Information furnished by Purchaser to the Company or by the
Company to Purchaser 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 the Company and Purchaser.
Notwithstanding the foregoing, the Company and Purchaser may disclose such
Confidential Information to their partners, directors, employees, managers,

 

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officers, investors, bankers, advisors, trustees and representatives, 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). The Company will consult with
Purchaser, and Purchaser will consult with the Company, 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 Governmental Authority with similar
regulatory authority, or except with the prior written consent of the other
party (which consent shall not be unreasonably withheld), no 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;
provided, however, that the Company and Purchaser may jointly prepare a press
release for dissemination promptly following the Closing Date.

Section 5.05 Guarantee and Collateral Agreement.

During the Revenue Interest Period, the Company shall, at all times until the
Obligations are paid and performed in full, grant in favor of Purchaser a valid,
continuing, first perfected lien on and security interest in the Revenue
Interests, the Assigned Interests and the other Assigned Interests Collateral
described in the Guarantee and Collateral Agreement.

Section 5.06 Efforts; Further Assurance.

(a) Subject to the terms and conditions of this Agreement, each of Purchaser and
the Company will use its commercially reasonable 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. Purchaser and the Company
agree to execute and deliver such other documents, certificates, agreements and
other writings (including any financing statement filings requested by
Purchaser) 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 Purchaser 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 Purchaser
pursuant to the Guarantee and Collateral Agreement, the Assignment of Interests
and any other Transaction Document.

(b) Purchaser and the Company shall execute and deliver such additional
documents, certificates and instruments, and 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) Purchaser and the Company shall cooperate and provide assistance as
reasonably requested by the other party in connection with any Third Party
litigation, arbitration or other Third Party 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

 

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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 Assigned Interests Collateral, or
the transactions described herein or therein.

Section 5.07 Change of Control; Put Option.

(a) Change of Control. In the event that a Change of Control shall occur during
the Revenue Interest Period, the Company shall repurchase the Assigned Interests
from Purchaser for a repurchase price equal to the Change of Control Payment on
or prior to the third Business Day after the occurrence of a Change of Control.
The Change of Control Payment shall be made by wire transfer of immediately
available funds to the account designated by Purchaser.

(b) Put Option. In the event that a Put Option Event shall occur during the
Term, Purchaser shall have the right, but not the obligation (the “Put Option”)
to require the Company to repurchase from Purchaser the Assigned Interests at
the Put Price. In the event Purchaser elects to exercise its Put Option,
Purchaser shall deliver written notice to the Company specifying the closing
date which date shall be forty-five (45) days from such notice date (the “Put
Option Closing Date”), which notice must be given within sixty (60) days of
Purchaser’s receipt of written notice from the Company of a Put Option Event.
Failure to provide notice by such times will be deemed an irrevocable waiver of
the right to exercise the Put Option. On the Put Option Closing Date, the
Company shall repurchase from Purchaser the Assigned Interests at the Put Price
in cash, the payment of which shall be made by wire transfer of immediately
available funds to the account designated by Purchaser. Notwithstanding anything
to the contrary contained herein, immediately upon the occurrence of a
Bankruptcy Event, Purchaser shall be deemed to have automatically and
simultaneously elected to have the Company repurchase from Purchaser the
Assigned Interests for the Put Price in cash and the Put Price shall be
immediately due and payable without any further action or notice by any party.

(c) Call Option. At any time after the fourth anniversary following the Closing
Date, the Company shall have the right (the “Call Option”), exercisable upon ten
(10) days’ written notice to Purchaser, to repurchase the Assigned Interests
from Purchaser at a repurchase price equal to the Change of Control Payment. In
order to exercise the Call Option, the Company shall deliver written notice to
Purchaser of its election to so repurchase the Assigned Interests not less than
ten (10) days prior to the proposed closing date (the “Call Closing Date”). On
the Call Closing Date, the Company shall repurchase from Purchaser the Assigned
Interests at the Change of Control Payment, the payment of which shall be made
by wire transfer of immediately available funds to the account designated by
Purchaser.

(d) Obligations of Purchaser. In connection with the consummation of a
repurchase of the Assigned Interests pursuant to the Change of Control Payment
or the Put Option, Purchaser agrees that it will (i) promptly but no later than
three (3) Business Days execute and deliver to the Company such UCC termination
statements and other documents as may be necessary to release Purchaser’s Lien
on the Assigned Interests Collateral and otherwise give effect to such
repurchase and (ii) take such other actions or provide such other assistance as
may be necessary to give effect to such repurchase.

 

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Section 5.08 Remittance to Deposit Account.

(a) On the Closing Date, the parties hereto shall enter into a Deposit Agreement
in form and substance reasonably satisfactory to the parties hereto and the
Deposit Bank, which Deposit Agreement will provide for, among other things, the
establishment and maintenance of a Deposit Account and Joint Concentration
Account in accordance with the terms herein and therein. Funds deposited into
the Deposit Account shall be swept by the Deposit Bank on a daily basis into the
Joint Concentration Account. The parties understand and agree that the current
Deposit Bank cannot accommodate multiple Deposit Accounts; and accordingly, so
long as the Company has not established a separate Company Concentration Account
and Purchaser Concentration Account as required pursuant to Section 5.08(b), the
Company shall be responsible for computing the Daily Amount and shall retain at
all times (subject to any payments of the Daily Amount paid to Purchaser, which
payments shall be made promptly upon Purchaser’s request) an amount equal to the
aggregate Daily Amount owed to Purchaser pursuant to this Agreement.

(b) Notwithstanding any provision herein or in any other Transaction Document to
the contrary, the Company shall no later than one hundred twenty (120) days
after the Closing Date to enter into a new Deposit Agreement (in form and
substance reasonably satisfactory to Purchaser) with a bank or financial
institution approved by Purchaser, which bank or financial institution shall
thereafter serve as the Deposit Bank pursuant to the terms hereof. Upon
engagement of the replacement Deposit Bank and the entering into the new Deposit
Agreement in accordance with the immediately preceding sentence, such Deposit
Agreement shall provide for, among other things, the establishment and
maintenance of a Deposit Account, a Joint Concentration Account, a Company
Concentration Account and a Purchaser Concentration Account in accordance with
the terms herein and therein. Any Purchaser Concentration Account shall be held
solely for the benefit of Purchaser, but shall be subject to the terms and
conditions of this Agreement, the Guarantee and Collateral Agreement and the
other Transaction Documents. Funds deposited into the Deposit Account shall be
swept by the Deposit Bank on a daily basis into the Joint Concentration Account
and subsequent thereto, the Daily Amount shall be swept into the Purchaser
Concentration Account. Purchaser shall have immediate and full access to any
funds held in the Purchaser Concentration Account and such funds shall not be
subject to any conditions or restrictions whatsoever. After the Daily Amount is
swept into the Purchaser Concentration Account, the amounts remaining in the
Joint Concentration Account shall then be swept, at the direction of the
Company, into the Company Concentration Account. The Company shall have
immediate and full access to any funds held in the Company Concentration Account
and such funds shall not be subject to any conditions or restrictions whatsoever
other than those of the Deposit Bank; provided, however, that nothing herein
shall (i) affect or reduce the Company’s obligations to pay in full all amounts
due to Purchaser under this Agreement, or (ii) in any manner limit the recourse
of Purchaser to the Assigned Interests Collateral to satisfy the Company’s
Obligations.

(c) The Company shall pay all fees, expenses and charges of the Deposit Bank
(including the replacement Deposit Bank contemplated by Section 5.08(b)).

(d) The Company shall use commercially reasonable efforts to amend each License
Agreement, within thirty (30) Business Days after the engagement of the
replacement Deposit Bank contemplated by Section 5.08(b), to contain a provision
providing for all payments in

 

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respect of sales of the Product and in respect of royalties received from
Licensees to be remitted directly by the applicable party into the Deposit
Account and the Company shall cause such payments to be remitted directly by the
applicable party into the Deposit Account. If the Company is unsuccessful in
amending the License Agreements in accordance with the foregoing sentence and at
all times prior to the engagement of the replacement Deposit Bank as
contemplated by Section 5.08(b), the Company shall instruct each Licensee to
such License Agreement to remit to the Deposit Account when due all applicable
payments in respect of sales and licensing revenue in respect of the Product and
in respect of royalties received from such Licensees. Without in any way
limiting the foregoing, commencing on the Closing Date and thereafter, any and
all payments in respect of sales of the Product received by the Company shall be
deposited into the Deposit Account within two (2) Business Days of the Company’s
receipt thereof.

(e) With respect to any License Agreement (excluding License Agreement that do
not call for direct payment to the Company) entered into by the Company from and
after the engagement of the replacement Deposit Bank contemplated by
Section 5.08(b), the Company shall (i) at the time of the execution and delivery
of such agreement, instruct any party thereto under such agreement to remit to
the Deposit Account when due all applicable payments in respect of sales and
licensing revenue in respect of the Product and in respect of royalties received
from Licensees that are due and payable to the Company in respect of or derived
from such agreement during the Revenue Interest Period and (ii) deliver to
Purchaser evidence of such instruction and of such applicable party’s agreement
thereto. Without in any way limiting the foregoing, commencing on the Closing
Date and thereafter, any and all payments in respect of sales of the Product
received by the Company shall be deposited into the Deposit Account within two
(2) Business Days of the Company’s receipt thereof.

(f) Prior to the termination of this Agreement, the Company shall not have any
right to terminate the Deposit Bank without Purchaser’s prior written consent.
Any such consent, which Purchaser may grant or withhold in its sole and absolute
discretion, shall be subject to the satisfaction of each of the following
conditions to the satisfaction of Purchaser:

(i) the successor Deposit Bank shall be acceptable to Purchaser;

(ii) Purchaser, the Company and the successor Deposit Bank shall have entered
into a deposit agreement substantially in the form of the Deposit Agreement
initially entered into;

(iii) all funds and items in the accounts subject to the Deposit Agreement to be
terminated shall be transferred to the new accounts held at the successor
Deposit Bank prior to the termination of the then existing Deposit Bank; and

(iv) Purchaser shall have received evidence that all of the applicable parties
making payments in respect of sales of the Product have been instructed to remit
all future payments in respect of sales of the Product to the new accounts held
at the successor Deposit Bank.

(g) True-Up.

 

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(i) Following the end of each Fiscal Quarter, as soon as the Company shall have
determined the Net Revenues for such Fiscal Quarter and for each other Fiscal
Quarter in the Fiscal Year in which the then most recently ended Fiscal Quarter
occurred (the “Year-to-Date Net Revenues”) and in any event no later than
forty-five (45) days after the end of such Fiscal Quarter (unless such Fiscal
Quarter is the last Fiscal Quarter of a Fiscal Year in which case no later than
ninety (90) days after the end of such Fiscal Quarter), the Company shall
present Purchaser a certificate, in reasonable detail with supporting
calculations and information, detailing the Year-to-Date Net Revenues (the
“True-Up Statement”). The True-Up Statement shall include a calculation of
(A) the year-to-date Assigned Interests as of the end of such quarterly period,
which shall be the product of the Applicable Percentage multiplied by the
Year-to-Date Net Revenues, with a separate calculation taking into account any
mandatory minimum payments as provided in the definition of Assigned Interests
(“Year-to-Date Assigned Interests”) and (B) the difference between (X) the
amount Purchaser has received on or prior to the last day of the most recently
ended Fiscal Quarter in payments from the Company under Section 2.02(a) or this
Section 5.08 in respect of the Fiscal Year for which Year-to-Date Net Revenues
is calculated less (Y) the Year-to-Date Assigned Interests (the “True-Up
Amount”).

(ii) If the True-Up Amount calculated pursuant to clause (i) above is positive,
Purchaser shall pay such amount to the Company within five (5) days of receipt
by Purchaser of the True-Up Statement.

(iii) If the True-Up Amount calculated pursuant to clause (i) above is negative,
the Company shall pay the absolute value of such amount to Purchaser within five
(5) days of the receipt by Purchaser of the True-Up Statement.

Section 5.09 Intellectual Property.

(a) The Company shall, at its sole expense, either directly or by causing any
Licensee to do so, take any and all actions (including taking legal action to
specifically enforce the applicable terms of any License Agreement), and
prepare, execute, deliver and file any and all agreements, documents or
instruments which are necessary to diligently maintain the Material Patents. The
Company shall ensure that all patent applications corresponding to the Material
Patents are diligently prosecuted with the intent to protect the Product. In the
exercise of its reasonable business discretion, the Company shall diligently
defend or assert such 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). The Company shall not, and shall use
its commercially reasonable efforts to cause any Licensee not to, disclaim or
abandon, or fail to take any action necessary or desirable to prevent the
disclaimer or abandonment of, the Material Patents.

(b) In the event that the Company becomes aware that any intellectual property
licensed by it to a Licensee under any License Agreement infringes or violates
any Third Party intellectual property, the Company shall, in the exercise of its
reasonable business discretion, use commercially reasonable efforts to attempt
to secure the right to use such intellectual property on behalf of itself and
the affected Licensee and shall pay all costs and amounts associated with
obtaining any such license, without any reduction in the Assigned Interests.

 

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(c) The Company shall directly, or through a Licensee, take any and all actions
and prepare, execute, deliver and file any and all agreements, documents or
instruments that are necessary or commercially reasonable or desirable to secure
and maintain, all Regulatory Approvals in the United States.

(d) The Company shall notify PDL regarding any material developments with the
Material Patents, including new filings, allowance and issuance, abandonment, or
the initiation of any interference, reexamination, reissue, post-grant review
proceeding and litigation, and shall provide PDL with an updated patent schedule
upon request, but at least once per year.

Section 5.10 Protective Covenants.

(a) The Company shall not, without the prior written consent of Purchaser:

(i) Forgive, release or compromise any amount owed to the Company or its
Subsidiary and relating to the Assigned Interests outside the ordinary course of
business;

(ii) Waive, amend, cancel or terminate, exercise or fail to exercise, any of its
material rights constituting or relating to the Revenue Interests (including any
rights under any License Agreement) outside the ordinary course of business;

(iii) Amend, modify, restate, cancel, supplement, terminate or waive any
material provision of any Material Contract, or grant any consent thereunder, or
agree to do any of the foregoing, including, without limitation, entering into
any agreement with any Person under the provisions of such Material Contract;

(iv) Enter into any agreement that would be reasonably expected to have a
Material Adverse Effect;

(v) Create, incur, assume or suffer any interference with the direction of
payments set for in Section 5.08; or

(vi) 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, the Revenue Interests or the other Assigned Interests
Collateral, or agree to do or suffer to exist any of the foregoing, except for
any Lien or agreements in favor of Purchaser granted under or pursuant to this
Agreement and the other Transaction Documents.

(b) During the Term, the Company agrees that, within five (5) Business Days of
any Person becoming a direct or indirect wholly owned Subsidiary of the Company,
the Company shall cause such Subsidiary to deliver to Purchaser an Assumption
Agreement (as defined in the Guarantee and Collateral Agreement) executed by
such Subsidiary, pursuant to which such Subsidiary shall become a guarantor of
the obligations hereunder and grant a security interest in the Assigned
Interests Collateral.

Section 5.11 Insurance.

The Company shall (i) maintain the current insurance policies with its current
insurance companies or with companies having at the least the same rating from
A.M. Best Company, Inc.,

 

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including product liability insurance and 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,
and (ii) maintain Purchaser as an additional insured party with respect to its
general liability and product liability insurance policies. From time to time
(with reasonable frequency) the Company will revise its insurance policy so as
to maintain coverage in amounts customary for companies of comparable size and
condition similarly situated in the same industry as the Company.

Section 5.12 Notice.

The Company shall provide Purchaser with written notice as promptly as
practicable (and in any event within two (2) Business Days) after becoming aware
of any of the following:

(a) any material breach or default by the Company of any covenant, agreement or
other provision of this Agreement, or any other Transaction Document;

(b) any representation or warranty made or deemed made by the Company in any of
the Transaction Documents or in any certificate delivered to Purchaser pursuant
hereto shall prove to be untrue, inaccurate or incomplete in any material
respect on the date as of which made or deemed made;

(c) the occurrence of a Change of Control; or

(d) the occurrence of a Put Option Event.

Section 5.13 Use of Proceeds.

The Company shall use proceeds received from Purchaser in support of the
business plan for the Product, including sales operation and expansion and
additional clinical studies. The Company shall take commercially reasonable
measures to support the sales of the Product.

Section 5.14 Taxes.

(a) The Company shall timely file (taking into account all extensions of due
dates) all Tax Returns required to be filed by it and will pay all Taxes
required to be paid with such returns.

(b) Each payment made by the Company pursuant to the Transaction Documents shall
be payable free of any Tax, withholding or other deduction except for any Tax,
withholding or deduction imposed by applicable law. The Company and Purchaser
agree that to each of their knowledge such payments are not subject to any
deduction or withholding under current applicable law.

Section 5.15 Board Designee.

Effective immediately after the Closing, Purchaser shall have the right to
designate, and the Company shall appoint an individual designated by the
Purchaser (the “Purchaser Designee”), who shall serve on the Board until the
2013 Annual Meeting of Shareholders (the “2013 Annual Meeting”). For the 2013
Annual Meeting and each annual meeting thereafter

 

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during the Term, the Board shall nominate and recommend the Purchaser Designee
as a director nominee to serve on the Board until the next annual meeting and
shall include such nomination in the Company’s proxy statement for the 2013
Annual Meeting and each annual meeting thereafter, provided that the election of
the Purchaser Designee is subject to shareholders’ approval. Should at any time
there become a vacancy on the Board as a result of (1) the resignation, death or
removal of the Purchaser Designee or (2) such Purchaser Designee failing to
obtain the requisite approval of the Company’s shareholders at any annual or
special meeting of the Company’s shareholders and where no other individual is
elected to such vacancy, Purchaser shall have the right to designate an
individual to fill such vacancy, and the Company shall take such actions
necessary to appoint, such individual to the Board. The Company shall have taken
all actions necessary at or prior to the Closing to ensure there is a vacancy on
the Board as of the Closing to permit the appointment of the Purchaser Designee
to the Board as of the Closing.

Section 5.16 Rights to Future Stock Issuances.

Subject to the terms and conditions of this Section 5.16 and applicable
securities laws, if the Company proposes to offer or sell any New Securities,
the Company shall first offer such New Securities to the Purchaser. The
Purchaser shall be entitled to apportion the right of first offer hereby granted
to it among itself and its Affiliates in such proportions as it deems
appropriate.

(a) The Company shall give notice (the “Offer Notice”) to the Purchaser, stating
(i) its bona fide intention to offer such New Securities, (ii) the number of
such New Securities to be offered, and (iii) the price and terms, if any, upon
which it proposes to offer such New Securities.

(b) By notification to the Company within five (5) days after the Offer Notice
is given, the Purchaser may elect to purchase or otherwise acquire, at the price
and on the terms specified in the Offer Notice, up to * * * of such New
Securities. The closing of any sale pursuant to this Section 5.16(b) shall occur
within the later of one hundred and twenty (120) days of the date that the Offer
Notice is given and the date of initial sale of New Securities pursuant to
Section 5.16(c).

(c) If all New Securities referred to in the Offer Notice are not elected to be
purchased or acquired as provided in Section 5.16(b), the Company may, during
the ninety (90) day period following the expiration of the periods provided in
Section 5.16(b), offer and sell such New Securities (including any portion of
New Securities Purchaser declined to acquire pursuant to Section 5.16(b)) to any
Person or Persons at a price not less than, and upon terms no more favorable to
the offeree than, those specified in the Offer Notice. If the Company does not
enter into an agreement for the sale of the New Securities within such period,
or if such agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to the Purchaser in
accordance with this Section 5.16.

(d) The right of first offer in this Section 5.16 shall not be applicable to
(i) issuance of options under the Company’s equity compensation plans, where
such plans have been approved by the Company’s shareholders; and (ii) issuance
of equity securities to one or more counterparties in connection with the
consummation, by the Company, of a strategic partnership,

 

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joint venture, collaboration or acquisition or license of any business products
or technology (it being understood and agreed that the primary purpose of any
issuance pursuant to this clause (ii) shall not be to raise capital).

(e) The Purchaser shall agree to treat the Offer Notice as confidential, and it
shall not trade any securities of the Company while the terms of the Offer
Notice remain as material, non-public information.

Section 5.17 Dividends.

During the period from the Closing Date to sixty (60) days after the fourth
anniversary of the Closing Date (or the payment of the Put Price in the event
the Put Option is exercised on or prior to 60 days after the fourth anniversary
of the Closing Date), the Company shall not, nor shall it permit any Subsidiary
to, declare, pay or make any dividend or distribution on any shares of the
common stock or preferred stock of such Person (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of any such
Person (collectively, “Restricted Payments”), except that: (a) each Subsidiary
may make direct or indirect Restricted Payments to the Company; and (b) the
Company and each Subsidiary may purchase, redeem or otherwise acquire Equity
Interests issued by it solely with the proceeds received from the substantially
concurrent issue of new shares of its common stock or other common Equity
Interests. For purposes of this Agreement, “Equity Interests” of any Person
means any and all shares, rights to purchase, options, warrants, general,
limited or limited liability partnership interests, member interests,
participation or other equivalents of or interest in (regardless of how
designated) equity of such Person, whether voting or nonvoting, including common
stock, preferred stock, convertible securities or any other “equity security”
(as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).

ARTICLE VI

TERMINATION

Section 6.01 Termination Date.

This Agreement shall terminate upon the earlier of expiration or termination of
the Revenue Interest Period, in each case after full satisfaction of any amounts
due under this Agreement by Company to the Purchaser (the “Term”).

Section 6.02 Effect of Termination.

In the event of the termination of this Agreement pursuant to Section 6.01, 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,
stockholders, partners, managers or members other than the provisions of this
Section 6.02 and Sections 5.04, and Article VII hereof, which shall survive any
termination as set forth in Section 6.01. Nothing contained in this Section 6.02
shall relieve any party from liability for any breach of this Agreement.

 

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ARTICLE VII

MISCELLANEOUS

Section 7.01 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
thereto shall survive the execution and delivery of this Agreement and shall
continue to survive until the termination of this Agreement in accordance with
Article VI.

(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 the Transaction Documents, and the parties may
rely on the representations and warranties in the Transaction Documents
irrespective of any information obtained by them by any investigation,
examination or otherwise.

Section 7.02 Specific Performance; Limitations on Damages.

(a) 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 any
of the 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.

(b) Notwithstanding anything to the contrary in this Agreement, in no event
shall either party be liable for special, indirect, incidental, punitive or
consequential damages of the other party, whether or not caused by or resulting
from the actions of such party or the breach of its covenants, agreements,
representations or warranties hereunder, even if such party has been advised of
the possibility of such damages.

Section 7.03 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 Purchaser to:

PDL BioPharma, Inc.

932 Southwood Blvd.

Attention: General Counsel

Facsimile No.: (775) 832-8501

with a copy to:

 

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Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, CA 90071-3197

Attention: Dhiya El-Saden

Facsimile No.: (213) 229-7520

If to the Company to:

AxoGen, Inc.

AxoGen Corporation

13859 Progress Blvd.

Alachua, FL 32615

Attention: Karen Zaderej

Fax: (386) 462-6803

with a copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, Pennsylvania 19103

Attention: Fahd M.T. Riaz

Fax: (215) 963-5001

or to such other address or addresses as Purchaser or the Company 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 they shall be deemed effective five (5) Business Days after dispatch,
(b) when telegraphed, telecopied, telexed or facsimiled, be effective upon
receipt by the transmitting party of confirmation of complete transmission, or
(c) when delivered by a recognized overnight courier or in person, be effective
upon receipt when hand delivered.

Section 7.04 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. The Company
shall not be entitled to assign any of its obligations and rights under the
Transaction Documents without the prior written consent of Purchaser. Solely
upon the consent of the Company (which consent may not be unreasonably withheld,
delayed or conditioned), Purchaser may assign any of its obligations or rights
under the Transaction Documents without restriction; provided, however, that
Purchaser, notwithstanding such assignment, will remain liable under
Section 5.08(g) (to the extent of any amount subject thereto during the Fiscal
Quarter as of the date of such assignment) and Section 7.05.

Section 7.05 Indemnification.

 

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(a) The Company hereby indemnifies and holds Purchaser and its Affiliates and
any of their respective partners, directors, managers, members, officers,
employees and agents (each, a “Purchaser Indemnified Party”) harmless from and
against any and all Losses (including all Losses in connection with any product
liability claims or claims of infringement or misappropriation of any
Intellectual Property rights of any Third Parties) incurred or suffered by any
Purchaser Indemnified Party arising out of any breach of any representation,
warranty or certification made by the Company in any of the Transaction
Documents or certificates given by the Company in writing pursuant hereto or
thereto or any breach of or default under any covenant or agreement by the
Company pursuant to any Transaction Document, including any failure by the
Company to satisfy any of the Excluded Liabilities and Obligations.

(b) Purchaser hereby indemnifies and holds the Company, its Affiliates and any
of their respective partners, directors, managers, officers, employees and
agents (each, a “Company Indemnified Party”) harmless from and against any and
all Losses incurred or suffered by a Company Indemnified Party arising out of
any breach of any representation, warranty or certification made by Purchaser in
any of the Transaction Documents or certificates given by Purchaser in writing
pursuant hereto or thereto or any breach of or default under any covenant or
agreement by Purchaser pursuant to any Transaction Document.

(c) If any claim, demand, action or proceeding (including any investigation by
any Governmental 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 7.05 unless, and only to the extent that, such omission results in the
forfeiture of, or has 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 7.05 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 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

 

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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.

(d) To the extent that any breach by the Company of this Agreement does not
trigger a Put Option Event, Purchaser’s sole remedy shall be to recover any
monetary damages associated with such breach, subject to the other terms and
provisions contained in this Agreement.

Section 7.06 No Implied Representations and Warranties.

Each party acknowledges and agrees that, other than the representations and
warranties specifically contained in any of the Transaction Documents or
certificates given in writing by a party hereto or thereto, there are no
representations or warranties of either party or any other Person either
expressed or implied with respect to the Assigned Interests or the transactions
contemplated hereby. Without limiting the foregoing, Purchaser acknowledges and
agrees that (a) Purchaser and its Affiliates, together with its and its
Affiliates’ representatives, have made their own investigation of the Product
and the Intellectual Property and are not relying on any implied warranties or
upon any representation or warranty whatsoever as to the future amount or
potential amount of the Assigned Interests or as to the creditworthiness of
Company and (b) except as expressly set forth in any representation or warranty
in a Transaction Document, Purchaser shall have no claim or right to
indemnification pursuant to Section 7.05 (or otherwise) with respect to any
information, documents or materials furnished to Purchaser, any of its
Affiliates, or any of its or its Affiliates’ representatives, including any
information, documents or material made available to Purchaser and its
Affiliates and its Affiliates’ representatives in any data room, presentation,
interview or any other form relating to the transactions contemplated hereby.

Section 7.07 Independent Nature of Relationship.

(a) The relationship between the Company and its Subsidiary, on the one hand,
and Purchaser, on the other, is solely that of seller and purchaser, and neither
Purchaser, on the one hand, nor the Company and its Subsidiary, 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 the Company and its Subsidiary and
Purchaser as a partnership, an association, a joint venture or other kind of
entity or legal form.

(b) No officer or employee of Purchaser will be located at the premises of the
Company or any of its Affiliates, except in connection with an audit performed
pursuant to

 

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Section 5.02. No officer, manager or employee of Purchaser shall engage in any
commercial activity with the Company or any of its Affiliates other than as
contemplated herein and in the other Transaction Documents.

(c) The Company and/or any of its Affiliates shall not at any time obligate
Purchaser, or impose on Purchaser any obligation, in any manner or respect to
any Person not a party hereto.

Section 7.08 Federal Tax.

Notwithstanding the accounting treatment thereof, for United States federal,
state and local tax purposes, the Company and Purchaser shall treat the
transactions contemplated by the Transaction Documents as debt for United States
tax purposes. The parties hereto agree not to take any position that is
inconsistent with the provision of this Section 7.08 on any tax return or in any
audit or other administrative or judicial proceeding unless (a) the other party
to this Agreement has consented to such actions, which consent shall not be
unreasonably withheld, or (b) the party that contemplates taking such an
inconsistent position has been advised by its tax advisor in writing that it is
more likely than not (i) that there is no “reasonable basis” (within the meaning
of Treasury Regulation Section 1.6662-3(b)(3)) for the position specified in
this Section 7.08 or (ii) that taking such a position would otherwise subject
the party to penalties under the Internal Revenue Code of 1986, as amended.

Section 7.09 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 Term Sheet and
the Interim Revenue Interest Purchase Agreement), 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 (or in the Exhibits,
Schedules or other Transaction Documents) 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 7.10 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 7.11 Interpretation.

 

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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.

Section 7.12 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 7.13 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 parties hereto. Any
counterpart may be executed by facsimile or pdf signature and such facsimile or
pdf signature shall be deemed an original.

Section 7.14 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 7.15 Expenses.

The Company will pay all of its own fees and expenses in connection with
entering into and consummating the transactions contemplated by this Agreement.
The Company shall, promptly (and, in any event, within five (5) Business Days)
upon demand, reimburse Purchaser up to * * * for its reasonable legal fees and
expenses incurred in connection with the transactions contemplated by the
Transaction Documents, less any amounts reimbursed in connection with the
Interim Royalty Purchase Agreement, not to exceed * * * in the aggregate.

Section 7.16 Governing Law; Jurisdiction.

(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 the State of Nevada, Washoe County and city of Reno. 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 now or hereafter

 

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have to the bringing of any action or proceeding in such jurisdiction in respect
of any 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) of this Section 7.16 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 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 7.17 Waiver of Jury Trial.

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 any Transaction Document or
the transactions contemplated under any Transaction Document. This waiver shall
apply to any subsequent amendments, renewals, supplements or modifications to
any Transaction Document.

[SIGNATURE PAGE FOLLOWS]

 

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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.

 

COMPANY:     AXOGEN, INC.     By:  

/s/ Karen Zaderej

      Name:   Karen Zaderej       Title:     Chief Executive Officer PURCHASER:
    PDL BIOPHARMA, INC.     By:  

/s/ John P. McLaughlin

      Name:   John P. McLaughlin       Title:     President and Chief Executive
Officer

 

[Signature Page to Revenue Purchase Agreement]

--------------------------------------------------------------------------------

Exhibit A

Form of Guarantee and Collateral Agreement

[See attached.]

--------------------------------------------------------------------------------

Exhibit B

Form of Assignment of Interests

[See attached.]

--------------------------------------------------------------------------------

Exhibit C

Form of Deposit Agreement

[See attached.]

--------------------------------------------------------------------------------

Exhibit D

Form of Legal Opinion

In form and substance agreed to by the parties.