Exhibit 10.5

Execution Copy

SECURITIES DISPOSITION AGREEMENT

This SECURITIES DISPOSITION AGREEMENT (this “Agreement”), is made and entered
into as of July 30, 2007, by and between PAUL ROYALTY FUND, L.P., a Delaware
limited partnership (“PRF”), and ORTHOVITA, INC., a Pennsylvania corporation
(“Orthovita”). Capitalized terms used herein and not defined shall have the
meanings assigned thereto in the Purchase Agreement (as defined below).

RECITALS

WHEREAS, pursuant to a certain Purchase and Sale Agreement (the “Purchase
Agreement”) dated as of July 30, 2007 by and between Royalty Securitization
Trust I, a Delaware statutory trust (“RST”) and Orthovita, RST has agreed to
sell, assign, convey and transfer to Orthovita, and Orthovita has agreed to
purchase from RST, the Assigned Interests (as defined in the Purchase and Sale
Agreement), for consideration consisting, inter alia, of 1,136,364 (one million
one hundred thirty-six thousand three hundred sixty-four) shares of the common
stock, par value $.01 per share, of Orthovita (the “Purchase Price Shares”);

WHEREAS, immediately following the closing of the transactions contemplated by
the Purchase Agreement, RST will assign the Purchase Price Shares to Royalty
Financial Company LLC, a Delaware limited liability company (“RFC”), and RFC
then will assign the Purchase Price Shares to PRF; and

WHEREAS, the parties hereto wish to provide for certain matters relating to the
disposition of the Purchase Price Shares, subject to and in accordance with the
terms and conditions set forth herein;

NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration the receipt and sufficiency is hereby acknowledged by the parties
hereto, and intending to be legally bound, the parties hereto hereby agree as
follows.

Section 1. Definitions.

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

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

“Aggregate Period” shall have the meaning set forth in Section 8.2.

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

 

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“Common Stock” shall mean the common stock, par value $.01 per share, of
Orthovita.

“Confidential Information” shall have the meaning set forth in Section 10.4.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.

“Indemnified Party” shall have the meaning set forth in Section 9.3.

“Initial Effectiveness Period” shall have the meaning set forth in Section 6.

“Initial Registration Statement” shall have the meaning set forth in Section 6.

“Insolvent” shall mean, with respect to Orthovita and VSP, as applicable, a
financial condition such that Orthovita’s or VSP’s respective debts (in the case
of Orthovita, on a consolidated basis) are greater than the fair market value of
Orthovita’s or VSP’s tangible and intangible assets (in the case of Orthovita,
on a consolidated basis), respectively. For purposes of the foregoing, fair
market value shall be the amount reasonably calculated by Orthovita’s Board of
Directors or a duly appointed committee thereof.

“Lock-Up Period” shall have the meaning set forth in Section 8.3.

“NASD” shall mean the National Association of Securities Dealers, Inc.

“Nasdaq Market” shall mean the Nasdaq Global Market.

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

“Orthovita Losses” shall have the meaning set forth in Section 9.2.

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

“PRF Losses” shall have the meaning set forth in Section 9.1.

“Purchase Agreement” shall have the meaning set forth in the recitals to this
Agreement.

“Purchase Price Shares” shall have the meaning set forth in the recitals to this
Agreement.

“Registration Statement” means a registration statement filed under, and meeting
the requirements of, the Securities Act.

“RFC” shall have the meaning set forth in the recitals to this Agreement.

“RST” shall have the meaning set forth in the recitals to this Agreement.

 

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“Rule 144” means Rule 144 promulgated by the SEC pursuant to the 1933 Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

“Second Registration Statement” shall have the meaning set forth in Section 6.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.

Section 2. Representations and Warranties of PRF.

PRF represents and warrants to Orthovita as follows:

2.1 Organization.

PRF is a limited partnership, and RFC is a limited liability company, each of
which is duly formed, validly existing and in good standing under the laws of
the State of Delaware, and each has all limited partnership or limited liability
company powers, as the case may be, and all licenses, authorizations, consents
and approvals required to carry on its respective business as now conducted and
as proposed to be conduct in connection with the transaction contemplated
hereby. RST is a wholly owned subsidiary of RFC, and RFC is the sole beneficial
owner of the trust beneficial interest in RST.

2.2 Authorization.

PRF has all necessary power and authority to enter into, execute and deliver
this Agreement and to perform all of the obligations to be performed by it
hereunder. This Agreement has been duly authorized, executed and delivered by
PRF and constitutes its valid and binding obligation of PRF, enforceable against
it in accordance with its terms, subject, as to enforcement of remedies, to
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and general equitable principles.

2.3 Governmental Authorization.

The execution and delivery by PRF of this Agreement and the other Closing
Documents to which it is a party, and the performance by PRF of its obligations
hereunder and thereunder, does not require any notice to, action or consent by,
or in respect of, or filing with, any Government Authority.

2.4 Litigation.

There is no (a) action, suit, arbitration proceeding, claim, investigation or
other proceeding pending or, to the Knowledge of PRF, threatened against PRF,
RFC or RST or (b) governmental inquiry pending or, to the Knowledge of PRF,
threatened against PRF, RFC or RST, in each case with respect to clauses (a) and
(b) above, which, if adversely determined, would question the validity of, or
would materially and adversely affect or prevent the

 

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consummation of, the transactions contemplated by this Agreement or any of the
other Closing Documents or would reasonably be expected to have a material
adverse effect on the validity or enforceability of this Agreement or any of the
other Closing Documents (other than by virtue of a breach of a representation or
warranty of a party other than RST or PRF contained within this Agreement or any
of the other Closing Documents), or a material adverse effect on the ability of
PRF, RFC or RST to perform any of its material obligations under this Agreement
or any of the other Closing Documents.

2.5 Compliance with Laws.

Neither PRF, RFC nor RST (a) is in violation of, has violated, or to the
Knowledge of PRF, is under investigation with respect to, and, (b) to the
Knowledge of PRF has been threatened to be charged with or been given notice of
any violation of, with respect to clauses (a) and (b) above, any law, rule,
ordinance or regulation, judgment, order or decree entered by any Government
Authority applicable to PRF, RFC or RST, which would reasonably be expected to
have a material adverse effect on the validity or enforceability of this
Agreement or any of the other Closing Documents (other than by virtue of a
breach of a representation or warranty of a party other than RST or PRF
contained within this Agreement or any of the other Closing Documents), or a
material adverse effect on the ability of PRF, RFC or RST to perform any of its
material obligations under this Agreement or any of the other Closing Documents.

2.6 Broker’s Fees.

Neither PRF nor RFC has taken any action that would entitle any Person to any
commission or broker’s fee in connection with the transactions contemplated by
this Agreement.

2.7 Conflicts.

Neither the execution and delivery of this Agreement 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: (ii) any law, rule or regulation of any Government
Authority, or any judgment, order, writ, decree, permit or license of any
Government Authority, to which either PRF or RFC or any of their respective
assets or properties may be subject or bound; or (ii) any contract, agreement,
commitment or instrument to which either PRF or RFC is a party or by which
either PRF or RFC 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, in any
respects any provisions of organizational or constitutional documents of either
PRF or RFC; or (c) require any notification to, filing with, or consent of, any
Person or Government Authority.

2.8 No Short Position.

Neither PRF nor RFC has a short position in Orthovita securities as of the date
hereof.

 

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2.9 Receipt of Agreements.

PRF and RFC each have received and reviewed a copy of this Agreement and the
Purchase Agreement.

2.10 No Registration of Shares.

PRF and RFC each are aware that the Purchase Price Shares have not been
registered under the Securities Act, that the offer and sale of the Purchase
Price Shares are intended to be exempt from registration under the Securities
Act and the rules promulgated thereunder by the SEC, and that none of the
Purchase Price Shares may be sold, assigned, transferred or otherwise disposed
of unless it is registered under the Securities Act or an exemption from the
registration requirements of the Securities Act is available. PRF and RFC each
are also aware that the certificates for the Purchase Price Shares will bear
appropriate legends restricting their transfer pursuant to applicable law.

2.11 Suitability of Investment.

(1) RFC is acquiring the Purchase Price Shares from RST solely for the purpose
of transferring such shares to PRF as contemplated by Section 1.

(2) PRF is acquiring the Purchase Price Shares from RFC for its own account for
investment purposes only and not with a view to the resale or distribution
thereof.

(3) Neither PRF, RFC nor RST will, directly or indirectly, offer, sell,
transfer, assign, exchange or otherwise dispose of all or any part of the
Purchase Price Shares, except in accordance with applicable federal and state
securities laws and the provisions of this Agreement.

(4) Each of PRF, RFC and RST has such knowledge and experience in financial,
business and tax matters that it is capable of evaluating the merits and risks
relating to its investment in the Purchase Price Shares and making an investment
decision with respect to Orthovita.

(5) Each of PRF, RFC and RST has been given the opportunity to obtain
information and documents relating to Orthovita and to ask questions of and
receive answers from representatives of Orthovita concerning Orthovita and the
investment in the Purchase Price Shares.

(6) Each of PRF, RFC and RST is able at this time, and in the foreseeable
future, to bear the economic risk of a total loss of its investment in
Orthovita.

(7) Each of PRF, RFC and RST is aware that there are substantial risks incident
to an investment in the Purchase Price Shares.

 

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(8) Each of PRF, RFC and RST is an “accredited investor” within the meaning of
Rule 501(a) of Regulation D under the Securities Act as presently in effect.

Section 3. Representations and Warranties of Orthovita.

Orthovita hereby represents and warrants to PRF as follows:

3.1 Organization.

Orthovita is a corporation duly incorporated, validly subsisting and in good
standing under the laws of Pennsylvania, and has all corporate powers and all
licenses, authorizations, consents and approvals required to carry on its
businesses as now conducted and as proposed to be conducted in connection with
the transaction contemplated hereby.

3.2 Corporate Authorization.

Orthovita has all necessary power and authority to enter into, execute and
deliver this Agreement and the other Closing Documents to which it is a party
that require execution and to perform all of the obligations to be performed by
it hereunder and thereunder and to consummate the transactions contemplated
hereunder and thereunder. This Agreement and the other Closing Documents have
been duly authorized, executed and delivered by Orthovita (to the extent a party
thereto) and each of this Agreement and each other Closing Document to which
Orthovita is a party constitutes the valid and binding obligation of Orthovita,
enforceable against Orthovita and VSP 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.

3.3 Governmental Authorization.

The execution and delivery by Orthovita of the other Closing Documents to which
it is a party, and the performance by Orthovita of its respective obligations
thereunder, does not require any notice to, action or consent by, or in respect
of, or filing with, any Government Authority other than filings with the SEC and
the applicable state securities regulatory authorities in connection with the
issuance by Orthovita of the Purchase Price Shares.

3.4 Solvency.

Orthovita is not Insolvent. Assuming consummation of the transactions
contemplated by this Agreement, (a) the present fair saleable value of
Orthovita’s assets is greater than the amount required to pay its debts as they
become due, (b) Orthovita does not have unreasonably small capital with which to
engage in its business, and (c) Orthovita has not incurred, or has no present
plans to and does not intend to incur, debts or liabilities (other than debts or
liabilities incurred pursuant hereto and pursuant to the Closing Documents)
beyond its ability to pay such debts or liabilities as they become absolute and
matured.

 

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3.5 Litigation.

There is no (a) action, suit, arbitration proceeding, claim, investigation or
other proceeding pending or, to the Knowledge of Orthovita, threatened against
Orthovita or (b) governmental inquiry pending or, to the Knowledge of Orthovita,
threatened against Orthovita, in each case with respect to clauses (a) and
(b) above, which, if adversely determined, would question the validity of, or
would materially and adversely affect or prevent the consummation of, the
transactions contemplated by this Agreement or any of the other Closing
Documents or would reasonably be expected to have a Material Adverse Effect.

3.6 Compliance with Laws.

Orthovita (a) is not in violation of, has not violated, or to the Knowledge of
Orthovita, is not under investigation with respect to, and, (b) to the Knowledge
of Orthovita has not been threatened to be charged with or been given notice of
any violation of, with respect to clauses (a) and (b) above, any law, rule,
ordinance or regulation, judgment, order or decree entered by any Government
Authority applicable to Orthovita, which would reasonably be expected to have a
Material Adverse Effect.

3.7 Conflicts.

Neither the execution and delivery of this Agreement or any other Closing
Document to which Orthovita 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 respect any provisions
of: (i) any law, rule or regulation of any Government Authority, or any
judgment, order, writ, decree, permit or license of any Government Authority, to
which Orthovita or any of its assets or properties may be subject or bound; or
(ii) any contract, agreement, commitment or instrument to which Orthovita is a
party or by which Orthovita 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, in any
respects any provisions of the articles of incorporation or by-laws (or other
organizational or constitutional documents) of Orthovita; (c) require any
notification to, filing with, or consent of, any Person or Government Authority
other than filings with the SEC and the applicable state securities regulatory
authorities in connection with the issuance by Orthovita of the Purchase Price
Shares.

3.8 Broker’s Fees.

Orthovita has not taken any action which would entitle any Person to any
commission or broker’s fee in connection with the transactions contemplated by
this Agreement.

3.9 Reliance on Certain Representations and Warranties

The representations and warranties of Orthovita set forth in Section 5.01 of the
Purchase Agreement are hereby incorporated herein by reference, mutatis
mutandis, and PRF may rely upon such representations and warranties as if set
forth herein in full and addressed to PRF instead of RST.

 

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Section 4. Transfer Consent and Restrictions.

4.1 Consent to Transfer

Notwithstanding any provisions in this Agreement or the Purchase Agreement to
the contrary, assuming the accuracy of PRF’s representations and warranties
herein and of RST’s representations and warranties in the Purchase Agreement,
Orthovita hereby consents to the following transfers of the Purchase Price
Shares:

(a) The transfer by RST of the Purchase Price Shares to RFC; and

(b) The transfer by RFC of the Purchase Price Shares to PRF.

4.2 Restrictions on Transfer.

The Purchase Price Shares have not been registered under the Securities Act and
may not be sold, assigned, transferred or otherwise disposed of unless they are
registered under the Securities Act or an exemption from such registration is
available. Sales or transfers of the Purchase Price Shares are further
restricted by state securities laws and the provisions of this Agreement.

4.3 Legend.

Unless sold pursuant to an effective Registration Statement, each certificate
representing the Purchase Price Shares shall bear a legend substantially in the
following form:

“The shares represented by this certificate have not been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), and may
not be offered, sold or otherwise transferred, pledged or hypothecated unless
and until such shares are registered under the Securities Act or, except as
otherwise permitted pursuant to Rule 144 under the Securities Act or another
exemption from registration under the Securities Act or an opinion of counsel
reasonably satisfactory to Orthovita is obtained to the effect that such
registration is not required.”

4.4 Removal of Legend.

The foregoing legend described in Section 4.3 shall be removed from the
certificates representing any Purchase Price Shares at the request of the holder
thereof, at such time as (a) they are sold pursuant to an effective Registration
Statement, (b) they become eligible for resale pursuant to Rule 144(k) under the
Securities Act or another provision of Rule 144 of the Securities Act pursuant
to which all or a portion of such Purchase Price Shares could be sold in

 

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a single transaction, or (c) an opinion of counsel reasonably satisfactory to
Orthovita is obtained to the effect that the proposed transfer is exempt from
the Securities Act. Orthovita shall direct the transfer agent for the Common
Stock to issue new share certificates without the legend upon receipt of a
certificate from PRF stating that the Purchase Price Shares have been registered
or transferred pursuant to an effective Registration Statement under the
Securities Act or can be sold in reliance upon Rule 144 or if Orthovita has
received an opinion of counsel reasonably satisfactory to Orthovita to the
effect that the proposed transfer is exempt from the Securities Act.

Section 5. Registration and Listing of Common Stock.

Orthovita (a) will use its best commercially practicable efforts to cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, (b) will comply in all respects with its reporting and filing
obligations under the Exchange Act, (c) will comply with all requirements
related to any Registration Statement filed pursuant to this Agreement and
(d) will not take any action or file any document (whether or not permitted by
the Securities Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or the Securities Act, except as permitted
herein. Orthovita will take all commercially reasonable action necessary to
continue the listing or trading of its Common Stock on the Nasdaq Market at any
time during which Orthovita’s Common Stock is eligible for listing thereon, and
will comply in all material respects with Orthovita’s reporting, filing and
other obligations under the bylaws or rules of the NASD and the Nasdaq Market.

Section 6. Registration Statement for Purchase Price Shares.

Within 30 days after the Closing Date, Orthovita shall cause to be filed with
the SEC an initial Registration Statement on Form S-3 (the “Initial Registration
Statement”), which Initial Registration Statement shall provide for the resale
of the Purchase Price Shares. Orthovita shall use its best commercially
practicable efforts to cause the Initial Registration Statement to be declared
effective by the SEC as promptly as possible after the filing thereof, and,
subject to Section 8.2 of this Agreement, shall maintain the effectiveness of
the Initial Registration Statement and any successor Registration Statement
until the earlier of either (a) the date on which all Purchase Price Shares have
been sold pursuant to the Initial Registration Statement or Rule 144 or (b) two
years from the date of its effectiveness (the “Initial Effectiveness Period”).
If, at the end of the Initial Effectiveness Period, PRF or its Affiliates
collectively own 50% or more of the number of Purchase Price Shares originally
issued to PRF, Orthovita shall maintain the effectiveness of the Initial
Registration Statement for an additional two years or, if sooner, until all
Purchase Price Shares have been sold pursuant to the Initial Registration
Statement or under Rule 144; provided, however, that if the Initial Registration
Statement shall have lapsed or the Purchase Price Shares registered thereunder
shall have been deregistered prior to the time during which Orthovita is
obligated to maintain the effectiveness of the Initial Registration Statement,
within 30 days of receipt by Orthovita of PRF’s written demand therefor,
Orthovita shall cause to be filed with the SEC a second Registration Statement
on Form S-3 (the “Second Registration Statement”). Orthovita shall use its best
commercially practicable efforts to cause

 

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the Second Registration Statement to be declared effective by the SEC as
promptly as possible after the filing thereof, and shall maintain the
effectiveness of the Second Registration Statement and any successor
Registration Statement until the earlier of either (i) the date on which all
Purchase Price Shares have been sold pursuant to the Initial Registration
Statement and the Second Registration Statement or Rule 144 or (ii) two years
from the date of its effectiveness. In the event PRF is not permitted to resell
the Purchase Price Shares pursuant to the Initial Registration Statement or, if
required, the Second Registration Statement, due to Orthovita’s non-compliance
with its obligations under the Exchange Act or for any other similar reason, but
would be permitted to resell the Purchase Price Shares pursuant to a
Registration Statement on another form prescribed by the SEC, Orthovita shall,
upon its receipt of PRF’s written demand therefor, use its best commercially
practicable efforts cause a Registration Statement on such other appropriate
form to be filed within 60 days after the date the Form S-3 became unavailable
for such resales, and to become effective as promptly thereafter as practicable.
Such Registration Statement on such other form will permit PRF to resell the
Purchase Price Shares pursuant to such Registration Statement. If required,
Orthovita shall take such actions as Orthovita shall reasonably determine are
necessary in order to obtain an exemption for or to qualify the Purchase Price
Shares for offer and sale pursuant to any Registration Statement filed pursuant
to this Section 6 under applicable securities or “Blue Sky” laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to PRF on or prior to date of
such effectiveness of such Registration Statement. Orthovita shall make all
filings and reports relating to the offer and sale of the Purchase Price Shares
required under applicable securities or “Blue Sky” laws of the states of the
United States following the effectiveness of any Registration Statement filed
pursuant to this Section 6. All costs and expenses associated with the
Registration Statements described herein shall be borne by Orthovita.

Section 7. Notice.

Orthovita shall immediately notify PRF of the happening of any event known to
Orthovita as a result of which the prospectus included in any Registration
Statement, as then in effect, contains an untrue statement of a material fact or
omits to state any fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made, and, at the request of PRF, Orthovita will prepare and furnish PRF a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to PRF, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.

Section 8. Disposition of Purchase Price Shares.

8.1 Prospectus Delivery.

PRF agrees not to make any sale of the Purchase Price Shares under any
Registration Statement without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied, and PRF acknowledges and
agrees that the Purchase Price Shares are not

 

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transferable on the books of Orthovita unless the certificate submitted to the
transfer agent evidencing the Purchase Price Shares is accompanied by a separate
officer’s certificate, executed by an officer of, or other authorized person
designated by, PRF, to the effect that (a) such Purchase Price Shares have been
sold pursuant to and in accordance with the Registration Statement and the “Plan
of Distribution” section of the prospectus included therein and (b) the
requirement of delivering a current prospectus has been satisfied, unless exempt
from registration and prospectus delivery requirements.

8.2 Suspension of Sales.

PRF acknowledges that there occasionally may be times when Orthovita must
suspend the use of the prospectus forming a part of the Registration Statement
(a) until such time as an amendment to the Registration Statement has been filed
by Orthovita and declared effective by the Commission, or until such time as
Orthovita has filed an appropriate report with the Commission pursuant to the
Exchange Act; or (b) due to the existence of material non-public information
relating to Orthovita that, in the reasonable opinion of Orthovita’s board of
directors or counsel, should not be disclosed. PRF agrees that it will not sell
any Purchase Price Shares during the period commencing at the time at which
Orthovita gives PRF notice of the suspension of the use of said prospectus and
ending at the time Orthovita gives PRF notice that PRF may thereafter effect
sales pursuant to said prospectus. Orthovita shall only be able to suspend the
use of said prospectus for periods aggregating no more than 90 days in any
12-month period (the “Aggregate Period”), of which no individual period shall be
longer than 60 consecutive days; provided, that should a Lock-Up Period (as
defined below in 8.3) occur, then the Aggregate Period for the 12-month period
during which such Lock-Up Period occurs shall be reduced by a number of days
equal to the number of days in such Lock-Up Period, but in no case shall the
Aggregate Period be reduced to a number of days that is less than 60 days. PRF
further agrees to promptly notify Orthovita in writing of any material changes
in the information set forth in the Registration Statement relating to PRF or
its plan of distribution, or of any supplemental information required to be
included in the Registration Statement relating to its plan of distribution. The
number of days during which the use of the prospectus is suspended under
Section 8.2(b) (for reasons other than a Lock-Up Period) shall be added to the
duration of the period of time for which Orthovita is required to maintain the
effectiveness of a Registration Statement under Section 6 hereof.

8.3 Lock-Up Requirement.

PRF agrees, in connection with any firm commitment underwritten offering of the
Common Stock, upon the request of the managing underwriters of such offering,
not to directly or indirectly (a) offer for sale, sell, pledge, contract to sell
or otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any person at
any time in the future of) any of the Purchase Price Shares or (b) enter into
any swap or derivatives transaction that transfers to another, in whole or in
part, any of the economic benefits or risks of ownership of the Purchase Price
Shares, whether any such transaction described in clause (a) or (b) above is to
be settled by delivery of Purchase Price Shares or other securities, in cash or
otherwise, without the prior written consent of such managing underwriters

 

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during the period of time beginning ten days prior to the date when such
managing underwriters advise Orthovita that they expect to initiate such public
offering and ending at a date not to exceed 90 days from the commencement of
such public offering (the “Lock-Up Period”). Notwithstanding the foregoing, this
obligation shall not apply to PRF unless each of Orthovita’s directors and
executive officers who beneficially own shares of Common Stock enters into a
similar agreement.

8.4 Information to be Furnished by PRF.

Orthovita may require PRF to furnish to Orthovita information regarding PRF and
the distribution of the Purchase Price Shares as is required by law to be
disclosed in a Registration Statement, and PRF agrees to furnish to Orthovita
such information within a reasonable amount of time after receiving such
request.

Section 9. Indemnification.

9.1 Orthovita Indemnification.

Orthovita covenants and agrees to defend, indemnify and save and hold harmless
PRF, together with its officers, directors, partners, shareholders, beneficial
owners, employees, trustees, affiliates (within the meaning of Rule 405 of the
SEC under the Securities Act), attorneys and representatives, from and against
any and all losses, costs, expenses, liabilities, claims or legal damages
(including, without limitation, reasonable fees and disbursements of counsel and
accountants and other costs and expenses incident to any actual or threatened
claim, suit, action or proceeding, whether incurred in connection with a claim
against Orthovita or a third party claim) (collectively, “PRF Losses”) alleged
by any third parties not affiliated with PRF arising out of or resulting from
any breach of any representation, warranty, covenant or agreement made by
Orthovita or VSP in this Agreement, or any inaccuracy in any writing delivered
by Orthovita or VSP pursuant to this Agreement at the Closing. PRF Losses
resulting from the gross negligence or willful misconduct of PRF or any of its
respective officers, partners, shareholders, beneficial owners, employees,
trustees, affiliates (within the meaning of Rule 405 of the SEC under the
Securities Act), are not covered under this Section 9.1. If and to the extent
that the indemnification provided in this Section 9.1 is unenforceable for any
reason, Orthovita shall make the maximum contribution to the payment and
satisfaction of such indemnified liability that shall be permissible under
applicable laws. Orthovita shall not be liable for amounts paid in settlement of
any loss, claim, damage or liability if such settlement is effected without its
prior written consent.

9.2 PRF Indemnification.

PRF covenants and agrees to defend, indemnify and save and hold harmless
Orthovita, together with its officers, directors, partners, shareholders,
employees, trustees, affiliates (within the meaning of Rule 405 of the SEC under
the Securities Act), attorneys and representatives, from and against any and all
losses, costs, expenses, liabilities, claims or legal damages (including,
without limitation, reasonable fees and disbursements of counsel and accountants
and other costs and expenses incident to any actual or threatened claim, suit,
action

 

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or proceeding, whether incurred in connection with a claim against the Investor
or a third party claim) (collectively, “Orthovita Losses”), alleged by any third
parties not affiliated with Orthovita arising out of or resulting from any
breach of any representation, warranty, covenant or agreement made by PRF in
this Agreement or by RST in the Purchase Agreement, or any inaccuracy in any
writing delivered by PRF pursuant to this Agreement or by RST pursuant to the
Purchase Agreement at the Closing. Orthovita Losses resulting directly from the
gross negligence or willful misconduct of Orthovita or any of its respective
officers, directors or employees, or any affiliate within the meaning of Rule
405 of the SEC under the Securities Act are not covered under this Section 9.2.
If and to the extent that the indemnification provided in this Section 9.2 is
unenforceable for any reason, PRF shall make the maximum contribution to the
payment and satisfaction of such indemnified liability that shall be permissible
under applicable laws. PRF shall not be liable for amounts paid in settlement of
any loss, claim, damage or liability if such settlement is effected without its
prior written consent.

9.3 Indemnification Procedure.

Each party entitled to be indemnified pursuant to Section 9.1 and 9.2 (each, an
“Indemnified Party”) shall notify the other party in writing of any action
against such Indemnified Party in respect of which the other party is or may be
obligated to provide indemnification pursuant to Section 9.1 or 9.2, promptly
after the receipt of notice or knowledge of the commencement thereof. The
omission of any Indemnified Party so to notify the other party of any such
action shall not relieve such other party from any liability which it may have
to such Indemnified Party except to the extent the other party shall have been
materially prejudiced by the omission of such Indemnified Party so to notify it,
pursuant to this Section 9.3. In case any such action shall be brought against
any Indemnified Party and it shall notify the other party of the commencement
thereof, the other party shall be entitled to participate therein and, to the
extent that such other party may wish, to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
it to such Indemnified Party of its election so to assume the defense thereof,
the other party will not be liable to such Indemnified Party under Section 9.1
or 9.2 for any legal or other expense subsequently incurred by such Indemnified
Party in connection with the defense thereof nor for any settlement thereof
entered into without the consent of the other party; provided, however, that
(a) if the other party shall elect not to assume the defense of such claim or
action or (b) if the Indemnified Party reasonably determines (x) that there may
be a conflict between the positions of the other party and of the Indemnified
Party in defending such claim or action or (y) that there may be legal defenses
available to such Indemnified Party different from or in addition to those
available to the other party, then not more than one firm of separate counsel
for the Indemnified Party shall be entitled to participate in and conduct the
defense, in the case of (a) and (b)(x), or such different defenses, in the case
of (b)(y), and the other party shall be liable for any reasonable legal or other
expenses incurred by the Indemnified Party in connection with the defense.

 

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9.4 Indemnification Non-Exclusive.

The foregoing indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable or common law remedy any party may have
for breach of representation, warranty, covenant or agreement.

Section 10. Miscellaneous.

10.1 Survival.

(a) All representations and warranties made herein and in any certificates or in
any other writing delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the Closing and shall
continue to survive until the date that is the first anniversary of the Closing
Date. Notwithstanding anything in this Agreement or implied by law to the
contrary, all the agreements contained in Sections 4, 5, 6, 7, 8, 9 and this
Section 10, shall survive indefinitely following the execution and delivery of
this Agreement and the Closing and the termination of this Agreement.

(b) Any investigation or other examination that may have been made or may be
made at any time by or on behalf of the party to whom representations and
warranties are made shall not limit, diminish or in any way affect the
representations and warranties in this Agreement and the other Closing
Documents, and the parties may rely on the representations and warranties in
this Agreement and the other Closing Documents irrespective of any information
obtained by them by any investigation, examination or otherwise.

10.2 Specific Performance.

Each of the parties hereto acknowledges that the other party will have no
adequate remedy at law if it fails to perform any of its obligations under this
Agreement. 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.

 

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10.3 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 PRF to:

c/o Paul Capital Advisors, L.L.C.

50 California Street

Suite 3000

San Francisco, California 94111

Attention: Chief Financial Officer

Facsimile No.: (415) 283-4301

with a copy to:

Mr. Lionel Leventhal

Paul Capital Partners

Two Grand Central Tower

140 East 45th Street, 44th Floor

New York, New York 10017

Facsimile No.: (646) 264-1101

and

Chadbourne & Parke LLP

30 Rockefeller Plaza

New York, New York 10112

Attention: Andrew C. Coronios, Esq.

Facsimile No.: (212) 541-5369

if to Orthovita to:

Orthovita, Inc.

77 Great Valley Parkway

Malvern, PA 19355

Attention: Antony Koblish, Chief Executive Officer

Facsimile No.: (610) 640-2603

with a copy to:

Orthovita, Inc. 77

Great Valley Parkway

Malvern, PA 19355

  Attention: Christine J. Arasin

Vice President, Business Development and Corporate Counsel

Facsimile No.: (610) 640-2603

 

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and a copy to:

Duane Morris LLP

30 South 17th Street

Philadelphia, PA 19103

Attention: Richard A. Silfen, Esq.

Facsimile No.: (215) 979-1020

if or to such other address or addresses as PRF or Orthovita may from time to
time designate by notice as provided herein, except that notices of changes of
address shall be effective only upon receipt. All such notices consents, waivers
and communications shall: (a) when posted by certified or registered mail,
postage prepaid, return receipt requested, be effective five Business Days after
dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective
as of (i) the date of transmission, if such notice or communication is received
via facsimile at the facsimile number specified in this Section prior to 6:30
p.m. (New York City time) on a Business Day, or (ii) the next Business Day after
the date of transmission, if such notice or communication is received via
facsimile at the facsimile number specified in this Section on a day that is not
a Business Day or later than 6:30 p.m. (New York City time) on any Business Day,
or (c) when delivered by a recognized overnight courier or in person, be
effective upon receipt when delivered.

10.4 Confidentiality.

(a) The terms, conditions and provisions of this Agreement and any other Closing
Document (the “Confidential Information”), shall be kept confidential by
Orthovita and PRF, and shall be used by Orthovita and PRF only in connection
with this Agreement and any other Closing Document and the transactions
contemplated hereby and thereby, except to the extent that such information
(a) is already in the public domain at the time the information is disclosed,
(b) thereafter becomes lawfully obtainable from other sources, (c) is required
to be disclosed in any document to be filed with any Government Authority, or
(d) is required to be disclosed under securities laws, rules and regulations
applicable to Orthovita or RST, as the case may be, or pursuant to the rules and
regulations of the Nasdaq Market or any other stock exchange or stock market on
which securities of Orthovita may be listed for trading. Notwithstanding the
foregoing, Orthovita and RST may disclose such information to their partners,
directors, employees, managers, officers, investors, bankers, advisors, trustees
and representatives on a need-to-know basis, provided that such Persons shall be
informed of the confidential nature of such information and shall be obligated
to keep such information confidential pursuant to the terms of this
Section 10.4(a). Orthovita will consult with PRF, and PRF will consult
Orthovita, on the form, content and timing of any such disclosures of
Confidential Information including, without limitation, any disclosures made
pursuant to applicable securities laws or made to investment or other analysts.

(b) Except as required by law or the rules and regulations of any securities
exchange or trading system or any Government Authority with similar regulatory
authority, or except with the prior written consent of the other party (which
consent shall not be unreasonably withheld), neither party shall issue any press
release or make any other public disclosure with respect to the transactions
contemplated by this Agreement or any other Closing Document. Orthovita and PRF
shall jointly prepare a press release for dissemination promptly following the
Closing Date.

 

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(c) Orthovita shall consult with PRF and PRF shall have opportunity to review
and comment with respect to public disclosures or filings to be made to the SEC
or any other Government Authority relating to the Closing Documents, any
Registration Statement filed or to be filed pursuant to Section 6, or any terms
thereof.

10.5 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.

10.6 Expenses.

Each party hereto will pay all of its own fees and expenses in connection with
entering into and consummating the transactions contemplated by this Agreement,
except as expressly set forth herein.

10.7 Entire Agreement.

This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. None of this Agreement, nor any provision
hereof, is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.

10.8 Amendments; No Waivers.

(a) Neither this Agreement nor any term or provision hereof may be amended,
changed or modified except with the written consent of each 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.

10.9 Interpretation.

When a reference is made in this Agreement to Articles, Sections, Schedules or
Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit to
this Agreement

 

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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.

10.10 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.

10.11 Counterparts; Effectiveness.

This Agreement may be executed in two or more counterparts, each of which shall
be an original, but all of which together shall constitute one and the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto.

10.12 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.

10.13 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 (OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

(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, COUNTY AND CITY OF NEW YORK. 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 HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.

 

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(c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE COURTS REFERRED TO IN SUBSECTION (b) ABOVE OF THIS SECTION 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.

10.14 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 THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.

[Signatures on following pages]

 

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ORTHOVITA, INC. By:   /s/ Antony Koblish Name:   Antony Koblish Title:  
President & CEO

[SIGNATURE PAGE TO SECURITIES DISPOSITION AGREEMENT]

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PAUL ROYALTY FUND, L.P. By:   Paul Capital Management, LLC, its General Partner
By:   Paul Capital Advisors, L.L.C., its Manager By:   /s/ Lionel Leventhal
Name:   Lionel Leventhal Title:   Manager

[SIGNATURE PAGE TO SECURITIES DISPOSITION AGREEMENT]