Document:

exv10w14

 

Exhibit 10.14

TERMINATION AGREEMENT

     This Termination Agreement (“Termination Agreement”) is made and entered into as of this
January 23, 2007 (“Effective Date”), by and between XinTec, Inc. (“XinTec”), a Taiwan company, and
OmniVision Trading (Hong Kong) Co., Ltd., a Hong Kong company (“OmniVision”).

     WHEREAS, the parties hereto entered into that certain Equipment Procurement Agreement on
August 31, 2006 (the “Equipment Agreement”); and

     WHEREAS, the parties hereto desire to terminate the Equipment Agreement.

     NOW, THEREFORE, in consideration of the premises and the respective representations,
warranties, covenants and agreements contained herein, the parties hereto agree as follows:

     1. XinTec and OmniVision hereby terminate the Equipment Agreement effective
immediately. As of this Effective Date, no provision of such Equipment Agreement shall have any
force or effect nor shall any such provision control or otherwise be binding upon XinTec and
OmniVision, except as otherwise set forth herein.

     2. Within three (3) days upon execution of this Termination Agreement, XinTec
shall return to OmniVision a lump sum of any and all funds remitted by OmniVision to XinTec for the
purpose of the equipment purchase under the Equipment Agreement, plus any interest accrued thereof,
net of the appropriate withholding taxes. The equipment purchased as of the Effective Date pursuant
to the Equipment Agreement shall be, or deemed to be, purchased by XinTec on its own account and
using its own monies.

     3. This Agreement may be executed in one or more counterparts each of which, when
executed and delivered, shall be deemed an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

     IN WITNESS WHEREOF, XinTec and OmniVision, by their duly authorized
representatives, have executed this Agreement.

	 	 	 
	FOR XINTEC:

	 	FOR OMNIVISION:
	 
	 	 
	[Illegible]

	 	[Illegible]
	 

	 	 
	(Signature)

	 	(Signature)
	[Illegible]

	 	Xinping He, Director
	 

	 	 
	(Print Name & Title)

	 	(Print Name & Title)
	4F, No. 25, Ji-Lin Road

	 	1341 Orleans Drive
	 

	 	 
	(Address)

	 	(Address)
	Chung-Li Industry Park, Taiwan

	 	Sunnyvale, CA 94089, USAExhibit 10.2

 

Exhibit 10.2

LOAN AND SECURITY AGREEMENT

     THIS
LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date
between SILICON VALLEY BANK, a California corporation
(“Bank”), and ISOTIS ORTHOBIOLOGICS, INC., a Washington corporation (“Borrower”), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:

     1 ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Capitalized terms not otherwise
defined in this Agreement shall have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein.

     2 LOAN AND TERMS OF PAYMENT

     2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding
principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due
in accordance with this Agreement.

     2.1.1 Revolving Advances.

          (a) Availability. Subject to the terms and conditions of this Agreement and to
deduction of Reserves, Bank will make Advances to Borrower up to an amount (“Net Borrowing
Availability”) not to exceed the lesser of: (a) the Revolving Line; or (b) the amounts available
under the Borrowing Base.

          (b) Streamline Period. Omitted.

          (c) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all
other Obligations relating to the Revolving Line shall be immediately due and payable.

     2.1.2 Letters of Credit Sublimit.

          (a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for
Borrower’s account. The face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed the Availability
Amount. Such aggregate amounts utilized hereunder shall at all times reduce the amount otherwise
available for Advances under the Revolving Line. If, on the Revolving Maturity Date, there are
any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral
in an amount equal to 105% of the face amount of all such Letters of Credit plus all interest,
fees, and costs due or to become due in connection therewith (as estimated by Bank in its good
faith business judgment), to secure all of the Obligations relating to said Letters of Credit.
All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Bank and opened for Borrower’s account or by Bank’s interpretations of any
Letter of Credit issued by Bank for Borrower’s account, and Borrower understands and agrees that
Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.

          (b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters
of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit
Application.

          (c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If
a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus fees and charges in connection
therewith such as wire, cable,

 

 

SWIFT or similar charges) in Dollars at the then-prevailing rate of exchange in San Francisco,
California, for sales of the Foreign Currency for transfer to the country issuing such Foreign
Currency.

          (d) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter
of Credit payable in a Foreign Currency, Bank shall create a reserve (the “Letter of Credit
Reserve”) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from time
to time to account for fluctuations in the exchange rate. The availability of funds under the
Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such
Letter of Credit remains outstanding.

     2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank
a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the
“Settlement Date”). FX Forward Contracts shall have a Settlement Date of at least one (1) FX
Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to $500,000 (the “FX Reserve”).
The aggregate amount of FX Forward Contracts at any one time may not exceed ten (10) times the
amount of the FX Reserve.

     2.1.4 Cash Management Services Sublimit. Borrower may use up to $500,000 (the
“Cash Management Services Sublimit”) of the Revolving Line for Bank’s cash management services
which may include merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in Bank’s various cash management services agreements (collectively,
the “Cash Management Services”). Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to Advances.

     2.1.5 Overall Aggregate Sublimit. In no event shall the total amount of (i) outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), and (ii) the FX Reserve, and (iii) the amount of the Revolving Line utilized for Cash
Management Services, at any time exceed $500,000 in the aggregate.

     2.1.6 Term Loan.

          (a) Term Loan Advances. Subject to the terms and conditions of this Agreement, Bank
agrees to lend to Borrower, during the Draw Period, term loan advances (each a “Term Loan Advance”
and collectively the “Term Loan Advances”) in an aggregate amount not to exceed the Term Loan
Amount. Each Term Loan Advance, other than the final Term Loan Advance, must be in an amount
equal to at least $200,000. Borrower may only request up to four (4) Term Loan Advances hereunder
and may not request more than one (1) Term Loan Advance in each month during the Draw Period. When
repaid, the Term Loan Advances may not be re-borrowed.

          (b) Repayment. Borrower shall repay each Term Loan Advance as follows: Interest
accrues from the date of each Term Loan Advance at the rate in Section 2.3(a) and is payable
monthly. For the first six months after the Effective Date, Borrower will pay interest only on
whatever Term Loan Advances may be outstanding. Thereafter, each Term Loan Advance will be
payable in 30 equal monthly installments of principal, plus accrued interest, commencing on the
date that is six months after the Effective Date and continuing on the same date of each month
thereafter until the Term Loan Maturity Date, on which date all remaining principal and accrued
interest shall be paid in full.

          (c) Term Loan Reserve. Notwithstanding the foregoing, an amount equal to the principal
Obligations relating to each Term Loan Advance shall be reserved against the Revolving Line which
would otherwise be available to Borrower as set forth above.

     2.2 Overadvances. If at any time or for any reason the total of all outstanding Advances and
all other monetary Obligations exceeds Net Borrowing Availability (an
“Overadvance”), Borrower
shall immediately pay the amount of the excess to Bank, without notice or demand. Without
limiting Borrower’s obligation to repay to Bank the amount of any Overadvance, Borrower agrees to
pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.

     2.3
Payment of Interest on the Credit Extensions.

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          (a)
Interest Rate; Advances.

               (i) Subject to Section 2.3(b), the amounts outstanding under the Revolving Line
shall accrue interest at a floating per annum rate equal to 1.75 percentage points above the Prime
Rate, which interest shall be payable monthly; provided, however, if Borrower is able to
achieve two consecutive fiscal quarters of profitability (beginning with the fiscal quarter ending
March 31, 2006 or any fiscal quarter ending thereafter), and if Borrower is able to maintain such
quarterly profitability, then such rate shall be a floating per annum rate equal to 1.25
percentage points above the Prime Rate, which interest shall be payable monthly.

               (ii) Term Loan. Subject to Section 2.3(b), the principal amount outstanding under
the Term Loan shall accrue interest at a floating per annum rate equal to 2.0 percentage points
above the Prime Rate, which interest shall be payable monthly;
provided, however, if
Borrower is able to achieve two consecutive fiscal quarters of profitability (beginning with the
fiscal quarter ending March 31, 2006 or any fiscal quarter ending thereafter), and if Borrower is
able to maintain such quarterly profitability, then such rate shall be a floating per annum rate
equal to 1.50 percentage points above the Prime Rate, which interest shall be payable monthly.

          (b) Default Rate. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is five percentage
points above the rate effective immediately before the Event of
Default (the “Default Rate”). Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a
permitted alternative to timely payment and shall not constitute a waiver of any Event of Default
or otherwise prejudice or limit any rights or remedies of Bank.

          (c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the effective date of any change to the
Prime Rate and to the extent of any such change.

          (d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed.

          (e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts, including
the Designated Deposit Account, for principal and interest payments or any other amounts Borrower
owes Bank when due. These debits shall not constitute a set-off.

          (f) Minimum Monthly Interest. Omitted

          (g) Payment; Interest Computation; Float Charge. Interest is payable monthly on the
last calendar day of each month. In computing interest on the Obligations, all Payments received
after 12:00 p.m. Pacific time on any day shall be deemed received on the next Business Day. In
addition, so long as any principal or interest with respect to any Hard Credit Extension (defined
as any Credit Extensions other than Letters of Credit, FX Forward Contracts or amounts utilized for
Cash Management Services) remains outstanding, Bank shall be entitled to charge Borrower a “float”
charge in an amount equal to three (3) Business Days interest, at the interest rate applicable to
the Advances, on all Payments received by Bank. Said float charge is not included in interest for
purposes of computing Minimum Monthly Interest (if any) under this Agreement. The float charge for
each month shall be payable on the last day of the month. Bank shall not, however, be required to
credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Bank in
its good faith business judgment, and Bank may charge Borrower’s Designated Deposit Account for the
amount of any item of payment which is returned to Bank unpaid.

     2.4
Fees. Borrower shall pay to Bank:

          (a) Commitment Fee. A fully earned, non-refundable commitment fee of $50,000, on the
Effective Date; and

          (b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit upon the issuance or renewal of such Letter of Credit by Bank; and

          (c) Termination Fee. Subject to the terms of Section 4.1, a termination fee;
and

          (d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line
Facility Fee”), which fee shall be paid quarterly, in arrears, on a calendar year basis, in an amount equal
to 0.50% per annum

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of the average unused portion of the Revolving Line (less the outstanding principal balance of the
Term Loan), as determined by Bank. Borrower shall not be entitled to any credit, rebate or
repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this
Section notwithstanding any termination of the within Agreement, or suspension or termination of
Bank’s obligation to make loans and advances hereunder; and

          (e) Collateral Monitoring Fee. A monthly collateral monitoring fee of $2,000,
payable in arrears on the last day of each month (prorated for any partial month at the beginning
and upon termination of this Agreement); and

          (f) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses, and expenses for documentation and negotiation of this Agreement) incurred through and
after the Effective Date, when due.

          (g) Anniversary Fee. A fully earned, non-refundable fee of $50,000, on the first
anniversary of the Effective Date; and if this Agreement is terminated prior to the first
anniversary of the Effective Date, either by Borrower or Bank, Borrower shall pay such Anniversary
Fee to Bank in addition to any Termination Fee.

     3 CONDITIONS OF LOANS

     3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit
Extension is subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:

          (a) Borrower shall have delivered duly executed original signatures to the Loan Documents to
which it is a party;

          (b) [omitted];

          (c) Borrower shall have delivered its Operating Documents and a good standing certificate of
Borrower certified by the Secretary of State of the State of Washington as of a date no earlier
than thirty (30) days prior to the Effective Date;

          (d) Borrower shall have delivered duly executed original signatures to the completed
Borrowing Resolutions for Borrower;

          (e) Borrower shall have delivered the Subordination Agreement duly executed by IsoTis S.A. in
favor of Bank;

          (f) [omitted];

          (g) Bank shall have received certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing statements either constitute
Permitted Liens or have been or, in connection with the initial Credit Extension, will be
terminated or released;

          (h) Borrower shall have delivered the Perfection Certificate(s) executed by
Borrower;

          (i) [omitted];

          (j) Borrower shall have delivered the duly executed original signatures to the Guaranty,
together with the completed Borrowing Resolutions for Guarantor;

          (k) Borrower shall have delivered the insurance policies and/or endorsements required
pursuant to Section 6.5 hereof; and

          (l) Borrower shall have paid the fees and Bank Expenses then due as specified in Section 2.4
hereof.

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     3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following:

          (a) except as otherwise provided in Section 3.4(a), timely receipt of an
executed Payment/Advance Form;

          (b) the representations and warranties in Section 5 shall be true in all material respects on
the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text thereof; and provided,
further that those representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no Default or Event of
Default shall have occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however, that such
materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be true, accurate and
complete in all material respects as of such date; and

          (c) in Bank’s sole discretion, there has not been a Material Adverse Change.

     3.3 Covenant to Deliver.

     Borrower agrees to deliver to Bank each item required to be delivered to Bank under this
Agreement as a condition to any Credit Extension. Borrower expressly agrees that the extension of
a Credit Extension prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank’s sole discretion.

     3.4 Procedures for Borrowing.

          (a) Advances. Subject to the prior satisfaction of all other applicable conditions
to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower shall
notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by
12:00 p.m. Pacific time on the Funding Date of the Advance. Together with such notification,
Borrower must promptly deliver to Bank by electronic mail or facsimile a completed Transaction
Report executed by a Responsible Officer or his or her designee. Bank shall credit Advances to
the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions
from a Responsible Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by
a person whom Bank believes is a Responsible Officer or designee.

          (b) Term Loan. Subject to the prior satisfaction of all other applicable conditions
to the making of the Term Loan set forth in this Agreement, if any portion of the proceeds of the
Term Loan shall be used to purchase or finance Equipment, Borrower shall deliver to Bank by
electronic mail or facsimile a copy of the invoice for the Equipment to be purchased and the
request for the Term Loan.

     4 CREATION OF SECURITY INTEREST

     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and
performance in full of all of the Obligations, a continuing security interest in, and pledges to
Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and
all proceeds and products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may have superior
priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof
and grant to Bank in such writing a security interest therein and in the proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance reasonably
satisfactory to Bank.

     This Agreement may be terminated prior to the Revolving Maturity Date by Borrower, effective
three (3) Business Days after written notice of termination is given to Bank or if Bank’s
obligation to fund Credit Extensions terminates pursuant to the terms of Section 2.1.1(c).
Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations. If such termination is at

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Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of
Default, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees
then-owing, a termination fee in an amount equal to 2.0% of the Revolving Line if termination
occurs on or before the first anniversary of the Effective Date, and 1.0% of the Revolving Line if
termination occurs after the first anniversary of the Effective Date and on or before the second
anniversary of the Effective Date; provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of Silicon Valley Bank.
Upon payment in full of the Obligations and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall release its liens and security interests in the Collateral
and all rights therein shall revert to Borrower.

     4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Bank’s interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.

     5 REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants as follows:

     5.1 Due Organization and Authorization. Borrower and each of its Subsidiaries are duly
existing and in good standing in their respective jurisdictions of formation and are qualified and
licensed to do business and are in good standing in any jurisdiction in which the conduct of their
business or their ownership of property requires that they be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In connection with this
Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower entitled
“Perfection Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal
name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower
is an organization of the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower’s place of business (provided that Borrower has informed Bank and
Bank acknowledges that Borrower will be moving its principal place of business to a different suite
within the same building and Bank hereby consents to such move), or, if more than one, its chief
executive office as well as Borrower’s mailing address (if different than its chief executive
office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed
its jurisdiction of formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate
pertaining to Borrower and each of its Subsidiaries is accurate and complete. If Borrower is not
now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification number.

     The execution, delivery and performance of the Loan Documents have been duly authorized, and
do not conflict with Borrower’s organizational documents, nor constitute an event of default under
any material agreement by which Borrower is bound. Borrower is not in default under any agreement
to which it is a party or by which it is bound in which the default could reasonably be expected
to cause a Material Adverse Change.

     5.2 Collateral. Borrower has good title to the Collateral, free of Liens except Permitted
Liens. Borrower has no deposit account other than the deposit accounts with Bank and deposit
accounts described in the Perfection Certificate delivered to Bank in connection herewith.

     The Collateral is not in the possession of any third party bailee (such as a warehouse).
Except as hereafter disclosed to Bank in writing by Borrower, none of the components of the
Collateral shall be maintained at locations other than as provided in the Perfection Certificate.
In the event that Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the written consent of
Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for
the benefit of Bank.

     All Inventory is in all material respects of good and marketable quality, free from material defects.

     5.3 Accounts Receivable.

          (a) For each Account with respect to which Advances are requested, on the date each
Advance is requested and made, such Account shall be an Eligible Account, set forth in Section 13
below.

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          (b) All statements made and all unpaid balances appearing in all invoices, instruments and
other documents evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents, and all of Borrower’s Books are genuine and in all respects what
they purport to be. All sales and other transactions underlying or giving rise to each Account
shall comply in all material respects with all applicable laws and governmental rules and
regulations. Borrower has and will have no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are shown as Eligible Accounts in any Borrowing
Base Certificate. To the best of Borrower’s knowledge, all signatures and endorsements on all
documents, instruments, and agreements relating to all Accounts are and will be genuine, and all
such documents, instruments and agreements are and will be legally enforceable in accordance with
their terms.

     5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries
involving more than $50,000 other than (i) a product liability litigation matter covered by its
products liability insurance and (ii) potentially some workers’ compensation claims which are
covered by workers’ compensation insurance.

     5.5 No Material Deviation in Financial Statements. All consolidated financial statements
for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material
respects Borrower’s consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s consolidated financial
condition since the date of the most recent financial statements submitted to Bank.

     5.6 Solvency. Borrower is able to pay its debts (including trade debts) as they mature.

     5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled”
by an “investment company” under the Investment Company Act. Borrower is not engaged as one of its
important activities in extending credit for margin stock (under Regulations T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of
which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any
of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the
best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all declarations or filings with,
and given all notices to, all government authorities that are necessary to continue its business as
currently conducted.

     5.8 Subsidiaries; Investments. Borrower does have any Subsidiaries, other than Subsidiaries
organized with the prior written consent of Bank, and does not own any stock, partnership interest
or other equity securities in any other Person, except for Permitted Investments.

     5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required
tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in
writing of the commencement of, and any material development in, the proceedings, (c) posts bonds
or takes any other steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”.
Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years
which could result in additional taxes becoming due and payable by Borrower. Borrower has paid
all amounts necessary to fund all present pension, profit sharing and deferred compensation plans
in accordance with their terms, and Borrower has not withdrawn from participation in, and has not
permitted partial or complete termination of, or permitted the occurrence of any other event with
respect to, any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency which could reasonably be expected to have a Material Adverse Change.

     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as
working capital, and to fund its general business requirements and not for personal, family,
household or agricultural purposes.

     5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank, as of the date such representations,
warranties, or other statements were made, taken together with all such written certificates and
written statements given to Bank, contains any

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untrue statement of a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading (it being recognized by Bank
that the projections and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ from the projected or forecasted results).

     6 AFFIRMATIVE COVENANTS

     Borrower shall do all of the following:

     6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal existence and
good standing in their respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to cause a Material
Adverse Change. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which could reasonably be expected to
cause a Material Adverse Change.

     6.2 Financial Statements, Reports, Certificates.

          (a) Borrower shall provide Bank with the following:

	 	(i)	 	a Transaction Report weekly and at the time of each request for an Advance if
there are any Hard Credit Extensions; otherwise within fifteen (15)
days after the end of each month;
	 
	 	(ii)	 	within fifteen (15) days after the end of each month,

	 	(A)	 	monthly accounts receivable agings, aged by invoice date,
	 
	 	(B)	 	monthly accounts payable
agings, aged by invoice date, and outstanding or held
check registers, if any,
	 
	 	(C)	 	monthly reconciliations of
accounts receivable agings (aged by invoice date), transaction
reports, and general ledger,
	 
	 	(D)	 	monthly perpetual inventory
reports for Inventory valued on a first-in, first-out basis at
the lower of cost or market (in accordance with GAAP) or such
other inventory reports as are requested by Bank in its good
faith business judgment;

	 	(iii)	 	as soon as available, and in any event within
thirty (30) days after the end of each month, monthly unaudited
financial statements on a consolidated and consolidating basis;
	 
	 	(iv)	 	within thirty (30) days after the end of each
month a monthly Compliance Certificate signed by a Responsible
Officer, certifying as of the end of such month, whether Borrower was
in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the
financial covenants set forth in this Agreement and such other
information as Bank shall reasonably request, including, without
limitation, a statement that at the end of such month there were no
held checks;
	 
	 	(v)	 	subject to subclause (b) below, as soon as available, and in any event within
forty-five (45) days after the end of each fiscal quarter of
Borrower, quarterly unaudited financial statements on a consolidated
and consolidating basis;
	 
	 	(vi)	 	within thirty (30) days after the end of each
fiscal year of Borrower, (A) annual operating budgets (including
income statements, balance sheets and cash flow statements, by month)
for the upcoming fiscal year of Borrower, and (B) annual financial
projections for the following fiscal year (on a quarterly basis) as
approved by Borrower’s board of directors, together with any related
business forecasts used in the preparation of such annual financial
projections; and
	 
	 	(vii)	 	subject to subclause (b) below, as soon as
available, and in any event within 120 days following the end of
Borrower’s fiscal year, annual financial statements, on

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a consolidated and consolidating basis, certified by, and with an
unqualified opinion of, independent certified public accountants
acceptable to Bank.

          (b) At all times that Borrower or Borrower’s parent, IsoTis S.A., is subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended, or similar public trading
exchange laws or provisions, within five (5) days after filing, all reports on Form 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission, or similar documents as required by the
similar public trading exchange laws or provisions, or a link thereto on Borrower’s or another
website on the Internet.

          (c) Prompt written notice of (i) any material change in the composition of the Intellectual
Property that generates any revenue for Borrower or is material to Borrower’s business (exclusive
of any partial modifications made during the application process of any such Intellectual Property;
provided that Borrower notify Bank of any material change reflected in the Intellectual Property at
the end of such application process), (ii) the registration of any Copyright, including any
subsequent ownership right of Borrower in or to any Copyright, Patent or Trademark that generates
any revenue for Borrower or is material to Borrower’s business not previously disclosed to the
Bank, or (iii) Borrower’s knowledge of an event that materially adversely affects the value of the
Intellectual Property that generates any revenue for Borrower or is material to Borrower’s business
(exclusive of any partial modifications made during the application process of any such
Intellectual Property; provided that Borrower notify Bank of any such event at the end of such
application process).

     6.3 Accounts Receivable.

          (a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard
forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect
or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein.
If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of
all contracts, orders, invoices, and other similar documents, and all shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on
its request, the originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same form as received,
with all necessary endorsements, and copies of all credit memos.

          (b) Disputes. Borrower shall promptly notify Bank of all disputes or claims in
excess of $25,000 relating to Accounts. Borrower may forgive (completely or partially),
compromise, or settle any Account for less than payment in full, or agree to do any of the
foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in
the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the
regular reports provided to Bank; and (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such discounts, settlements and forgiveness,
the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing
Base.

          (c) Collection of Accounts. Borrower shall have the right to collect all Accounts,
unless and until a Default or an Event of Default has occurred and is continuing. Whether or not
an Event of Default has occurred and is continuing, Borrower shall hold all payments on, and
proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver all such payments
and proceeds to Bank in their original form, duly endorsed, to be applied to the Obligations
pursuant to the terms of Section 9.4 hereof. Bank may, in its good faith business judgment,
require that all proceeds of Accounts be deposited by Borrower into a lockbox account, or such
other “blocked account” as Bank may specify, pursuant to a blocked account agreement in such form
as Bank may specify in its good faith business judgment. All collections shall be applied to
against any outstanding Obligations (as provided for in Section 9.4 hereof); provided, however, if
Borrower’s outstanding Hard Credit Extensions are less than $2,500,000 and no Default or Event of
Default has occurred and is continuing, the collections will be placed in Borrower’s general
operating account maintained with Bank.

          (d) Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason
for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount,
and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event
any attempted return occurs after the occurrence and during the continuance of any Event of
Default, Borrower shall hold the returned Inventory in trust for Bank, and immediately notify Bank
of the return of the Inventory.

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          (e) Verification. Bank may, from time to time, verify directly with the respective
Account Debtors the validity, amount and other matters relating to the Accounts, either in the name
of Borrower or Bank or such other name as Bank may choose.

          (f) No Liability. Bank shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of
which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any Account, or for settling
any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence
or willful misconduct.

     6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in
kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in
which received by Borrower not later than the following Business Day after receipt by Borrower, to
be applied to the Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to
remit to Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in
good faith in an arm’s length transaction for an aggregate purchase price of $25,000 or less (for
all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower’s other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Bank. Nothing in this Section
limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

     6.5 Taxes; Pensions. Timely file all required tax returns and reports and timely pay all
foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower
except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and
pay all amounts necessary to fund Borrower’s obligations for all present pension, profit sharing
and deferred compensation plans in accordance with their terms.

     6.6 Access to Collateral; Books and Records. At reasonable times, on one (1) Business Day’s
notice (provided no notice is required if an Event of Default has occurred and is continuing),
Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy
Borrower’s Books. The initial audit of Borrower’s Collateral and Books will be conducted on the
earlier of: (a) within sixty (60) days of the Effective Date or (b) prior to the initial Advance
hereunder, and thereafter, the parties contemplate that such audits will be performed no more
frequently than semi-annually, but nothing herein restricts Bank’s right to conduct such audits
more frequently if (i) Bank believes that it is advisable to do so in Bank’s good faith business
judgment, or (ii) Bank believes in good faith that a Default or Event of Default has occurred.
The foregoing inspections and audits shall be at Borrower’s expense, and the charge therefor shall
be $750 per person per day (or such higher amount as shall represent Bank’s then-current standard
charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Bank
schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedules
the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s
rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses
incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or
rescheduling.

     6.7 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender’s loss payable endorsement showing Bank as an additional
lender loss payee and waive subrogation against Bank, and all liability policies shall show, or
have endorsements showing, Bank as an additional insured. All policies (or the loss payable and
additional insured endorsements) shall provide that the insurer must give Bank at least twenty
(20) days notice before canceling, amending, or declining to renew its policy. At Bank’s
request, Borrower shall deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and
is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up
to $50,000, in the aggregate, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted
a first priority security interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be
payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required
under this Section 6.7 or to pay any amount or furnish any required proof of payment to third

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persons and Bank, Bank may make all or part of such payment or obtain such insurance policies
required in this Section 6.7, and take any action under the policies Bank deems prudent.

     6.8 Operating Accounts.

          (a) Within 30 days of the date of the Effective Date and at all times thereafter, maintain its
and its Subsidiaries’ primary depository and operating accounts and securities accounts in the
United States with Bank and Bank’s affiliates which accounts shall represent at least 85% of the
dollar value of Borrower’s and such Subsidiaries accounts at all financial institutions;
provided, however, that that certain certificate of deposit maintained by Borrower at City
National Bank (Account No. 402 144 009 in the original principal amount of $2,750,000) (the “City
National CD”) will not be included in the calculation of the
aforementioned 85%; provided,
further, within 30 days of the Effective Date and at all times thereafter, Borrower shall
maintain at Bank an additional amount of monies equal to the then present principal amount of the
City National CD; provided, further, that in order to reduce such amount maintained at Bank,
Borrower must provide written evidence to Bank, satisfactory to Bank in its good faith business
judgment, of the reduced present principal amount of the City National CD.

          (b) Provide Bank five (5) days prior written notice before establishing any Collateral Account
at or with any bank or financial institution other than Bank or its Affiliates.

     6.9 Financial Covenants.

          Borrower shall maintain at all times, to be tested as of the last day of each month, unless
otherwise noted, on the basis of Borrower only (and not on a consolidated basis):

          (a) Tangible Net Worth. A Tangible Net Worth of at least $8,500,000 (“Minimum
Tangible Net Worth”) plus (i) 50% of all consideration received after the date hereof for equity
securities and Subordinated Debt of the Borrower, plus (ii) 50% of the Borrower’s net income in
each fiscal quarter ending after the date hereof. Increases in the Minimum Tangible Net Worth
based on consideration received for equity securities and subordinated debt of the Borrower shall
be effective as of the end of the month in which such consideration is received, and shall
continue effective thereafter. Increases in the Minimum Tangible Net Worth based on net income
shall be effective on the last day of the fiscal quarter in which said net income is realized, and
shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth be
decreased.

     6.10 Intellectual Property Rights. Borrower shall: (a) protect, defend and maintain the
validity and enforceability of its Intellectual Property that generates any revenue for Borrower or
is material to Borrower’s business; (b) promptly advise Bank in writing of material infringements
of its Intellectual Property that generates any revenue for Borrower or is material to Borrower’s
business; and (c) not allow any Intellectual Property that generates any revenue for Borrower or is
material to Borrower’s business to be abandoned, forfeited or dedicated to the public without
Bank’s written consent; provided that any partial modification made by Borrower to its Intellectual
Property during the application process of such Intellectual Property will not be deemed
“abandonment” for purposes of this provision.

     6.11 Litigation Cooperation. From the date hereof and continuing through the termination of
this Agreement, make available to Bank, without expense to Bank, Borrower and its officers,
employees and agents and Borrower’s books and records, to the extent that Bank may deem them
reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or
against Bank with respect to any Collateral or relating to Borrower.

     6.12 Omitted.

     6.13 Further Assurances. Borrower shall execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to
effect the purposes of this Agreement.

     7 NEGATIVE COVENANTS

     Borrower shall not do any of the following without Bank’s prior written consent:

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     7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively,
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for (a) Transfers of Inventory in the ordinary course of business; (b) Transfers
of worn-out or obsolete Equipment; and (c) Transfers consisting of Permitted Liens and Permitted
Investments and (d) exclusive and non-exclusive licenses of Intellectual Property in the ordinary
course of business as provided for herein. In addition to the foregoing, Transfers of Inventory
pursuant to sales in the ordinary course of business from Borrower to its Affiliate, IsoTis NV, or
to Guarantor, pursuant to one or more purchase order issued by IsoTis NV or Guarantor with respect
to a non-U.S. customer will be permitted hereunder provided that the Accounts generated thereby
shall not be Eligible Accounts, provided, further that the aggregate amount of all such sales does
not exceed $10,000,000 in any fiscal year. Moreover, Borrower will be permitted to transfer cash or
other assets, besides the Inventory described in the preceding sentence, to IsoTis NV provided that
such transfers to not exceed $500,000 in the aggregate in any fiscal year. Borrower will also be
permitted to transfer cash or other assets to it parent, IsoTis S.A., for repayment of indebtedness
owed to IsoTis S.A. (e.g., Promissory Note dated March 14, 2006 for $50,182,558.91 executed by
Borrower to IsoTis S.A. and Promissory Note dated April 20, 2006 for $1,000,000 executed by
Borrower to IsoTis S.A.) in accordance with that certain Subordination Agreement executed by IsoTis
S.A. in favor of Bank and acknowledged by Borrower and of approximate even date herewith. Lastly,
Borrower will be permitted to transfer additional cash or other assets to IsoTis S.A. for operating
and other sales expenses charged to Borrower by IsoTis S.A., provided that such transfers do not
exceed $1,000,000 in the aggregate in any fiscal year.

     7.2 Changes in Business, Management, Ownership, or Business Locations.

          (a) Engage in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably
related thereto;

          (b) liquidate or dissolve; or

          (c) permit a change in the record or beneficial ownership of an aggregate of more than 20% of
the outstanding shares of stock of Borrower, in one or more transactions, compared to the
ownership of outstanding shares of stock of Borrower in effect on the date hereof (other than by
the sale of Borrower’s equity securities in a public offering or to venture capital investors so
long as Borrower identifies to Bank the venture capital investors prior to the closing of the
transaction); or

          (d) without at least thirty (30) days prior written notice to Bank: (1) add any new offices or
business locations, including warehouses (unless such new offices or business locations contain
assets and property of Borrower with an aggregate value of less than $10,000) other than Inventory
consigned to customers in the ordinary course of business, (2) change its jurisdiction of
organization, (3) change its organizational structure or type, (4) change its legal name, or (5)
change its organizational number (if any) assigned by its jurisdiction of organization.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another Person, except that a
Subsidiary of Borrower may merge or consolidate into another Subsidiary of Borrower or into
Borrower.

     7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

     7.5 Encumbrance. Create, incur, or allow any Lien on any of its property or assets, or
assign or convey any right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject
to the first priority security interest granted herein, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Bank) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning,
mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or
any Subsidiary’s intellectual property, except as is otherwise permitted in Section 7.1 hereof and
the definition of “Permitted Lien” herein.

     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.8.(a) and (b) hereof; it being understood that this Section 7.6 does not
limit Collateral Accounts as long as Borrower complies with Section 6.8 hereof.

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     7.7
Investments; Distributions. (a) Directly or indirectly make any Investment other than
Permitted Investments, or permit any of its Subsidiaries to do so; or (b) pay any dividends or make
any distribution or payment or redeem, retire or purchase any capital stock, provided that (i)
Borrower may convert any of its convertible securities into other securities pursuant to the terms
of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends
solely in common stock; and (iii) Borrower may repurchase the stock of former employees or
consultants pursuant to stock repurchase agreements so long as no Default or Event of Default has
occurred at the time of such repurchase and would not exist after giving effect to such repurchase,
provided such repurchase does not exceed in the aggregate of $100,000 per fiscal year.

     7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower, except for transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person and
as otherwise may be permitted under Section 7.1 hereof.

     7.9
Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under
the terms of the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof or the amount of any permitted payments
thereunder or adversely affect the subordination thereof to Obligations owed to Bank.

     7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940 or undertake as one of its important activities
extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor
Standards Act or violate any other law or regulation, if the violation could reasonably be expected
to cause a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any present pension, profit sharing and
deferred compensation plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

     7.11 Negative Pledge Re Intellectual Property. Borrower agrees as follows (the
“Negative Pledge”):

          1. Except for licenses granted by Borrower in the ordinary course of business (provided that
with respect to any exclusive license granted by Borrower, Borrower shall provide Bank with notice
thereof no later than the date of distribution of the draft agreement granting such exclusive
license), Borrower shall not sell, transfer, assign, mortgage, pledge, lease, grant a security
interest in, or encumber any of Borrower’s intellectual property, including, without limitation,
the following:

               a. Any and all copyright rights, copyright applications, copyright
registrations and
like protections in each work of authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing,
created, acquired or held (“Copyrights”);

               b. Any and all trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created, acquired or held;

               c. Any and all design rights which may be available to Borrower now or hereafter existing,
created, acquired or held;

               d. All patents, patent applications and like protections
including, without
limitation, improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, including without limitation the patents and patent applications
now or hereafter existing, created, acquired or held (“Patents”);

               e. Any trademark and servicemark rights, whether registered or not,
applications to
register and registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by such trademarks now or hereafter
existing, created, acquired or held (“Trademarks”);

               f. Any mask works or similar rights available for the protection of
semiconductor

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chips, now or hereafter existing, created, acquired or held;

               g. Any and all claims for damages by way of past, present and future infringements
of any of the rights included above, with the right, but not the obligation, to sue for and collect
such damages for said use or infringement of the intellectual property rights identified above;

               h. All licenses or other rights to use any of the Copyrights, Patents or Trademarks,
and all license fees and royalties arising from such use to the extent permitted by such license or
rights; and

               i. All amendments, extensions, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and

               j. All proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of any of the foregoing;

          2. It shall be an event of default under the Loan Documents between Borrower and Bank if there
is a breach of any term of this Negative Pledge.

          3. The Borrower and Bank agree and understand that abandonment of any Intellectual Property by
Borrower in accordance with the terms of this Agreement will not be deemed a violation of this
Section 7.11.

     8 EVENTS OF DEFAULT

     Any one of the following shall constitute an event of default (an “Event of Default”) under
this Agreement:

     8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable. During the cure period, the failure to cure the
payment default is not an Event of Default (but no Credit Extension will be made during the cure
period);

     8.2 Covenant Default.

          (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.6, 6.8,
or 6.9, or violates any covenant in Section 7; or

          (b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement, any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10)
day period, and such default is likely to be cured within a reasonable time, then Borrower shall
have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default (but no Credit Extensions shall be made during such cure period).
Grace periods provided under this section shall not apply, among other things, to financial
covenants or any other covenants set forth in subsection (a) above;

     8.3 Material Adverse Change. A Material Adverse Change occurs;

     8.4
Attachment. (a) Any material portion of Borrower’s assets is attached, seized, levied on,
or comes into possession of a trustee or receiver and the attachment, seizure or levy is not
removed in ten (10) days; (b) the service of process upon Bank seeking to attach, by trustee or
similar process, any funds of Borrower, or any entity under control of Borrower (including a
subsidiary) on deposit with Bank; (c) Borrower is enjoined, restrained, or prevented by court order
from conducting a material part of its business; (d) a judgment or other claim in excess of $10,000
becomes a Lien on any of Borrower’s assets; or (e) a notice of lien, levy, or assessment is filed
against any of Borrower’s assets by any government agency and not paid within ten (10) days after
Borrower receives notice unless contested in good faith as permitted herein and Borrower complies
with all of the requirements of Section 5.9. These are not Events of Default if stayed or if a bond
is posted pending contest by Borrower within ten days after the date such events occur (but no
Credit Extensions shall be made during the cure period);

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     8.5 Insolvency. Borrower is unable to pay its debts (including trade debts) as they become
due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days
(but no Credit Extensions shall be made while of any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);

     8.6 Other Agreements. There is a default in any agreement to which Borrower or any Guarantor
is a party with a third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of
$50,000 or that could result in a Material Adverse Change with respect to Borrower’s or any
Guarantor; provided, however, that the Event of Default under this Section 8.6 caused by the
occurrence of a default under such other agreement shall be cured or waived for purposes of this
Agreement upon Bank receiving a copy of an agreement or written notice from the party asserting
such default of such cure or waiver of the default under such other agreement, if at the time of
such cure or waiver under such other agreement (a) Bank has not declared an Event of Default under
this Agreement and/or exercised any rights with respect thereto; (b) any such cure or waiver does
not result in an Event of Default under any other provision of this Agreement or any Loan Document;
and (c) in connection with any such cure or waiver under such other agreement, the terms of any
agreement with such third party are not modified or amended in any manner which could in the good
faith judgment of Bank be materially less advantageous to Borrower or any Guarantor;

     8.7 Judgments. A judgment or judgments for the payment of money in an amount, individually or
in the aggregate, of $50,000 or more (not covered by independent third-party insurance subject to
customary deductibles) shall be rendered against Borrower and shall remain unsatisfied and unstayed
for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be
made prior to the satisfaction or stay of such judgment);

     8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any Loan Document or
in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document,
and such representation, warranty, or other statement is incorrect in any material respect when
made;

     8.9 Subordinated Debt. (a) A default or breach occurs under any agreement between Borrower
and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement
with Bank; provided, however, that the Event of Default under this Section 8.9 caused by the
occurrence of a default under such agreement between Borrower and such creditor shall be cured or
waived for purposes of this Agreement upon Bank receiving a copy of an agreement or written notice
from the creditor asserting such default of such cure or waiver of the default under such
agreement, if at the time of such cure or waiver under such agreement (i) Bank has not declared an
Event of Default under this Agreement and/or exercised any rights with respect thereto; (ii) any
such cure or waiver does not result in an Event of Default under any other provision of this
Agreement or any Loan Document; and (iii) in connection with any such cure or waiver under such
agreement, the terms of any agreement with such creditor are not modified or amended in any manner
which could in the good faith judgment of Bank be materially less advantageous to Borrower; or (b)
any creditor that has signed such an agreement with Bank breaches any terms of such agreement;

     8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be
in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any
guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8.
occurs with respect to any Guarantor, or (d) the death, liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of
Bank’s Lien in the collateral provided by Guarantor, if any, or in the value of such collateral or
(ii) a material adverse change in the general affairs, management, results of operation, condition
(financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any
Guarantor.

     9 BANK’S RIGHTS AND REMEDIES

     9.1 Rights and Remedies. If an Event of Default has occurred and is continuing, Bank may,
without notice or demand, do any or all of the following:

          (a) declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

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          (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank;

          (c) demand that Borrower (i) deposit cash with Bank in an amount equal to the aggregate amount
of any Letters of Credit remaining undrawn, as collateral security for the repayment of any future
drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;

          (d) terminate any FX Contracts;

          (e) demand payment of, and collect any Accounts and General Intangibles comprising Collateral,
settle or adjust disputes and claims directly with Account Debtors for amounts, on terms, and in
any order that Bank considers advisable, notify any Account Debtor or other Person owing Borrower
money of Bank’s security interest in such funds, verify the amount of the same and collect the
same;

          (f) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Bank requests and make it available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of
its premises, without charge, to exercise any of Bank’s rights or remedies;

          (g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any
amount held by Bank owing to or for the credit or the account of Borrower;

          (h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale,
and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other
right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any
similar property as it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this
Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;

          (i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;

          (j) demand and receive possession of Borrower’s Books; and

          (k) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral
pursuant to the terms thereof).

     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b)
sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of any security interest regardless of whether an Event of Default has
occurred until all Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact,
and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions
terminates.

     9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7
or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to
pay under this

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Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all
amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the
then highest applicable rate, and secured by the Collateral. Bank will make reasonable efforts to
provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within
a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank’s waiver of any Event of Default.

     9.4 Application of Payments and Proceeds. Unless an Event of Default has occurred and is
continuing, Bank shall apply any funds in its possession, whether from Borrower account balances,
payments, or proceeds realized as the result of any collection of Accounts or other disposition of
the Collateral, first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Bank in the exercise of its
rights under this Agreement; second, to the interest due upon any of the Obligations; and third, to
the principal of the Obligations and any applicable fees and other charges, in such order as Bank
shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an Event
of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from
Borrower account balances, payments, proceeds realized as the result of any collection of Accounts
or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank
shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in
its good faith business judgment, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Bank shall have the option,
exercisable at any time, of either reducing the Obligations by the principal amount of the purchase
price or deferring the reduction of the Obligations until the actual receipt by Bank of cash
therefor.

     9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking
practices regarding the safekeeping of the Collateral in the possession or under the control of
Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral.

     9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict
performance by Borrower of any provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by Bank and then is
only effective for the specific instance and purpose for which it is given. Bank’s rights and
remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s
delay in exercising any remedy is not a waiver, election, or acquiescence.

     9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by
Bank on which Borrower is liable.

     10 NOTICES

     All notices, consents, requests, approvals, demands, or other communication (collectively,
“Communication”), other than Advance requests made pursuant to Section 3.4, by any party to this
Agreement or any other Loan Document must be in writing and be delivered or sent by facsimile at
the addresses or facsimile numbers listed below. Bank or Borrower may change its notice address by
giving the other party written notice thereof. Each such Communication shall be deemed to have
been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the U.S. mail, registered or certified mail, return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission
(with such facsimile promptly confirmed by delivery of a copy by personal delivery or United
States mail as otherwise provided in this Section 10); (c) one (1) Business Day after deposit with
a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered
by messenger, all of which shall be addressed to the party to be notified and sent to the address
or facsimile number indicated below. Advance requests made pursuant to Section 3.4 must be in
writing and may be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
address of Bank provided below and shall be deemed to have been validly served, given, or
delivered when sent (with such electronic mail promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this Section 10). Bank or
Borrower may change its address, facsimile number, or

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electronic mail address by giving the other party written notice thereof in accordance with
the terms of this Section 10.

	 	 	 	 	 	 	 
	 

	 	If to Borrower:
	 	IsoTis OrthoBiologics, Inc.
	 	 
	 

	 	 	 	2 Goodyear, Suite B	 	 
	 

	 	 	 	Irvine, CA 92618	 	 
	 

	 	 	 	Attn:  
 

	 	 
	 

	 	 	 	Fax:  
 

	 	 
	 

	 	 	 	Email:  
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	If to Bank:
	 	Silicon Valley Bank
	 	 
	 

	 	 	 	38 Technology West, Suite 150	 	 
	 

	 	 	 	Irvine, CA 92618	 	 
	 

	 	 	 	Attn: Mr. Derek Brunelle	 	 
	 

	 	 	 	Fax:  
 

	 	 
	 

	 	 	 	Email: dbrunelle@svb.com	 	 

     11
CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE.

     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in
Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed
to operate to preclude Bank from bringing suit or taking other legal action in any other
jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce
a judgment or other court order in favor of Bank. Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court, and Borrower
hereby waives any objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees that service of
such summons, complaints, and other process may be made by registered or certified mail addressed
to Borrower at the address set forth in Section 10 of this Agreement and that service so made
shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three
(3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties
hereto agree that any and all disputes or controversies of any nature between them arising at any
time shall be decided by a reference to a private judge, mutually selected by the parties (or, if
they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court)
appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the course
of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at
that point pursuant to the judicial reference procedures, then such party may apply to the Santa
Clara County, California Superior Court for such relief. The proceeding before the private judge
shall be conducted in the same manner as it would be before a court under the rules of evidence
applicable to judicial proceedings. The parties shall be entitled to discovery which shall be
conducted in the same manner as it would be before a court under the rules of discovery applicable
to judicial proceedings. The private judge shall oversee

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discovery and may enforce all discovery rules and order applicable to judicial proceedings in the
same manner as a trial court judge. The parties agree that the selected or appointed private judge
shall have the power to decide all issues in the action or proceeding, whether of fact or of law,
and shall report a statement of decision thereon pursuant to the California Code of Civil
Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to
exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The
private judge shall also determine all issues relating to the applicability, interpretation, and
enforceability of this paragraph.

     12 GENERAL PROVISIONS

     12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors
and permitted assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion).
Bank has the right,
without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or
any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other
Loan Documents.

     12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank
harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with
the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by
Bank from, following, or arising from transactions between Bank and Borrower (including
reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by Bank’s gross negligence or willful
misconduct.

     12.3 Limitation of Actions. Any claim or cause of action by Borrower against Bank, its directors,
officers, employees, agents, accountants, attorneys, or any other Person affiliated with or
representing Bank based
upon, arising from, or relating to this Loan Agreement or any other Loan Document, or any
other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever,
occurred, done, omitted or suffered to be done by Bank, its directors, officers, employees,
agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of
competent jurisdiction by (a) the filing of a complaint within two years from the earlier of
(i) the date any of
Borrower’s officers or directors had knowledge of the first act, the occurrence or omission
upon which such claim or
cause of action, or any part thereof, is based, or (ii) the date this Agreement is terminated,
and (b) the service of a
summons and complaint on an officer of Bank, or on any other person authorized to accept
service on behalf of
Bank, within thirty (30) days thereafter. Borrower agrees that such two-year period is a
reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of action. The
two-year period provided
herein shall not be waived, tolled, or extended except by the written consent of Bank in its
sole discretion. This
provision shall survive any termination of this Loan Agreement or any other Loan Document.

     12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.

     12.5 Severability of Provisions. Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.

     12.6 Amendments in Writing; Integration. All amendments to this Agreement must be in writing
signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings,
representations, warranties, and negotiations between the parties about the subject matter of
this Agreement and the
Loan Documents merge into this Agreement and the Loan Documents.

     12.7 Counterparts. This Agreement may be executed in any number of counterparts and by
different
parties on separate counterparts, each of which, when executed and delivered, are an original,
and all taken together,
constitute one Agreement.

     12.8 Survival. All covenants, representations and warranties made in this Agreement continue
in full
force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the termination of
this Agreement) have
been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive
until the statute of

 -19- 

 

limitations with respect to all claims and causes of action with respect to which indemnity is
given to Bank shall have run.

     12.9 Confidentiality. In handling any confidential information, Bank shall exercise the same
degree of
care that it exercises for its own proprietary information, but disclosure of information may
be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in
the Credit Extensions
(provided, however, Bank shall use commercially reasonable efforts to obtain such prospective
transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order;
(d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or
audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential information
does not include
information that either: (i) is in the public domain or in Bank’s possession when disclosed to
Bank, or becomes part
of the public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third party,
if Bank does not know
that the third party is prohibited from disclosing the information.

     12.10
Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and
Bank
arising out of or relating to the Loan Documents, the prevailing party shall be entitled to
recover its reasonable
attorneys’ fees and other costs and expenses incurred, in addition to any other relief to
which it may be entitled.

     13 DEFINITIONS

     13.1 Definitions. As used in this Agreement, the following terms have the following
meanings:

     “Account” is any “account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable and other sums owing
to Borrower.

     “Account Debtor” is any “account debtor” as defined in the Code with such additions to such
term as may hereafter be made.

     “Advance” or “Advances” means an advance (or advances) under the Revolving Line.

     “Affiliate” of any Person is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control with the Person,
and each of that Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

     “Agreement” is defined in the preamble hereof.

     “Availability Amount” is at any time (a) the lesser of (i) the Revolving Line or (ii) the
Borrowing Base minus (b) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) minus (c) an amount equal to the Letter of Credit Reserves, minus
(d) the FX Reserve, and minus (e) the outstanding principal balance of any Advances (including any
amounts used for Cash Management Services).

     “Bank” is defined in the preamble hereof.

     “Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, administering, defending and enforcing
the Loan Documents (including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to Borrower.

     “Bankruptcy-Related Defaults” is defined in Section
9.1.

     “Borrower” is defined in the preamble hereof.

     “Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state
tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment
containing such information.

     “Borrowing Base” is (a) 80% of Eligible Accounts, plus (b) the lesser of (i) 35% of the value
of Borrower’s Eligible Inventory (valued at the lower of cost or wholesale fair market value) or
(ii) 50% of the amount of outstanding Advances based upon subclause (a) above or (iii) $650,000,
as determined by Bank from Borrower’s

 -20- 

 

most recent Borrowing Base Certificate; provided, however, that Bank may decrease the foregoing
percentages in its good faith business judgment based on events, conditions, contingencies, or
risks which, as determined by Bank, may adversely affect Collateral. Notwithstanding the
foregoing, prior to the Bank’s initial audit pursuant to Section 6.6 above, Borrower may only
utilize up to 50% of the amounts that would otherwise be available to it under subclauses (a) and
(b) above.

     “Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such
Person’s Board of Directors and delivered by such Person to Bank approving the Loan Documents to
which such Person is a party and the transactions contemplated thereby, together with a certificate
executed by its secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the Loan Documents to
which it is a party, (b) sets forth the resolutions then in full force and effect authorizing and
ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it
is a party, (c) the names of the Persons authorized to execute the Loan Documents on behalf of such
Person, together with a sample of the true signatures of such Persons, and (d) that Bank may
conclusively rely on such certificate unless and until such Person shall have delivered to Bank a
further certificate canceling or amending such prior certificate.

     “Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.

     “Cash Equivalents” means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having maturities of not more
than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either Standard & Poor’s Ratings Group
or Moody’s Investors Service, Inc., (c) Bank’s certificates of deposit issued maturing no more than
one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the
assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of
this definition.

     “Cash Management Services” is defined in Section 2.1.4.

     “Cash Management Services Sublimit” is defined in Section 2.1.4.

     “Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted
and in effect in the State of California; provided, that, to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined differently in different
Articles or Divisions of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien
on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other
than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of definitions relating to
such provisions.

     “Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

     “Collateral Account” is any Deposit Account, Securities Account,
or Commodity Account.

     “Commodity Account” is any “commodity account” as defined in the Code with such additions to
such term as may hereafter be made.

     “Communication” is defined in Section 10.

     “Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit E.

     “Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other
obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made,
discounted or sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (b) any obligations for undrawn letters of credit for the account of that
Person; and (c) all obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement designated to protect a
Person against fluctuation in interest rates, currency exchange rates or commodity prices; but
“Contingent Obligation” does not include endorsements in the ordinary course of business. The
amount of a Contingent Obligation is the stated or determined amount of the primary obligation for
which the Contingent Obligation is made or, if not determinable, the maximum reasonably

 -21- 

 

anticipated liability for it determined by the Person in good faith; but the amount may not exceed
the maximum of the obligations under any guarantee or other support arrangement.

     “Control Agreement” is any control agreement entered into among the depository institution at
which Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity account, Borrower,
and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit
Account, Securities Account, or Commodity Account.

     “Credit Extension” is any Advance, Term Loan, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank for Borrower’s
benefit.

     “Default” means any event which with notice or passage of time or both, would constitute an
Event of Default.

     “Default Rate” is defined in Section 2.3(b).

     “Deferred Revenue” is all amounts received or invoiced in advance of performance under
contracts and not yet recognized as revenue.

     “Deposit Account” is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.

     “Designated Deposit Account” is Borrower’s deposit account, account number                     ,
maintained with Bank.

     “Dollars,” “dollars” and “$” each mean lawful money of the United States.

     “Draw Period” is the period of time from the Effective Date through the earliest to occur of
(a) the date that is six months from the Effective Date, (b) an Event of Default, or (c) the
existence of any Default.

     “Effective Date” is the date Bank executes this Agreement and as indicated on the signature
page hereof.

     “Eligible Accounts” are Accounts which arise in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at
any time and from time to time after the Effective Date, to adjust any of the criteria set forth
below and to establish new criteria in its good faith business judgment. Unless Bank agrees
otherwise in writing, Eligible Accounts shall not include:

     (a) Accounts for which the Account Debtor has not been invoiced;

     (b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date;

     (c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not been paid within ninety (90) days of invoice date;

     (d) Credit balances over ninety (90) days from invoice date;

     (e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) of all Accounts, for the amounts that exceed that
percentage, unless Bank approves in writing;

     (f) Accounts owing from an Account Debtor which does not have its principal place of business
in the United States or Canada (but not including Quebec), provided that Eligible Accounts owing
from Account Debtors located in Canada shall not exceed $150,000 in the aggregate as between all such
Account Debtors;

     (g) Accounts owing from an Account Debtor which is a federal, state or local government entity
or any department, agency, or instrumentality thereof except for Accounts of the United States if
Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal
Assignment of Claims Act of 1940, as amended;

 -22- 

 

     (h) Accounts owing from an Account Debtor to the extent that Borrower is indebted or
obligated in
any manner to the Account Debtor (as creditor, lessor, supplier or otherwise — sometimes called
“contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

     (i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “bill and hold”, or other terms if
Account Debtor’s payment may be conditional;

     (j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;

     (k) Accounts in which the Account Debtor disputes liability or makes any claim (but only up
to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or
becomes insolvent, or goes out of business;

     (l) Accounts owing from an Account Debtor with respect to which Borrower has received
deferred revenue (but only to the extent of such deferred revenue);

     (m) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful; and

     (n) other Accounts Bank deems ineligible in the exercise of its good faith business
judgment.

     “Eligible Inventory” means, at any time, the aggregate of Borrower’s Inventory that (a)
consists of raw materials (including, without limitation, all bone Inventory), finished goods, in
good, new, and salable condition, which is not perishable, returned, consigned, obsolete, not
sellable, damaged, or defective, and is not comprised of demonstrative or custom inventory, works
in progress, packaging or shipping materials, or supplies; (b) meets all applicable governmental
standards; (c) has been manufactured in compliance with the Fair Labor Standards Act; (d) is not
subject to any Liens, except the first priority Liens granted or in favor of Bank under this
Agreement or any of the other Loan Documents; (e) is located at Borrower’s principal place of
business (or any location permitted under Section 7.2); and (f) is otherwise acceptable to Bank in
its good faith business judgment.

     “Equipment” is all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.

     “ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.

     “Event of Default” is defined in Section 8.

     “Foreign Currency” means lawful money of a country other than the United States.

     “Funding Date” is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.

     “FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its
normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to
Bank from the entity from which Bank shall buy or sell such Foreign Currency.

     “FX Forward Contract” is defined in Section 2.1.3.

     “FX Reserve” is defined in Section 2.1.3.

     “GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date of determination.

 -23- 

 

     “General Intangibles” is all “general intangibles” as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims,
income and other tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of any kind.

     “Guarantor” is any present or future guarantor of the Obligations, including IsoTis S.A.

     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations, and (d) Contingent Obligations.

     “Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

     “Intellectual Property” is as defined in Exhibit A attached hereto.

     “Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of Borrower’s custody
or possession or in transit and including any returned goods and any documents of title
representing any of the above.

     “Investment” is any beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to any Person.

     “Letter of Credit” means a standby or commercial letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement on the part of
Bank as set forth in Section 2.1.2.

     “Letter of Credit Application” is defined in Section 2.1.2(a).

     “Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

     “Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.

     “Loan Documents” are, collectively, this Agreement, the Perfection Certificate, the IP
Agreement, the Subordination Agreement, any note, or notes or guaranties executed by Borrower or
any Guarantor, and any other present or future agreement between Borrower or any Guarantor and/or
for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise
modified.

     “Material Adverse Change” is (a) a material impairment in the perfection or priority of
Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in
the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material
impairment of the prospect of repayment of any portion of the Obligations or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower shall fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.

     “Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan
Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit, cash management services, and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower
assigned to Bank, and the performance of Borrower’s duties under the Loan Documents.

 -24- 

 

     “Operating Documents” are, for any Person, such Person’s formation documents, as certified
with the Secretary of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

     “Payment/Advance Form” is that certain form attached hereto as Exhibit B. 

     “Perfection Certificate” is defined in Section 5.1.

     “Permitted Indebtedness” is:

     (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;

     (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

     (c) Subordinated Debt;

     (d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

     (e) Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;

     (f) Indebtedness secured by Permitted Liens;

     (g) extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (g) above, provided that the principal amount thereof is not
increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case
may be;

     (h) intercompany advances owed to Guarantor as permitted under the terms of this Agreement.

     “Permitted Investments” are: 

     (a) Investments shown on the Perfection Certificate and existing on the Effective Date;

     (b) Cash Equivalents;

     (c) Investments consisting of the endorsement of negotiable instruments for deposit or
collection or
similar transactions in the ordinary course of Borrower;

     (d) Investments consisting of deposit accounts in which Bank has a perfected security interest
and, unless otherwise agreed to by Bank in writing;

     (e) Investments accepted in connection with Transfers permitted by Section 7.1;

     (f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed $50,000 in the aggregate in any fiscal year;

     (g) Investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers
or directors relating to
the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

     (h) Investments (including debt obligations) received in connection with the
bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of business; and

 -25- 

 

     (i) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that
this paragraph shall not apply to Investments of Borrower in any Subsidiary.

     “Permitted Liens” are:

     (a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising
under this Agreement and the other Loan Documents;

     (b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or
being contested in good faith and for which Borrower maintains adequate reserves on its Books,
if they have no priority over any of Bank’s Liens;

     (c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing
the acquisition of the Equipment securing no more than $1,500,000 in the aggregate amount
outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the
proceeds of the Equipment;

     (d) statutory Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties, provided, they have no
priority over any of Bank’s Lien;

     (e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business,
provided, they have no priority
over any of Bank’s Liens;

     (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

     (g) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property)
granted in the ordinary course
of Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit
granting Bank a security interest;

     (h) non-exclusive license of intellectual property granted to third parties in the ordinary
course of business;

     (i) Liens arising from judgments, decrees or attachments in circumstances not constituting
an Event of Default under Section 8.4 or 8.7;

     (j) bankers liens and rights of set off; and

     (k) liens in favor of customs authorities incurred in the ordinary course of business.

     “Person” is any individual, sole proprietorship, partnership, limited liability company,
joint venture, company, trust, unincorporated organization, association, corporation, institution,
public benefit corporation, firm, joint stock company, estate, entity or government agency.

     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s
lowest rate.

     “Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made.

     “Reserves” means, as of any date of determination, such amounts as Bank may from time to time
establish and revise which reduce the amount of the Advances, Letters of Credit and other
financial accommodations which would otherwise be available to Borrower under the lending
formula(s) provided herein: (a) for accrued interest; (b) to reflect events, conditions,
contingencies or risks which, as determined by Bank, do or may adversely affect (i) the Collateral
or any other property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of
Borrower or any Guarantor, or

 -26- 

 

(iii) the security interests and other rights of Bank in the Collateral (including the
enforceability, perfection and priority thereof); (c) to reflect Bank’s good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower or any Guarantor
to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (d)
in respect of any state of facts which Bank determines is reasonably likely to constitute an Event
of Default or Default.

     “Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial
Officer and Controller of Borrower.

     “Revolving Line” is an Advance or Advances in an aggregate amount of up to $5,000,000
outstanding at any time.

     “Revolving Line Maturity Date” is Two years from the Effective Date.

     “Securities Account” is any “securities account” as defined in the Code with such additions
to such term as may hereafter be made.

     “Settlement Date” is defined in Section 2.1.3.

     “Subordinated Debt” is Indebtedness incurred by Borrower subordinated to all of Borrower’s
now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other
similar agreement in form and substance satisfactory to Bank entered into between Bank and the
other creditor), on terms acceptable to Bank.

     “Subsidiary” means, with respect to any Person, any Person of which more than 50% of the
voting stock or other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.

     “Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its
Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii) intangible items
including unamortized debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, (iii) notes, accounts
receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv)
reserves not already deducted from assets, minus (b) Total Liabilities, plus (c)
Subordinated Debt.

     “Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.6 hereof.

     “Term Loan Advance” is as defined in Section 2.1.6(a) hereof.

     “Term Loan Amount” is an aggregate amount equal to $1,000,000 outstanding at any time.

     “Term Loan Maturity Date” the earlier of (i) Thirty-six months from the Effective Date or
(ii) the Revolving Line Maturity Date.

     “Term Loan Payment” is defined in Section 2.1.6(b).

     “Total Liabilities” is on any day, obligations that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including without duplication all
Indebtedness, and current portion of Subordinated Debt permitted by Bank to be paid by Borrower,
but excluding all other Subordinated Debt.

     “Transaction Report” is a report in such form as Bank shall specify, a sample of which will
be provided to Borrower pursuant to Exhibit D.

     “Transfer” is defined in Section 7.1.

     “Unused Revolving Line Facility Fee” is defined in Section 2.4(d)

[Signature page follows.]

 -27- 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the Effective Date.

BORROWER:

ISOTIS ORTHOBIOLOGICS, INC.

	 	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Robert Morocco
	 	 	 	By
	 	/s/ Pieter Wolters
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:     Robert Morocco	 	 	 	 	 	Pieter Wolters	 	 
	Title:     CFO	 	 	 	 	 	CEO	 	 

BANK:

SILICON VALLEY BANK

	 	 	 
	By  
 

	 
	Name:  
 

	 
	Title:  
 

	 
	Effective Date:   
 

	 

	 	 	 
	Exhibits	 	 
	A

	 	“Collateral”
	B

	 	[intentionally omitted]
	C

	 	[intentionally omitted]
	D

	 	[intentionally omitted]
	E

	 	Compliance Certificate
	F

	 	Transaction Report

[Signature
page to Loan and Security Agreement]

 

 

EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to the following
personal property:

     All goods, Accounts (including health-care receivables), Equipment, Inventory, contract
rights or rights to payment of money, leases, license agreements, franchise agreements, General
Intangibles (except as provided below), commercial tort claims, documents, instruments (including
any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations, and financial
assets, whether now owned or hereafter acquired, wherever located; and all Borrower’s Books
relating to the foregoing, and any and all claims, rights and interests in any of the above and
all substitutions for, additions, attachments, accessories, accessions and improvements to and
replacements, products, proceeds and insurance proceeds of any or all
of the foregoing.

     Notwithstanding the foregoing, the Collateral does not include any of the following, whether
now owned or hereafter acquired (collectively, the “Intellectual Property”): any copyright rights,
copyright applications, copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, any patents, patent applications and like
protections, including improvements, divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent permitted under
applicable law, any applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade
secret rights, rights to unpatented inventions, and any claims for damage by way of any past,
present, or future infringement of any of the foregoing; provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out
of or relating to any of the foregoing.

     Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed
not to encumber any of its copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether published or unpublished,
any patents, patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks,
service marks and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, and the goodwill of the business of Borrower connected with and
symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future infringement of any
of the foregoing, without Bank’s prior written consent.

1

 

EXHIBIT E

COMPLIANCE CERTIFICATE

TO:               SILICON VALLEY BANK                                             Date:        
                                                    

FROM:        ISOTIS
ORTHOBIOLOGICS, INC.

     The undersigned authorized officer of IsoTis OrthoBiologics, Inc. (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank
(the “Agreement”), (1) Borrower is in complete
compliance for the period ending                                         with all required covenants except as noted below, (2) there are
no Events of Default, (3) all representations and warranties in the Agreement are true and correct in
all material respects on this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof; and provided, further that those representations
and warranties expressly referring to a specific date shall be true, accurate and complete in all
material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and
local taxes, assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied
or claims made against Borrower [or any of its Subsidiaries] relating to unpaid employee payroll
or benefits of which Borrower has not previously provided written notification to Bank. Attached
are the required documents supporting the certification. The undersigned certifies that these are
prepared in accordance with generally GAAP consistently applied from one period to the next except
as explained in an accompanying letter or footnotes. The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is determined not just at
the date this certificate is delivered. Capitalized terms used but not otherwise defined herein
shall have the meanings given them in the Agreement.

Please
indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Monthly financial statements with

	 	Monthly within 30 days
	 	Yes     No
	Compliance Certificate
	 	 	 	 
	Annual Operating Budget and Financial Projections

	 	Within 30 days after start of Fiscal Year
	 	Yes     No
	10-Q, 10-K and 8-K

	 	Within 5 days after filing with SEC
	 	Yes     No
	A/R & A/P Agings, Reconciliations and Inventory Reports

	 	Monthly within 15 days
	 	Yes     No
	Transaction Report

	 	Weekly and with each request for an
Advance if Hard Credit Extensions
outstanding; otherwise, monthly
within 15 days
	 	Yes     No

The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”)

	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Maintain on a Monthly Basis:
	 	 	 	 	 	 
	Minimum Tangible Net Worth

	 	$8,500,000
plus (i) 50%of
new equity and
subordinated
debt plus
(ii) 50% of
quarterly net
income
	 	$                        
	 	Yes     No

1

 

     The following financial covenant analysis and information set forth in Schedule 1 attached
hereto are true and accurate as of the date of this Certificate.

     The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)

      

 
 

 
 

	 	 	 	 	 	 	 	 	 
	IsoTis OrthoBiologics, Inc.	 	 	 	BANK USE ONLY	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Received by:  
 

	 	 
	By:

	 	/s/ Robert Morocco
	 	 	 	AUTHORIZED SIGNER	 	 
	 

	 	 	 	 	 	 	 	 
	Name:  Robert Morocco	 	 	 	Date:  
 

	 	 
	Title:  CFO	 	 	 	 	 	 
	 

	 	 	 	 	 	Verified:  
 

	 	 
	By:

	 	/s/ Pieter Wolters
	 	 	 	AUTHORIZED SIGNER	 	 
	 

	 	 	 	 	 	 	 	 
	Name:  Pieter Wolters	 	 	 	Date:  
 

	 	 
	Title:  CEO	 	 	 	 	 	 
	 

	 	 	 	 	 	Compliance Status:          Yes     No	 	 

2

 

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                                         

Tangible Net Worth (Section 6.9(a))

			
	Required:	 	$8,500,000 plus (i) 50% of consideration for equity securities and subordinated debt plus
(ii) 50% of Borrower’s quarterly net income

Actual:

	 	 	 	 	 
	A.

	 	Aggregate value of total assets of Borrower and its Subsidiaries
	 	$_____
	 
	 	 	 	 
	B.

	 	Aggregate value of goodwill of Borrower and its
Subsidiaries
	 	$_____
	 
	 	 	 	 
	C.

	 	Aggregate value of intangible assets of Borrower
and its Subsidiaries
	 	$_____
	 
	 	 	 	 
	D.

	 	Aggregate value of investments of Borrower and its Subsidiaries
consisting of minority investments in companies which
investments are not publicly-traded
	 	$_____
	 
	 	 	 	 
	E.

	 	Aggregate value of any reserves not already deducted from assets
	 	$_____
	 
	 	 	 	 
	F.

	 	Aggregate value of liabilities of Borrower and its Subsidiaries
(including all Indebtedness) and current portion of
Subordinated Debt permitted by Bank to be paid by Borrower (but
no other Subordinated Debt)
	 	$_____
	 
	 	 	 	 
	G.

	 	Aggregate value of Indebtedness of Borrower subordinated to
Borrower’s Indebtedness to Bank
	 	$_____
	 
	 	 	 	 
	H.

	 	Tangible Net Worth (line A minus
line B minus line C minus line D minus line E minus line F plus line G)
	 	$_____

Is line H equal to or greater than $                    ?

	 	 	 
	                     No, not in compliance
	 	                     Yes, in compliance

3

 

Exhibit D

Transaction Report

[EXCEL spreadsheet to be provided separately]

1

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