exv10w1



 








Exhibit 10.1




October 19, 2007




IsoTis, Inc.

IsoTis OrthoBiologics, Inc.

2 Goodyear

Irvine, CA 92618

Attn: Robert J. Morocco, Chief Financial Officer




	 	 	 	 	 
	 

	 	RE:
	 	Credit and Security Agreement dated as of May 29, 2007 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, the
“Credit Agreement”) by and among ISOTIS, INC., a Delaware corporation, and ISOTIS
ORTHOBIOLOGICS, INC., a Washington corporation, and any additional Borrower from
time to time parties thereto (collectively, “Borrowers”), the various financial
institutions from time to time parties thereto as Lenders and MERRILL LYNCH CAPITAL,
a division of Merrill Lynch Business Financial Services Inc., as Administrative
Agent, Sole Lead Arranger and Sole Bookrunner






Ladies and Gentlemen




     This letter agreement (“Letter Agreement”) is being executed by the parties hereto in
connection with the Credit Agreement referenced above. Unless specifically defined herein,
capitalized defined terms used in this Letter Agreement will have the respective meanings given
thereto in the Credit Agreement.



     Borrowers have requested that Administrative Agent and Lenders agree to certain amendments and
modifications to Borrowers’ obligations under the Credit Agreement to make the Required Term Loan
Paydown on the date otherwise provided for under the Credit Agreement. Administrative Agent and
Lenders have agreed to grant Borrower’s requests, but only on the terms and conditions set forth in
this Letter Agreement.



     Therefore, for good and sufficient consideration, the receipt of which by each party hereto is
hereby acknowledged, and intending to be legally bound, and notwithstanding anything to the
contrary provided for in the Credit Agreement or any of the other Financing Documents, specifically
including Section 2.1(a)(ii)(B) and Section 4.14 of the Credit Agreement, the parties hereto agree
as follows:



     (1) the deadline by which Principal Borrower must complete a Required Securities Financing and
received the proceeds of thereof in order to avoid triggering the Borrowers’ obligations under
Section 2.1(a)(ii)(B) of the Credit Agreement to make and pay a Required Term Loan Paydown shall be
extended from October 31, 2007 to November 30, 2007.



     The parties hereto further agree that this Letter Agreement, and the consents and waivers
provided for above, shall become effective immediately upon (i) execution and delivery of this
Letter Agreement by all parties hereto and (ii) payment by Borrowers to Administrative Agent of any
and all costs and expenses (including legal fees) of Administrative Agent and each Lender in
connection with the negotiation, preparation and execution of this Letter Agreement. Borrowers
hereby also agree that Administrative Agent is hereby authorized (but not obligated) to make
Revolving Loans under the Credit Agreement and disburse the proceeds thereof to Administrative
Agent and each Lender as necessary to make the payments provided for in clause (ii) of the
foregoing sentence.



     As further consideration for the amendments and modifications granted in this Letter
Agreement, Borrowers hereby agree to pay to Administrative Agent (for the benefit of all Lenders in
accordance with their respective Pro Rata Shares) an extension fee of $50,000, which such extension
fee shall be fully-earned and non-refundable upon the effectiveness of this Letter Agreement and
shall be due and payable on November 1, 2007; provided that, notwithstanding anything to the
contrary provided in the foregoing, if Borrowers shall pay the Obligations in full in cash and
terminate the Financing Documents and the Revolving Loan Commitments thereunder on or before
October 31, 2007 (all in accordance with the terms and provisions of the Financing Documents), such
extension fee shall immediately and automatically be waived by Administrative Agent and the Lenders
and Borrowers shall have no further liability or obligation with respect thereto. Borrowers hereby
also agree that Administrative Agent is hereby authorized (but not obligated) to make Revolving
Loans under the Credit



 









 







Agreement and disburse the proceeds thereof to Administrative Agent and each Lender as
necessary to pay this extension fee if and as it becomes due and payable in accordance with the
provisions of the foregoing sentence.



     Borrowers hereby specifically agree and acknowledge that the agreements of Administrative
Agent and Lenders hereunder on the terms provided for herein shall not be deemed to create a
“course of conduct” or “course of dealing” by Administrative Agent and/or any Lenders, or otherwise
create any obligations that would be binding on any of them in the future to give its consent to
any amendments, consents or waivers with respect to the terms and provisions of the Credit
Agreement and the other Financing Documents, specifically including without limitation any further
extensions of the deadline for the Required Term Loan Paydown. Furthermore, Borrowers hereby also
agree and acknowledge that all of the terms, conditions and provisions of each of the Credit
Agreement and the other Financing Documents are ratified and confirmed and continue unchanged in
full force and effect except to the extent expressly modified by the terms of this Letter
Agreement. This Letter Agreement shall be deemed incorporated into and made a part of the Credit
Agreement. Each Borrower hereby confirms and restates its existing grants to Administrative Agent,
for the benefit of Lenders and Administrative Agent, of all Liens in the Collateral belonging to
such Borrower as provided for in the Credit Agreement, the other Security Documents and the other
Financing Documents. Each Borrower hereby confirms that all Liens at any time granted by it to
Administrative Agent continue and shall continue in full force and effect, have been given and are
for the benefit of Lenders and Administrative Agent, and do and shall continue to secure the
Obligations, all for so long as any such Obligations remain outstanding, and that all Collateral
subject thereto remain free and clear of any Liens other than Permitted Liens. Nothing herein
contained is intended to in any manner impair or limit the validity, priority and extent of
Administrative Agent’s existing Liens upon the Collateral.



     Each Borrower, by signing below, acknowledges and agrees that it has no actual or potential
claim or cause of action against Administrative Agent or any Lender relating to the Credit
Agreement or any other Financing Documents and/or the Obligations of such Borrower arising
thereunder or related thereto, in any such case arising on or before the date hereof. As further
consideration for the consents and waivers set forth herein, each Borrower hereby waives and
releases and forever discharges Administrative Agent and each Lender, and the respective officers,
directors, attorneys, agents, professionals and employees of Administrative Agent and each Lender
(all collectively the “Releasees”) from any liability, damage, claim, loss or expense of any kind
that such Borrower had, may now have or may hereafter have against any one or more of the
Releasee(s) arising out of or relating to this Letter Agreement, the Credit Agreement or any other
Financing Document and/or the transactions described herein or therein or contemplated hereby or
thereby and/or the Obligations of such Borrower arising herefrom or therefrom or relating hereto or
thereto and/or any actual or alleged actions, conduct, inaction or omission on the part of any
Releasee(s), to the extent arising or occurring on or before the date hereof. Each such Borrower
hereby further agrees and covenants not to sue any of the Releasees for any matter released or
discharged hereby, and not to bring any such cause of action against any Releasee at any time in
the future with respect thereto.



[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

[SIGNATURES ON FOLLOWING PAGE]




 









 








     Please indicate your acceptance of and agreement to the terms of this Letter Agreement by
executing this signature page as indicated below. The parties hereto shall be deemed to have
executed this Letter Agreement as of the date first written above.



	 	 	 	 	 
	 	Very truly yours,





MERRILL LYNCH CAPITAL, a division of Merrill
 Lynch
Business Financial Services Inc.,

as Administrative Agent and Lender

 	 
	 	By  	/s/
Maurice Amsellem
 	 
	 	Name:  	Maurice Amsellem 	 
	 	Title:  	Vice
President 	 
	 



	 	 	 	 	 
	 	SILICON VALLEY BANK,

as Lender

 	 
	 	By  	/s/
Robert Anderson
 	 
	 	Name:  	Robert
Anderson 	 
	 	Title:  	Senior
Relationship Manager 	 
	 



Accepted and Agreed to:




BORROWERS




	 	 	 	 	 
	 	ISOTIS, INC.

 	 
	 	By  	/s/ Robert Morocco
 	 
	 	Name:  	Robert Morocco 	 
	 	Title:  	CFO 	 
	 



	 	 	 	 	 
	 	ISOTIS ORTHOBIOLOGICS, INC.

 	 
	 	By  	/s/ Robert Morocco
 	 
	 	Name:  	Robert Morocco 	 
	 	Title:  	CFO 	 
	 



[Signature Page to Letter Agreement Re Second Extension of Required Term Loan Paydown]