Exhibit 10.3

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is made effective as of March 3, 2008
(the “Effective Date”) by and among Alphatec Spine, Inc., a Delaware corporation
with a principal place of business at 2051 Palomar Airport Road, Suite 100,
Carlsbad, California 92008 (“Licensee”), Stout Medical Group LP, a limited
partnership company organized under the laws of the state of Delaware, and
having a place of business at 410 East Walnut Street, Suite #8, Perkasie,
Pennsylvania 18944 (“Licensor”) and for purposes of Section 7.2 and
Section 11.15 hereof only Alphatec Holdings, Inc., a Delaware corporation with a
principal place of business at 2051 Palomar Airport Road, Suite 100, Carlsbad,
California 92008 (“Holdings”). Licensee and Licensor are each hereafter referred
to individually as a “Party” and together as the “Parties”.

WHEREAS, Licensor is the owner of or otherwise controls certain proprietary
Licensed Patents and Licensed Technology (as defined below); and

WHEREAS, Licensee desires to obtain a license from Licensor under such Licensed
Patents and Licensed Technology to develop and commercialize Licensed Products
(as defined below); and

WHEREAS, Licensor desires to grant such license to Licensee on the terms and
subject to the conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties hereby agree as follows.

1. DEFINITIONS

Whenever used in the Agreement with an initial capital letter, the terms defined
in this Article 1 shall have the meanings specified.

1.1 “Affiliate” shall mean any company, corporation, partnership, limited
liability company, trust, or other business entity that directly or indirectly
controls, is controlled by, or is under common control with a designated person
or entity, and for such purpose “control” shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of the entity, whether through the ownership of voting securities, by
contract or otherwise.

1.2 “Common Stock” shall mean the common stock of Holdings, and any securities
into which such common stock may hereafter be reclassified, converted or
exchanged.

1.3 “Confidential Information” shall mean with respect to a Party (the
“Receiving Party”), all information which is disclosed by the other Party (the
“Disclosing Party”) to the Receiving Party hereunder or to any of its employees,
consultants, Affiliates, licensees or sublicensees, except to the extent that
the Receiving Party can demonstrate by written record or other suitable physical
evidence that such information, (a) as of the date of disclosure is demonstrably
known to the Receiving Party or its Affiliates other than by virtue of a prior
confidential disclosure to such Party or its Affiliates; (b) as of the date of

 

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disclosure is in, or subsequently enters, the public domain, through no fault or
omission of the Receiving Party; (c) is obtained from a Third Party having a
lawful right to make such disclosure free from any obligation of confidentiality
to the Disclosing Party; or (d) is independently developed by or for the
Receiving Party without reference to or reliance upon any Confidential
Information of the Disclosing Party. Any information in relation to the subject
matter of this Agreement disclosed by a Party under that certain Mutual
Confidentiality Agreement between the parties dated the 2nd day of July 2007
shall, subject to the foregoing exceptions, be considered Confidential
Information for purpose of this Agreement.

1.4 “Exclusive Design” shall mean those aspects of the final design of the
Licensed Product, which embody the concepts set forth on Schedule C, attached
hereto, as modified pursuant to Article 3.

1.5 “First Commercial Sale” shall mean the date of the first transaction,
transfer or disposition for value by or on behalf of Licensee or any Affiliate
or Sublicensee of Licensee to a Third Party of a Licensed Product in the United
States following the applicable regulatory clearance by the FDA (as defined
below).

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

1.7 “Guarantee and Agreement” shall mean the guarantee and agreement of Holdings
set forth in Section 11.15 hereof.

1.8 “Joint Inventions” shall have the meaning given in Section 3.3.

1.9 “Licensor Indemnitees” and “Licensee Indemnitees” (each individually an
“Indemnitee”) shall have the meaning given in Section 8.1.

1.10 “Licensed Field” shall mean: [***]

1.11 “Licensed Patent Rights” shall mean any of the patent applications
described in Schedule A attached hereto, and any divisional, continuation,
continuation-in-part (to the extent that the continuation-in-part is entitled to
the priority date of an initial patent or patent application which is the
subject of this Agreement), reissue, reexamination, registration, renewal, or
extension, or any patent issuing therefrom or any supplementary protection
certificates related thereto, and any foreign counterparts to any of the
foregoing.

1.12 “Licensed Product” shall mean any product sold by Licensee, its Affiliates
or Sublicensees that embodies or uses any aspect of the Licensed Patent Rights
and/or the Licensed Technology.

1.13 “Licensed Technology” shall mean all Technology which:

1.13.1 Licensor controls as of the Effective Date and which (i) is described in
or related to any patent or patent application included in the Licensed Patent
Rights and (ii) is necessary or useful for Licensee to practice the license
granted to it hereunder;

 

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1.13.2 is developed by Licensor as a part of its efforts contemplated by
Section 3.2;

1.13.3 Licensor controls after the Effective Date but during the Term and which
(i) it has the right to disclose and license without the payment of royalties or
other consideration to any Third Party and (ii) constitutes an improvement to
the subject matter of the Licensed Patent Rights or Licensed Technology as it
exists on the date of determination, including Licensor’s interest in any Joint
Inventions; and/or

1.13.4 Licensee controls after the Effective Date but during the Term and which
constitutes an improvement to the subject matter of the Licensed Patent Rights
or Licensed Technology as it exists on the date of determination.

1.14 “Market Launch” shall mean the first national commercial launch of any
Licensed Product.

1.15 “Net Sales” shall mean the gross amount invoiced by or otherwise payable to
Licensee, any of its Affiliates or any Sublicensee on account of sales or other
transfers of a Licensed Product anywhere in the Territory during a designated
period (and for the avoidance of doubt if such Licensed Product is sold in
kitted form, such gross amount invoiced shall include the amount invoiced for
the entire kit and/or each component thereof), less to the extent otherwise then
or previously included in amounts invoiced for such Licensed Products and in
respect of which no previous deduction was taken:

1.15.1 trade, cash and quantity discounts or rebates actually allowed or taken
on Licensed Products, including discounts or rebates to governmental or managed
care organizations;

1.15.2 credits or allowances actually given or made for rejection of, and for
uncollectible amounts (except to the extent later collected) on, or return of
previously sold Licensed Products;

1.15.3 any charges for insurance, freight, and other transportation costs
directly related to the delivery of Licensed Product to the extent included in
the gross invoiced sales price;

1.15.4 any tax, tariff, duty or governmental charge levied on the sales,
transfer, transportation or delivery of a Licensed Product (including any tax
such as a value added or similar tax or government charge), other than franchise
or income tax of any kind whatsoever; and

1.15.5 any import or export duties or their equivalent borne.

In addition, should Licensee be required, in order to lawfully exercise its
rights as to a Licensed Product, obtain additional rights in a country to
patents of any Third Parties which are not Affiliates of Licensee, which patents
are (i) pending or issued on the Effective Date, and (ii) required for Licensee
to practice the inventions described in the Licensed Patent Rights or Licensed
Technology or

 

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exercise the license granted under this Agreement for reasons not attributable
to a design selection made by Licensee for which alternative design selections
not requiring such additional rights are available, then Licensee may also
deduct from Net Sales with respect to a designated period the amount of the
royalty Licensee is required to pay to such Third Party or Parties for such
necessary rights to such patents with respect to such Licensed Product; provided
that in no event (i) shall the amount of Net Sales for any designated period be
reduced by more than [***] on account of royalties paid to Third Parties, and
any amount so disallowed shall be lost and not carried forward and (ii) no such
reduction shall be permitted with respect to additional rights obtained more
than [***] after the First Commercial Sale in such country. “Net Sales” shall
not include amounts invoiced by or otherwise payable to Licensee, any of its
Affiliates and/or any Sublicensees for Licensed Products sold or otherwise
transferred to Licensee or any of its Affiliates and/or its Sublicensees, unless
the Licensed Product is consumed by the invoiced entity.

1.16 “Shares” shall have the meaning set forth in Paragraph 4.4.1(a) hereof.

1.17 “Sublicensee” shall mean any Third Party to whom Licensee grants a
sublicense of some or all of the rights granted to Licensee under this
Agreement.

1.18 “Technology” shall mean all of the following intangible legal rights,
whether or not filed, perfected, registered or recorded, applicable to the
Licensed Field: (i) inventions, patents, patent disclosures, patent rights,
including any and all continuations, continuations-in-part, divisionals,
reissues, reexaminations, utility models, industrial designs and design patents
or any extensions thereof, (ii) rights associated with works of authorship,
including without limitation, copyrights, copyright applications and copyright
registrations and (iii) any and all proprietary ideas, inventions, discoveries,
Confidential Information, data, results, formulae, designs, specifications,
methods, processes, techniques, ideas, know-how, technical information
(including, without limitation, structural and functional information), process
information, pre-clinical information, clinical information, and any and all
proprietary control and manufacturing data and materials, whether or not
patentable.

1.19 “Term” shall have the meaning given in Section 9.1.

1.20 “Territory” shall mean all countries and jurisdictions of the world.

1.21 “Third Party” shall mean any person or entity other than Licensee, Licensor
and their respective Affiliates.

2. GRANT OF RIGHTS

2.1 License to Licensee.

2.1.1 Grant of Non-Exclusive License. Licensor hereby grants to Licensee a
non-exclusive, royalty-bearing license, including the right to grant sublicenses
in accordance with Subsection 2.1.3, under the Licensed Patent Rights and
Licensed Technology: (i) to conduct research and development in support of the
licensed uses described in clause (ii) of this Subsection, and (ii) to make,
have made, import, export, use, offer for sale or sell Licensed Products in the
Licensed Field, subject to the terms and conditions of this Agreement.

 

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2.1.2 Grant of Exclusive License. Licensor hereby grants to Licensee an
exclusive (even as to the Licensor and its Affiliates), royalty-bearing license,
including the right to grant sublicenses in accordance with Subsection 2.1.3:
(i) to conduct research and development in support of the licensed uses describe
in clause (ii) of this Subsection, and (ii) to make, have made, import, export,
use, offer for sale or sell Licensed Products in the Licensed Field to the
extent embodying the Exclusive Design, subject to the terms and conditions of
this Agreement.

2.1.3 Right to Sublicense. Licensee shall have the right to grant sublicenses,
subject to the terms of this Agreement, to all or any portion of its rights
under the license granted pursuant to this Subsection.

2.2 Right of First Discussion in Relation to Sales of Licensed Patent Rights or
Licensed Technology. In the event that Licensor decides to sell any of the
Licensed Patent Rights or Licensed Technology (subject, of course, to this
Agreement), it shall give prompt notice thereof to the Licensee. Such notice
shall include a description of the Licensed Patent Rights or Licensed Technology
to be sold. Thereafter, Licensee shall have sixty (60) days to notify Licensor
whether Licensee is interested in commencing negotiations to obtain a fully-paid
license to such Licensed Patent Rights or Licensed Technology in the Licensed
Field. If Licensee does not give such notice within such sixty (60) day period,
Licensor shall be entitled to sell such Licensed Patent Rights or Licensed
Technology as it sees fit. If Licensee gives such written notice within such
sixty (60) days, the parties shall for a further sixty (60) days from the giving
of such notice, or such longer time period as upon which the Parties mutually
agree in writing, negotiate in good faith as to the terms of such fully-paid
license in the Licensed Field, and Licensor shall not be entitled to commence
negotiations with any Third Party with respect to the sale of such Licensed
Patent Rights or Licensed Technology, or sell such Licensed Patent Rights or
Licensed Technology, until the end of such sixty (60) day or longer agreed-upon
period, after which it shall be free to negotiate or sell such intellectual
property as it sees fit.

2.3 Right of First Discussion as to New In-Field License. If, at any time during
the term of the Agreement, Licensor acquires or develops intellectual property
in respect of uses or applications within the Licensed Field (a “New In-Field
Use”) which is not included in the Licensed Technology and which Licensor has
the right to disclose and license without the payment of royalties or other
consideration to any Third Party, it shall give prompt notice thereof to the
Licensee. Such notice shall include a description of the intellectual property
which Licensor has acquired or developed. Thereafter, Licensee shall have sixty
(60) days to notify Licensor whether Licensee is interested in commencing
negotiations to obtain a license to such rights (the “New In -Field License”).
If Licensee does not give such notice within such sixty (60) day period,
Licensor shall be entitled to license such intellectual property as it sees fit.
If Licensee gives such written notice within such sixty (60) days, the parties
shall for a further sixty (60) days from the giving of such notice, or such
longer time period as upon which the Parties mutually agree in writing,
negotiate in good faith as to the terms of such New In-Field License, and
Licensor shall not be entitled to commence negotiations with any Third Party in
respect to a license of such intellectual property, or license such intellectual
property, within the Licensed Field until the end of such sixty (60) day or
longer agreed-upon period, after which it shall be free to negotiate or license
such intellectual property as it sees fit. For the sake of clarity, this
Section 2.2 does not apply to any intellectual property that is included in
Licensed Technology and, as such, is subject to the license grant under
Section 2.1.

 

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3. DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCTS.

3.1 Commercialization.

3.1.1 From and after the Effective Date, Licensee shall have full control and
authority over the development and commercialization of Licensed Products in the
Licensed Field in the Territory. Without prejudice to Section 3.3 hereof,
Licensee shall own all Technology resulting solely from the efforts of its
agents, Affiliates and employees as a part of such development and
commercialization, but for such purposes (or any other purpose of this
Agreement) Licensor shall not be considered an agent of Licensee. All activities
relating to development and commercialization under this Agreement shall be
undertaken at Licensee’s sole cost and expense.

3.1.2 Diligence. After the Effective Date, Licensee will exercise commercially
reasonable efforts to develop a Licensed Product which will pass Required
Testing, and thereafter cause the Market Launch of the first Licensed Product as
soon as practicable, such commercially reasonable efforts to take into account
the competitiveness of the marketplace, the proprietary position of the Licensed
Product, the relative potential safety and efficacy of the Licensed Product, the
cost of goods and availability of capacity to manufacture and supply the
Licensed Product at commercial scale, the profitability of the applicable
Licensed Product, and other relevant factors including, without limitation,
technical, legal, scientific or medical factors.

3.2 Licensor Assistance. Prior to the Market Launch of a Licensed Product,
Licensor agrees that it shall provide commercially reasonable assistance to the
Licensee in connection with the development and commercialization of a Licensed
Product as described in Schedule B hereto in exchange for the compensation also
described in Schedule B. Licensor shall own all Technology resulting solely from
the efforts of the agents, Affiliates and employees of Licensor as a part of
such development and commercialization, (but for such purposes (or any other
purpose of this Agreement) Licensee shall not be considered an agent of
Licensor), but such Technology shall be deemed included in the Licensed
Technology.

3.3 Joint Inventions. Technology conceived, developed or reduced to practice
jointly by employees or consultants of Licensor and Licensee during the term
hereof shall be jointly owned by them (“Joint Inventions”). For purposes of this
Section 3.3 Technology that is the subject of a patent application shall be
deemed to have been developed jointly by employees or consultants of Licensee
and Licensor, and thus be a Joint Invention, if at least one employee or
consultant of each of Licensee and Licensor is required to be named as an
inventor in such application in order for such patent to be valid, and a
comparable concept shall apply to Technology not the subject of a patent
application. Subject to its right of abandonment or other forfeiture, Licensee
shall be responsible, at its costs, for preparing, filing and, prosecuting
patent applications which are available with respect to Joint Inventions in the
United States, Japan, Germany, the United Kingdom, France, Spain and Italy (and
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it may elect), using patent counsel reasonably chosen by Licensee, and for
maintaining any patents obtained thereon. Licensee shall keep Licensor
reasonably appraised as to the prosecution of each such patent application.
Licensee agrees to send Licensor copies of all file histories and prosecution
documents for each of the patent applications of the Licensed Patent Rights,
within thirty (30) days of receipt by Licensor. Licensee shall have the right in
its discretion to abandon or otherwise cause or allow to be forfeited, any
patents or applications therefore as to Joint Inventions. Licensee shall give
Licensor at least sixty (60) days written notice prior to abandonment or other
forfeiture so as to permit, but not obligate, Licensor, to file, in the name of
Licensor, for protection as to such patent or application, at its cost and
expense, and Licensee shall have no interest in such patent or applications or
underlying Joint Inventions (which shall thereupon cease to be Joint Inventions
by shall rather be Confidential Information of Licensor). In any event each
Party will, and will cause its employees and consultants to, provide any
assistance and executed agreements and instruments as are reasonably requested
by a Party which is seeking to obtain in accordance herewith patents or other
protection with respect to any Joint Inventions.

3.4 Licensee License Grant. Licensee hereby grants to Licensor:

3.4.1 Non-exclusive License. a non-exclusive, fully-paid and royalty-free,
perpetual license, including the right to grant sublicenses, under all
Technology owned by Licensee as a result of the activities set forth in
Section 3.1: (i) to conduct research and development in support of the licensed
uses describe in clause (ii) of this Subsection, and (ii) to make, have made,
import, export, use, offer for sale or sell any component or product for
indications outside of the treatment of spinal disorders, subject to the terms
and conditions of this Agreement; and

3.4.2 Exclusive License. an exclusive, fully-paid and royalty-free, perpetual
license, including the right to grant sublicenses, under its interest in all
Joint Inventions: (i) to conduct research and development in support of the
licensed uses describe in clause (ii) of this Subsection, (ii) to make, have
made, import, export, use, offer for sale or sell any component or product for
indications outside of the treatment of spinal disorders, subject to the terms
and conditions of this Agreement, and (iii) to prosecute at Licensor’s sole cost
and for its sole benefit infringements of Joint Inventions within the scope of
the licenses granted in clauses (i) and (ii) of this Subsection 3.4.2.

4. PAYMENTS AND ROYALTIES

4.1 Initial Payment; Milestone Payments, Payment of Royalties; Royalty Rates;
and Minimum Royalties;

4.1.1 Initial Payment. Licensee shall pay Licensor a lump-sum, payment of
(i) five-hundred thousand dollars ($500,000), and (ii) five-hundred thousand
dollars ($500,000) in shares of Common Stock, with a price per share of Common
Stock for such purpose equal to the average per share NASDAQ Close/NASDAQ
Official Closing Price (as defined by NASDAQ) or a defined successor closing
price (designated by NASDAQ) on the fifteen (15) trading days prior to the date
of issuance; provided that if on any such trading day the Common Stock shall not
be listed on the NASDAQ national exchange or a similar national securities
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Licensor shall receive [***] in cash in lieu of such shares of Common Stock
(collectively the “Initial Payment”), with the cash portion of the Initial
Payment being due and payable within ten (10) business days of the Effective
Date, and the Common Stock portion of the Initial Payment being due and payable
within thirty (30) business days of the Effective Date. The Initial Payment
shall be fully-earned and non-refundable.

4.1.2 Initial Milestone Payments. Licensee shall pay milestone payments (or in
the case of the Common Stock cause the issuance thereof by Holdings) to Licensor
(each such payment or issuance a “Milestone Payment”) as specified below no more
than thirty (30) days after the occurrence of the corresponding event designated
below, unless this Agreement has been terminated prior to such due date. No
Milestone Payments described in this Subsection 4.1.2 shall be credited against
or otherwise reduce any other amounts payable hereunder.

 

Event

  

Milestone Payment

[***]

   [***]

[***]

   [***]

[***]

   [***]

4.1.3 Royalty Payments. During the Term, Licensee shall pay to Licensor within
thirty (30) days of the end of each calendar quarter earned royalties of [***]
of Net Sales during such calendar quarter. Each royalty payment shall (i) be
accompanied by a report specifying: the Net Sales (including an accounting of
deductions taken in the calculation of Net Sales) and (ii) state the applicable
exchange rate used in conversion from any foreign country’s currency to United
States Dollars (which conversion shall be determined in accordance with
Subsection 4.2.2). Earned royalties described in this Subsection 4.1.4 shall
only be credited against minimum royalties which would otherwise be due as
contemplated by Subsection 4.1.5 and shall not be credited against or otherwise
reduce any other amounts payable hereunder.

4.1.4 Minimum Royalties. Licensee shall pay Licensor the following minimum
annual royalty amounts in each calendar year listed next to such amount. No
minimum annual royalty described in this Subsection 4.1.5 shall be credited
against or otherwise reduce any other amounts payable hereunder. For a
particular calendar year, in the event that the sum of the earned royalties on
Net Sales timely paid in accordance with Subsection 4.1.4 above with respect to
the four calendar quarters of such calendar year are less than the minimum
annual royalty for such year designated below, the obligation to pay the
difference to Licensor shall accrue on the last day of such calendar year and be
payable by Licensee no later than forty-five (45) days following the end of such
calendar year:

 

Twelve (12) Months Ending

  

Minimum Annual Royalty

[***]

   [***]

[***]

   [***]

[***]

   [***]

 

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By way of illustration, if Licensee pays to Licensor during calendar year [***]
a running royalty of [***], then not later than [***], Licensee shall pay to
Licensor [***] to avoid being in breach of this Agreement.

4.1.5 One Royalty. Only one royalty shall be payable to Licensor hereunder for
each sale of a Licensed Product, notwithstanding that more than one patent or
patent claim reads upon such Licensed Product and/or such Licensed Product
embodies or was made using one or more aspects of Licensed Technology.

4.2 Payment, Conversion and Withholding.

4.2.1 Payment. All payments hereunder shall originate in the United States and
be made in United States dollars. Licensor hereby directs that all payments,
save payments for services and expense reimbursement as contemplated by
Section 3.2, be divided as follows and paid by wire transfer or other means
reasonably selected by the payee to the following persons or as they shall
direct from time to time:

 

[***]

   [***]

[***]

   [***]

4.2.2 Conversion. Conversion of foreign currency to United States dollars shall
be made at the conversion rate existing in the United States (as reported in The
Wall Street Journal) on the last business day of the quarter immediately
preceding the applicable calendar quarter. If The Wall Street Journal ceases to
be published, then the rate of exchange to be used shall be that reported in
such other business publication of national circulation in the United States as
the Parties reasonably agree.

4.2.3 Tax Withholding; Restrictions on Payment. All taxes, assessments and fees
of any nature levied or incurred on account of any payments from Licensee to
Licensor accruing under this Agreement, by national, state or local governments,
will be assumed and paid by Licensee, except taxes levied thereon as income to
Licensor and if such taxes are required by applicable law to be withheld by
Licensee they will be deducted from payments due to Licensor and will be timely
paid by Licensee to the proper taxing authority for the account of Licensor, a
receipt or other proof of payment therefore secured and sent to Licensor as soon
as practicable. Licensee shall remit all payments to Licensor hereunder from
within the United States.

4.3 Records Retention; Review.

4.3.1 Royalties. Licensee shall keep accurate books and accounts of the
computation of the number of Licensed Products sold and the Net Sales of
Licensee, its Affiliates and Sublicensees of Licensed Products, and shall cause
such Affiliates and Sublicensees to keep such records of their respective sales
of Licensed Products and Net Sales of Licensed Products, in sufficient detail to
permit accurate determination of all figures necessary for verification of
payments required to be paid hereunder, which books and accounts shall be
maintained for at least three (3) years from the end of the calendar year to
which they pertain.

 

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4.3.2 Review. At the request of Licensor, which shall not be made more
frequently than once per calendar year during the Term, on a business day
designated by Licensor upon at least thirty (30) days’ prior written notice to
Licensee, Licensee shall permit, under confidentiality obligations with terms
substantially the same as those hereunder, an independent certified public
accountant reasonably selected by Licensor and reasonably acceptable to Licensee
to inspect (during regular business hours) the relevant records required to be
maintained by Licensee under Subsection 4.3.1. In the event such inspection
reveals an underpayment, such underpayment shall be due and payable by Licensee
within thirty (30) days of the date of such inspection, together with interest
thereon from the date the amount due but unpaid was first due until the date
paid, at the lower of 12% per annum or the maximum rate permitted by applicable
law. Such inspection shall be at the expense of Licensor unless there is an
underpayment that differs by greater than five percent (5%) from the amount that
was otherwise due, in which event Licensee shall also pay the reasonable costs
of the inspection. The foregoing is without prejudice to the right of Licensee
to dispute the conclusion of the accountant, but such dispute shall not relieve
Licensee of its obligation to pay interest and, under the circumstances
described, costs of inspection as to amount actually due.

4.4 Matters Related to the Issuance of Common Stock.

4.4.1 Representations, Warranties and Certain Covenants of the Licensee. The
Licensee represents, warrants and covenants that:

(a) Assuming the covenant of Licensor contained in Subsection 4.4.2 of this
Agreement is complied with, the issuance to Licensor of each share of Common
Stock (all shares so issued the “Shares”) will be in compliance with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the securities.

(b) The execution, delivery and performance of this Agreement by Holdings, the
issuance and sale of the Shares and the consummation by Holdings of the other
transactions by it contemplated hereby do not and will not on the date of the
issuance and sale of the Shares(i) conflict with or violate any provision of
Holdings’ or any of its subsidiaries certificates or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien or encumbrance
upon any of the properties or assets of Holdings or any of its subsidiaries, or
give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument or other understanding to which
Holdings or any of its subsidiaries is a party or by which any property or asset
of Holdings or any such subsidiary is bound or affected, in each case with
respect to this Subsection (ii), to a degree that would have a material adverse
effect on the assets or results of operations of Holdings or its subsidiaries
when considered as a whole (a “Material Adverse Effect”), or (iii) conflict with
or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which Holdings or any such subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of Holdings
or any such subsidiary is bound or affected, in each case with respect to this
Subsection (iii), to a degree that would have a Material Adverse Effect.

 

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(c) Prior to the issuance of the Shares, Holdings shall obtain all consents,
approvals, orders, authorizations or registrations, qualifications,
designations, declarations, and make all filings or registrations with any court
or other federal, state, local or other governmental authority or other person
that is required in order to issue the Shares.

(d) The Shares, when issued in accordance herewith, will be (i) duly authorized,
(ii) duly and validly issued, (iii) fully paid and nonassessable, and (iv) free
and clear of all liens imposed by Holdings, other than restrictions on transfer
provided for herein.

(e) At all times prior to the second anniversary of the last issuance of the
Shares during which there are Shares outstanding which have not been previously
(i) sold or transferred to or through a broker or dealer or underwriter in a
public distribution, or (ii) sold or transferred in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the “Securities Act”), in the case of either Subsection (i) or
Subsection (ii) in such a manner that, upon the consummation of such sale or
transfer, all transfer restrictions and restrictive legends with respect to such
Shares are removed upon the consummation of such sale or transfer, Holdings
shall use its commercially reasonable efforts to: (1) comply with the
requirements of Rule 144(c) under the Securities Act with respect to current
public information about Holdings, and (2) furnish to the Licensor such
non-publicly available reports and documents of Holdings as Licensor may
reasonably request to avail itself of Rule 144 of the Securities Act, or any
similar rule or regulation of the United States Securities Exchange Commission
allowing Licensor to sell the Shares without registration.

4.4.2 Representations and Warranties of the Licensor. The Licensor represents
and warrants that (i) it is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D of the Securities Act; (ii) it is acquiring the
Shares for investment for the Licensor’s own account and not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
without prejudice, however, to Licensor’s right to at all times to sell or
otherwise dispose of any or all of the Shares so issued in compliance with
applicable federal and state securities laws and (iii) it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of such Shares.

4.4.3 Restrictions on the Shares. Licensor understands and agrees that the
Shares may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Shares or any
available exemption from registration under the Securities Act, the Shares must
be held indefinitely. The Licensor agrees and acknowledges that the following
legend will be placed on the back of any certificate evidencing the Shares:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT

BEEN REGISTERED UNDER THE SECURITIES ACT OF

1933, AS AMENDED, AND MAY NOT BE SOLD,

TRANSFERRED, ASSIGNED OR HYPOTHECATED

UNLESS THERE IS AN EFFECTIVE REGISTRATION

STATEMENT UNDER SUCH ACT COVERING SUCH

SECURITIES, THE SALE IS MADE IN ACCORDANCE

 

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WITH RULE 144 UNDER THE ACT, OR THE

CORPORATION RECEIVES AN OPINION OF COUNSEL

FOR THE HOLDER OF THESE SECURITIES

REASONABLY SATISFACTORY TO THE

CORPORATION, STATING THAT SUCH SALE,

TRANSFER, ASSIGNMENT OR HYPOTHECATION IS

EXEMPT FROM THE REGISTRATION AND

PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

4.4.4 Limitation on the Number of Shares Issued. Notwithstanding anything to the
contrary in this Agreement, in no event shall the aggregate number of Shares
issued pursuant to this Agreement be greater than 19.9% of the number of shares
of Common Stock outstanding on the Effective Date. In the event that an issuance
of Shares pursuant to this Agreement would cause an aggregate issuance of Shares
that is more than 19.9% of the number of shares Common Stock outstanding on the
Effective Date, the Licensee shall make a cash payment to the Licensor equal to
the difference between cash value of the Shares that were scheduled to be issued
pursuant to this Agreement, and the value of the Shares that were actually
issued after giving effect to the limitation set forth in this Section 4.4.4.

5. TREATMENT OF CONFIDENTIAL INFORMATION

5.1 Confidential Obligations. Licensor and Licensee each recognize that the
other Party’s Confidential Information constitutes highly valuable and
proprietary confidential information. Licensor and Licensee each agree that
during the Term and for [***] thereafter, it will keep confidential, and will
cause its employees, consultants, Affiliates and sublicensees to keep
confidential, all Confidential Information of the other Party. Neither Licensor
nor Licensee nor any of their respective employees, consultants, Affiliates or
sublicensees shall use Confidential Information of the other Party for any
purpose whatsoever other than exercising any rights granted to it or reserved by
it hereunder. Without limiting the foregoing, each Party may disclose
information to the extent such disclosure is reasonably necessary to (a) file,
prosecute or defend litigation in accordance with the provisions of this
Agreement or (b) comply with applicable laws, regulations (including those of
the United States Securities Exchange Commission) or court orders; provided,
however, that if a Party is required to make any such disclosure of the other
Party’s Confidential Information in connection with any of the foregoing, it
will give reasonable advance notice to the other Party of such disclosure
requirement and will use reasonable efforts to cooperate with such other Party
in efforts to secure confidential treatment of such information required to be
disclosed. Each Party agrees that any Confidential Information disclosed by a
Party under that certain Mutual Confidentiality Agreement between the Parties
dated the 2nd day of July 2007 shall be protected by the obligations set forth
therein through the date hereof and from and after the date hereof shall be
protected by the obligations as to Confidential Information set forth herein so
as to be continuously protected.

5.2 Limited Disclosure and Use. Licensor and Licensee each agree that any
disclosure of the other Party’s Confidential Information to any officer,
employee, consultant or agent of the other Party or any of its Affiliates or
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only if and to the extent necessary to carry out its rights and responsibilities
under this Agreement, shall be limited to the maximum extent possible consistent
with such rights and responsibilities and shall only be made to the extent any
such persons are bound by written confidentiality obligations to maintain the
confidentiality thereof and not to use such Confidential Information except as
expressly permitted by this Agreement. Licensor and Licensee each further agree
not to disclose or transfer the other Party’s Confidential Information to any
Third Parties under any circumstance without the prior written approval from the
other Party (such approval not to be unreasonably withheld), except as otherwise
required by law, and except as otherwise expressly permitted by this Agreement.
Each Party shall take such action, and shall cause its Affiliates or
Sublicensees to take such action, to preserve the confidentiality of each
other’s Confidential Information as it would customarily take to preserve the
confidentiality of its own Confidential Information, using, in all such
circumstances, not less than reasonable care. Each Party, upon the request of
the other Party, will return all the Confidential Information disclosed or
transferred to it by the other Party pursuant to this Agreement, including all
copies and extracts of documents and all manifestations in whatever form, within
sixty (60) days of such request or, if earlier, the termination or expiration of
this Agreement; provided however, that a Party may retain (i) any Confidential
Information of the other Party relating to any license which expressly survives
such termination, and (ii) one (1) copy of all other Confidential Information in
inactive archives in legal counsel’s files solely for the purpose of
establishing the contents thereof.

5.3 Publicity. Neither Party may publicly disclose the existence or terms or any
other matter of fact regarding this Agreement without the prior written consent
of the other Party, which consent shall not be unreasonably withheld or delayed;
provided, however, that either Party may make such a disclosure (i) to the
extent required by law or by the requirements of any nationally recognized
securities exchange, quotation system or over-the-counter market on which such
Party has its securities listed or traded, or (ii) with respect to Licensee, to
any prospective Sublicensees, or to investors, prospective investors, lenders
and other potential financing sources, who are obligated to keep such
information confidential. The Parties, upon the execution of this Agreement,
will mutually agree to a press release with respect to this transaction for
publication. Once such press release or any other written statement is approved
for disclosure by both Parties, neither Party may make subsequent public
disclosure of the contents of such statement without the further approval of the
other Party.

5.4 Use of Name. Neither Party shall employ or use the name of the other Party
in any promotional materials or advertising without the prior express written
permission of the other Party.

6. PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF PATENT
RIGHTS

6.1 Patent Filing, Prosecution and Maintenance as to Licensed Patent Rights.
Subject to its right of abandonment or other forfeiture, Licensor shall be
responsible, at its cost, for preparing, filing and prosecuting the patent
applications listed in Schedule A, and available foreign counterparts to such
patent applications in [***] using patent counsel reasonably chosen by Licensor
(which in any event includes Levine Bagade Han LLP), and for maintaining any
patents obtained thereon. Licensor shall keep Licensee reasonably appraised as
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“Prosecution”) of each such patent application. Licensor agrees to send Licensee
copies of all file histories and Prosecution documents for each of the patent
applications of the Licensed Patent Rights, within thirty (30) days of receipt
by Licensor. Licensor shall have the right in its discretion to abandon or
otherwise cause or allow to be forfeited, any Licensed Patent Rights (each a
“Discontinued Patent”). Licensor shall give Licensee at least sixty (60) days
written notice (a “Discontinuation Notice”) prior to abandonment or other
forfeiture of any such Discontinued Patent (the “Discontinuation Notice Period”)
so as to permit Licensee to exercise its rights under Section 6.3.

6.2 Requests for Other Patent Filing, Prosecution and Maintenance. Licensee may
reasonably request that Licensor seek patent protection of the Licensed Patent
Rights and/or Licensed Technology in addition to that contemplated by
Section 6.1 by written notice to Licensor.

6.3 Right to Effect Other Patent Filing, Prosecution and Maintenance. Subject to
any right of another licensee with respect to all or part of the Licensed Patent
Rights or Licensed Technology existing as of the Effective Date, as to any
Discontinued Patent or as to any patent with respect to which Licensor refuses
in its discretion to seek such additional patent protection in response to a
request from Licensee in accordance with Section 6.2 (a “Refused Patent”),
Licensee shall have the right, but not the obligation, to give Licensor notice
of its intent to continue the Prosecution of such Discontinued Patent or Refused
Patent. Subject to any right of another licensee with respect to all or part of
the Licensed Patent Rights or Licensed Technology existing as of the Effective
Date, if Licensee gives such notice to Licensor, Licensor shall continue to
Prosecute the Discontinued Patent or Refused Patent at the reasonable direction
of Licensee. Licensee shall pay to Licensor its pro rata share of Prosecution
costs (based on the number of licensees after the Effective Date, including the
Licensee and any licensees that acquire rights to the Licensed Patent Rights and
Licensed Technology after the Effective Date, but specifically not including any
licensee of the Licensed Patent Rights and Licensed Technology prior to the
Effective Date, or any licensee that opts out of making its pro-rata payment to
Prosecute a Discontinued Patent or Refused Patent), which will be divided
equally between Licensee and all such non-excluded licensees that have acquired
rights to exploit such Discontinued Patent or Refused Patent and have not opted
out. Other than with respect to any licensee of the Licensed Patents right that
has entered into a license agreement prior to the Effective Date, if any
licensee to the Discontinued Patent or Refused Patent, including Licensee, opts
not to support continued Prosecution or does not pay its pro rata share of the
costs of Prosecution (based on the number of licensees after the Effective Date,
including the Licensee and any licensees that acquire rights to the Licensed
Patent Rights and Licensed Technology after the Effective Date, but specifically
not including any licensee of the Licensed Patent Rights and Licensed Technology
prior to the Effective Date, or any licensee that opts out of making its
pro-rata payment to Prosecute a Discontinued Patent or Refused Patent), such
licensee shall have no further rights or licenses to exploit the Discontinued
Patent or Refused Patent. The Licensor shall covenant that any licenses granted
to exploit the Licensed Patent Rights after the Effective Date shall contain
language regarding Discontinued Patents or Refused Patents that is materially
identical to the foregoing language set forth in this Section 6.3. Licensee
shall have the right to deduct from Net Sales, on a country-by-country basis,
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amount of such costs paid to Licensor by Licensee to Prosecute each such
Discontinued Patents and Refused Patents that Licensee has filed in such country
in the name of Licensor. All such Discontinued Patents or Refused Patents filed
by Licensee in the name of Licensor shall be included in the Licensed
Technology. Nothing in this Section 6.3 shall be deemed to limit Licensor’s
right to file, Prosecute or maintain patent applications at its own expense in
any country.

6.4 Notice of Infringement or Claims. If, during the Term, either Party learns
of any (i) actual, alleged or threatened infringement by a Third Party of any
Licensed Patent Rights or Licensed Technology, (ii) attack on the enforceability
or validity of any Licensed Patent Rights or Licensed Technology, or (iii) claim
by a Third Party alleging that the development or commercialization of a
Licensed Product infringes or otherwise violates the intellectual property
rights of such Third Party, then such Party shall promptly notify the other
Party of the same and shall provide such other Party with available details as
to and evidence of such infringement, suit or claim.

6.5 Infringement. Licensor shall have the exclusive right but not the obligation
to claim and take legal action against, in its own name to the extent
permissible by law, third parties for infringement or misappropriation of any
Licensed Patent Rights or Licensed Technology. If Licensee is requested by
Licensor to join a lawsuit under this subparagraph, whether or not Licensee is
considered to be an indispensable party, it shall so join.

6.6 Certain Patent Filing, Prosecution and Maintenance as to Exclusive Design.
Subject to its right of abandonment or other forfeiture, Licensor shall be
responsible, at its cost, for preparing, filing and Prosecuting the patent
applications as it determines, after consultation with Licensee, is commercially
reasonable in relation to technology associated with the Exclusive Design using
patent counsel reasonably chosen by Licensor (which in any event includes Levine
Bagade Han LLP), and for maintaining any patents obtained thereon (each a
“Design Patents”). Licensor shall keep Licensee reasonably apprised as to the
prosecution of each such patent application. Licensor agrees to send Licensee
copies of all file histories and prosecution documents for each of the patent
applications of the Design Patents, within thirty (30) days of receipt by
Licensor. Licensor shall have the right in its discretion to abandon or
otherwise cause or allow to be forfeited, any patent or application therefore in
relation to technology associated with the Exclusive Design (each a “Design
Discontinued Patent”). Licensor shall give Licensee at least sixty (60) days
written notice prior to abandonment or other forfeiture of any such Design
Discontinued Patent so as to permit Licensee to exercise its rights under
Section 6.8.

6.7 Requests for Other Patent Filing, Prosecution and Maintenance. Licensee may
reasonably request that Licensor seek patent protection as to the Exclusive
Design in addition to that contemplated by Section 6.6 by written notice to
Licensor.

6.8 Right to Effect Other Patent Filing, Prosecution and Maintenance. As to any
Design Discontinued Patent or as to any patent with respect to which Licensor
refuses in its discretion to seek such additional patent protection in response
to a request from Licensee in accordance with Section 6.7 (a “Design Refused
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obligation, to file, in the name of Licensor, for protection as to such Design
Discontinued Patent or Design Refused Patent. Licensee shall bear all costs
associated with the preparation, filing, Prosecuting and maintenance of all such
Design Discontinued Patents and Design Refused Patents; provided that Licensee
shall have the right to deduct from Net Sales, on a country-by-country basis,
[***] of the amount of such costs borne by Licensee with respect to each such
Design Discontinued Patents and Design Refused Patents that Licensee has filed
in such country in the name of Licensor. All such Design Discontinued Patents or
Design Refused Patents filed by Licensee in the name of Licensor shall be
included in the Licensed Technology. Nothing in this Section 6.8 shall be deemed
to limit Licensor’s right to file, prosecute or maintain patent applications at
its own expense in any country.

6.9 Notice of Infringement or Claims. If, during the Term, either Party learns
of any (i) actual, alleged or threatened infringement by a Third Party of any
Design Patent, (ii) attack on the enforceability or validity of any Design
Patent, or (iii) claim by a Third Party alleging that the development or
commercialization of a Licensed Product embodying the Exclusive Design infringes
or otherwise violates the intellectual property rights of such Third Party, then
such Party shall promptly notify the other Party of the same and shall provide
such other Party with available details as to and evidence of such infringement,
suit or claim.

6.10 Infringement of Design Patents. Licensee shall have the first right (but
not the obligation), at its own expense and with legal counsel of its own
choice, to bring suit (or take other appropriate legal action) against any
actual, alleged or threatened infringement of any Design Patent in the Licensed
Field. Such right includes the right to settle the infringement claim, provided
that such settlement may not encompass matters beyond the scope of the license
grant set forth in Section 2.1.2 and if such settlement would include Licensee’s
agreement to the invalidity or unenforceability of any claim within any Design
Patent, Licensor must first approve in writing such settlement, which approval
shall not be unreasonably withheld. Any damages, monetary awards or other
amounts recovered, whether by judgment or settlement, pursuant to any suit,
proceeding or other legal action taken by Licensee under this Section 6.10,
shall applied as follows:

(a) first, to reimburse the cost of Licensee for its reasonable costs and
expenses (including reasonable attorneys’ fees and costs) incurred in
prosecuting such enforcement action;

(b) second, to reimburse the costs of Licensor for its reasonable costs and
expenses (including reasonable attorneys’ fees and costs) incurred in such
enforcement action;

(c) third, to Licensee in reimbursement for lost sales associated with Licensed
Products and to Licensor in reimbursement for lost royalties, it being agreed
that for such purpose such lost sales shall equate to Net Sales; and

(d) fourth, any amounts remaining shall be allocated to each Party on a pro rata
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If Licensee brings any such action or proceeding hereunder, Licensor agrees to
be joined as party plaintiff if necessary to prosecute such action or
proceeding, and to give Licensee reasonable assistance and authority to file and
prosecute the suit. Licensee shall bear Licensor’s costs, including costs of
responding to discovery, arising from involvement in such action or proceeding
as and when incurred, subject to clause (a) of this Section 6.10; provided that
in the event Licensor elects to actively participate in such action by counsel
of Licensor’s own choice, the incremental expense thereof shall be Licensor’s,
subject to clause (b) of this Section 6.10. In no event shall Licensor being a
party to or represented in any such action by Licensee affect the right of
Licensee to control the suit as described in the first sentence of this
Section 6.10. If Licensee fails to take any action it is permitted to take by
this Section 6.10 to obtain a discontinuance of such infringement or to bring
suit against the infringer within four (4) months of having knowledge of such
infringement, Licensor shall have the right but not the obligation to enforce
the Design Patents at its expense and for its sole benefit. For the avoidance of
doubt, neither Licensee’s nor Licensor’s failure to enforce any Design Patent in
any way affects the rights granted to or responsibilities of Licensee under the
Agreement.

7. REPRESENTATIONS AND WARRANTIES

7.1 Representations and Warranties of Licensor. As of the Effective Date,
Licensor represents and warrants to Licensee as follows:

7.1.1 it owns and controls the Licensed Patents Rights and Licensed Technology
and has the right to grant the non-exclusive licenses within the Licensed Field
free and clear of all encumbrances, and no Third Party has notified Licensor
that the Third Party is claiming any ownership of or right to the Licensed
Patents Rights or Licensed Technology;

7.1.2 it has not received any notice of invalidity or infringement of any of the
Licensed Patent Rights or Licensed Technology; and

7.1.3 it is not a party to any agreements which would be inconsistent with the
licenses granted herein or the exercise of the license granted under this
Agreement.

7.2 Representations and Warranties of each Party and Holdings. As of the
Effective Date, each Party and Holdings represents and warrants as follows:

7.2.1 the execution, delivery and performance of this Agreement will not
constitute a violation, be in conflict with, or result in a breach of any
agreement or contract to which it is bound;

7.2.2 it is a corporation or entity duly organized and validly existing under
the laws of the state or other jurisdiction of incorporation or formation;

7.2.3 the execution, delivery and performance of this Agreement by it has been
duly authorized by all requisite corporate action and do not require any
shareholder action or approval;

7.2.4 it has the power and authority to execute and deliver this Agreement and
to perform its obligations hereunder; and

7.2.5 it shall at all times comply with all applicable material laws and
regulations relating to its activities under the Agreement

 

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7.3 No Warranties. Nothing in this Agreement is or shall be construed as a
warranty or representation that anything made, used, sold or otherwise disposed
of under any license granted pursuant to this Agreement is or will be free from
infringement of patents, copyrights, and other rights of Third Parties. EXCEPT
AS EXPRESSLY SET FORTH IN THIS ARTICLE 7, EACH PARTY EXCLUDES ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING AMONG SUCH
EXCLUDED REPRESENTATIONS AND WARRANTIES ANY AND ALL REPRESENTATIONS OR
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

8. INDEMNIFICATION

8.1 Indemnification.

8.1.1 Licensee Indemnity. Licensee shall indemnify, defend and hold harmless
Licensor, its Affiliates and their respective directors, officers, employees,
stockholders and agents and their respective successors, heirs and assigns (the
“Licensor Indemnitees”) from and against any claims, liability, damage, loss or
expense (including reasonable attorneys’ fees and expenses of litigation)
incurred by or imposed upon such Licensor Indemnitee, or any of them, in
connection with any Third Party claims, suits, actions, demands or judgments to
the extent arising out of or related to (i) the design, development, testing,
production, manufacture, supply, promotion, marketing, importation, sale, use or
instructions for use of any Licensed Product (or any component thereof)
manufactured or sold by Licensee or any Affiliate or Sublicensee under this
Agreement, including without limitation any claims that (a) the design of any
Licensed Product by Licensee infringed the intellectual property right of any
Third Party or (b) any Licensed Product manufactured or sold by Licensee or any
Affiliate or Sublicensee under this Agreement caused the death of any person or
any injury to any person or property, (ii) any material breach of any
representation or warranty by Licensee in Article 7 of this Agreement.

8.1.2 Licensor Indemnity. Licensor shall indemnify, defend and hold harmless
Licensee, its Affiliates and their respective directors, officers, employees,
stockholders and agents and their respective successors, heirs and assigns (the
“Licensee Indemnitees”) from and against any claims, liability, damage, loss or
expense (including reasonable attorneys’ fees and expenses of litigation)
incurred by or imposed upon such Licensee Indemnitee, or any of them, in
connection with any Third Party claims, suits, actions, demands or judgments to
the extent arising out of any material breach of any representation or warranty
by Licensor in Article 7 of this Agreement.

8.2 Indemnification Procedures. In the event that any Indemnitee is seeking
indemnification under Section 8.1 above from a Party (the “Indemnifying Party”),
the Indemnitee shall notify the Indemnifying Party of such claim with respect to
such Indemnitee as soon as reasonably practicable after the Indemnitee receives
notice of the claim, and the Party seeking indemnification, on behalf of itself
and such Indemnitee, shall permit the Indemnifying Party to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration) and shall cooperate as requested (at the
expense of the Indemnifying Party) in the defense of the claim. The
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Article 8 shall not apply to any harm suffered as a direct result of any delay
in notice to the Indemnifying Party hereunder or to amounts paid in settlement
of any claim, demand, action or other proceeding if such settlement is effected
without the consent of the Indemnifying Party, which consent shall not be
withheld or delayed unreasonably. The Indemnitee, its employees and agents,
shall reasonably cooperate with the Indemnifying Party and its legal
representatives in the investigation of any claim, demand, action or other
proceeding covered by Section 8.1.

9. TERM AND TERMINATION

9.1 Expiration. The term of this Agreement shall commence on the Effective Date
and expire twenty (20) years after the First Commercial Sale (the “Term”).
Following the Term, Licensee shall have a fully paid-up, irrevocable, freely
transferable and sublicensable license in the Territory under the Licensed
Patent Rights and Licensed Technology, to develop, have developed, make, have
made, use, have used, sell, have sold, offer for sale, import and have imported
any and all Licensed Products in the Licensed Field.

9.2 Termination Rights for Breach and Voluntary Termination.

9.2.1 Termination for Breach. Subject to the other terms of this Agreement, this
Agreement and the rights granted herein may be terminated by either Party upon
any material breach by the other Party of any material obligation or condition,
effective ninety (90) days after giving written notice to the breaching Party of
such termination, which notice shall describe such breach in reasonable detail.
The foregoing notwithstanding, if such material breach is cured or remedied or
shown to be non-existent or not to be material within the aforesaid ninety
(90) day period, the notice shall be automatically withdrawn and of no effect.

9.2.2 Voluntary Termination. Licensee shall have the right to terminate this
Agreement effective as of the first day of any calendar year upon not less than
ninety (90) days prior written notice to Licensor.

9.3 Effects of Termination.

9.3.1 Certain Effects of Termination. Upon any termination of this Agreement:
(i) as of the effective date of such termination all relevant licenses and
sublicenses granted by Licensor to Licensee hereunder, and any sublicense
granted by Licensee to any Sublicensee, shall terminate automatically, (ii) all
payment or other rights or obligations accrued hereunder prior to termination
shall survive the expiration or termination of the Term; (iii) except in respect
of a termination by Licensor under Subsection 9.2.1, Licensee and its Affiliates
and Sublicensees shall have the right, for nine (9) months or such longer time
period as upon which the Parties mutually agree in writing, to sell or otherwise
dispose of all finished Licensed Products then on hand, with royalties to be
paid to Licensor on all Net Sales of such Licensed Products as provided for in
this Agreement; and (iv) by Licensor under Subsection 9.2.1 or by Licensee under
Subsection 9.2.2 (other than because Licensee shall have reasonably concluded
that notwithstanding its commercially reasonable efforts, no commercially viable
Licensed Product is developable and marketable) Licensee shall not, nor shall it
permit its Affiliates to, for a period of [***] following such termination in
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Sale and for a period of [***] following such termination in the event such
termination is effective on or after the First Commercial Sale, engage in any
business anywhere in the Territory, whether as a sole proprietor, partner,
shareholder, consultant, agent, independent contractor, trustee or otherwise, to
hold any beneficial interest in any business, incorporated or otherwise, which
designs, develops, tests, produces, manufactures, supplies, promotes, markets,
imports or sells any product in the Licensed Field that are similar to the
Exclusive Design (a “Competing Business”), derive any income from any interest
in a Competing Business, or provide any service or assistance to a Competing
Business; provided that the foregoing will not restrict Licensee from owning a
passive interest of less than five percent (5.0%) of the outstanding stock of a
corporation engaged in a Competing Business.

9.4 Remedies. Except as otherwise expressly set forth in this Agreement, the
termination provisions of this Article 9 are in addition to any other relief and
remedies available to either Party at law.

9.5 Surviving Provisions. Notwithstanding any provision herein to the contrary,
the rights and obligations of the Parties set forth in Subsections 3.1.1 (with
respect to Licensee’s ownership of Technology), Sections 3.3, 3.4, 4.3, 7.3,
9.3, 9.4, 9.5 and Articles 5, 8, 10, and 11 (to the extent relevant) shall
survive the expiration or termination of this Agreement.

10. DISPUTES

10.1 Negotiation. The Parties recognize that a bona fide dispute as to certain
matters may from time to time arise during the term of this Agreement that
relates to either Party’s rights and/or obligations hereunder. In the event of
the occurrence of such a dispute, either Party may, by written notice to the
other Party, have such dispute referred to their respective senior officials
designated below or their successors, for attempted resolution by good faith
negotiations within sixty (60) days after such notice is received. Said
designated senior officials are as follows:

For Licensee: President and Chief Executive Officer

For Licensor: Chief Executive Officer

In the event the designated senior officials are not able to resolve such
dispute within the sixty (60) day period, either Party may invoke the provisions
of Section 10.2.

10.2 Arbitration. Subject to Section 10.1, any dispute, controversy or claim
initiated by either Party arising out of, resulting from or relating to this
Agreement, or the performance by either Party of its obligations under this
Agreement (other than bona fide Third Party actions or proceedings filed or
instituted in an action or proceeding by a Third Party against a Party), whether
before or after termination of this Agreement, shall be finally resolved by
binding arbitration. Whenever a Party shall decide to institute arbitration
proceedings, it shall give written notice to that effect to the other Party. Any
such arbitration shall be conducted under the Commercial Arbitration Rules of
the American Arbitration Association by one arbitrator appointed in accordance
with such rules. Any such arbitration shall be held in New York, New York. The
method and manner of discovery in any such arbitration proceeding shall be
governed by the laws of the State of New York. The arbitrator shall have the
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to grant injunctions and/or specific performance and to allocate between the
parties the costs of arbitration in such equitable manner as they determine.
Judgment upon the award so rendered may be entered in any court having
jurisdiction or application may be made to such court for judicial acceptance of
any award and an order of enforcement, as the case may be. In no event shall a
demand for arbitration be made after the date when institution of a legal or
equitable proceeding based upon such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Notwithstanding the
foregoing, either Party shall have the right, without waiving any right or
remedy available to such Party under this Agreement or otherwise, to seek and
obtain from any court of competent jurisdiction any interim or provisional
relief that is necessary or desirable to protect the rights or property of such
Party, pending the selection of the arbitrators hereunder or pending the
arbitrators’ determination of any dispute, controversy or claim hereunder.

11. MISCELLANEOUS

11.1 Notification. All notices, requests and other communications hereunder
shall be in writing, shall be addressed to the receiving Party’s address set
forth below or to such other address as a Party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) sent by
nationally-recognized overnight courier service providing evidence of receipt,
or (iii) sent by registered or certified mail, return receipt requested, postage
prepaid. The addresses and other contact information for the parties are as
follows:

 

If to Licensor:   

Stout Medical Group LP

410 East Walnut Street, Suite #8,

Perkasie, Pennsylvania 18944

(215) 450-8860 (ext. 102)

Attn: Chief Executive Officer

With a copy to:    [***] With a copy to:   

Oppenheimer Wolff & Donnelly

Plaza VII Building, Suite 3300

45 South Seventh Street

Minneapolis, Minnesota 55402

(612) 607-7397

Attn: Dennis P. Whelpley

If to Licensee:   

Alphatec Spine, Inc.

2051 Palomar Airport Road, Suite 100

Carlsbad, CA 92011

(760) 431-9286 (ext. 169)

Attn: President and CEO

With a copy to:   

Heller Ehrman LLP

Times Square Tower

7 Times Square

New York, New York 10036

 

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Attention: Blaine Templeman

Telephone: (212) 847-8572

Fax: (212) 763-7600

Email: blaine.templeman@hellerehrman.com

All notices, requests and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the
receiving Party at the address of such Party set forth above, (ii) if made by
telecopy or facsimile transmission, at the time that receipt thereof has been
acknowledged by the recipient, (iii) if sent by nationally-recognized overnight
courier, on the day such notice is delivered to the recipient, or (iv) if sent
by registered or certified mail, on the fifth (5th) business day following the
day such mailing is made.

11.2 Governing Law. This Agreement will be construed and interpreted in
accordance with the laws of the State of New York.

11.3 Limitations. Except as expressly set forth in this Agreement, neither Party
grants to the other Party any right or license to any of its intellectual
property.

11.4 Entire Agreement. This is the entire Agreement between the Parties with
respect to the subject matter hereof and supersedes all prior representations,
understandings and agreements between the Parties with respect to the subject
matter hereof. No modification shall be effective unless in writing with
specific reference to this Agreement and signed by the Parties. No modification
shall be effective unless in writing with specific reference to this Agreement
and signed by the Parties. No modification shall be effective unless in writing
with specific reference to this Agreement and signed by the Parties; provided
that no modification to this Agreement may be made without the prior written
consent of Hawk Healthcare, LLC if such modification both: (i) will materially
and adversely affect the stream of payments made directly to Hawk Healthcare,
LLC under Subsection 4.1 hereof and (ii) does not proportionately effect the
parallel payments made to Licensor under such Subsection.

11.5 Waiver. The terms or conditions of this Agreement may be waived only by a
written instrument executed by the Party waiving compliance. The failure of
either Party at any time or times to require performance of any provision hereof
shall in no manner affect its rights at a later time to enforce the same. No
waiver by either Party of any condition or term shall be deemed as a continuing
waiver of such condition or term or of another condition or term.

11.6 Headings. Section, Subsection and Paragraph headings are inserted for
convenience of reference only and do not form part of this Agreement.

11.7 Assignment. Neither this Agreement nor any right or obligation hereunder
may be assigned, delegated or otherwise transferred, in whole or part, by either
Party without the prior express written consent of the other Party; provided
that a Party may freely assign this Agreement, including all rights and
obligations hereunder, at any time to any entity acquiring in the same
transaction substantially all of such Party’s business and assets, including
those to which this Agreement relates, whether by way of sale, merger,
consolidation or other transaction without the prior written consent of the
other Party. Any permitted assignee shall assume all obligations of its assignor
under this Agreement. Any purported assignment in violation of this Section 11.7

 

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shall be void. The terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the permitted successors and assigns of the parties.

11.8 Force Majeure. Neither Party shall be liable for failure of or delay in
performing obligations set forth in this Agreement, and neither shall be deemed
in breach of its obligations, for so long as and to the extent that such failure
or delay is due to natural disasters or any causes beyond the reasonable control
of such Party. In event of such force majeure, the Party affected thereby shall
use reasonable efforts to cure or overcome the same and resume performance of
its obligations hereunder.

11.9 Construction. The Parties hereto acknowledge and agree that: (i) each Party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting Party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all Parties hereto
and not in favor of or against any Party, regardless of which Party was
generally responsible for the preparation of this Agreement.

11.10 Severability. If any provision(s) of this Agreement are or become invalid,
are ruled illegal by any court of competent jurisdiction or are deemed
unenforceable under then current applicable law from time to time in effect
during the Term hereof, it is the intention of the Parties that the remainder of
this Agreement shall not be affected thereby provided that a Party’s rights
under this Agreement are not thereby materially diminished. The Parties hereto
covenant and agree to renegotiate any such term, covenant or application thereof
in good faith in order to provide a reasonably acceptable alternative to the
term, covenant or condition of this Agreement or the application thereof that is
invalid, illegal or unenforceable, it being the intent of the Parties that the
basic purposes of this Agreement are to be effectuated.

11.11 Status. Nothing in this Agreement is intended or shall be deemed to
constitute a partner, agency, employer-employee, or joint venture relationship
between the Parties.

11.12 Section 365(n). All licenses granted under this Agreement are deemed to
be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
right to “intellectual property” as defined in Section 101 of such Code. The
Parties agree that Licensee may fully exercise all of its rights and elections
under the U.S. Bankruptcy Code, regardless of whether either Party files for
bankruptcy in the United States or other jurisdiction.

11.13 Further Assurances. Each Party agrees to execute, acknowledge and deliver
such further instructions, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

11.14 Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

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11.15 Guarantee and Agreement of Alphatec Holding, Inc. By its signature below,
Holdings hereby guarantees the full and timely payment and performance of all
obligations of Licensee under this Agreement and agrees to issue shares to
Licensor consistent with the terms of this Agreement, including without
limitation Section 4.4 hereof.

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties and Holdings have caused this Agreement to be
executed by their duly authorized representative.

 

ALPHATEC SPINE, INC.   STOUT MEDICAL GROUP, LP:   By: Stout Medical Group, Inc.
  Its: General Partner By:   /s/ Dirk Kuyper     By:   /s/ Tom Molz   Name:  
Dirk Kuyper       Name:   Tom Molz   Title:   President and CEO       Title:  
President and CEO

 

ALPHATEC HOLDINGS, INC. By:   /s/ Dirk Kuyper   Name:   Dirk Kuyper   Title:  
President and CEO

 

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Schedule A

Licensed Patent Rights

 

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

[***]

   [***]   [***]   [***]   [***]   [***]

 

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Schedule B

Licensor Assistance and Compensation

[***]

 

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Schedule C

Exclusive Design Concepts

[***]

 

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