Document:

Exhibit 10.12

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DEVELOPMENT AGREEMENT

This DEVELOPMENT AGREEMENT
(this “Agreement”) is made and entered into this 5th day of
March, 2003 (the “Effective Date”), by and between BOSTON SCIENTIFIC
CORPORATION (“BSC”), a Delaware corporation, and OSIRIS ACQUISITION II,
INC. (“Osiris”), a Delaware corporation (each a “Party,” and
collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties are
parties to that certain Investment Agreement of even date herewith (the “Investment
Agreement”), that certain License Agreement of even date herewith (the “License
Agreement”), that certain Contract Manufacturing Agreement of even date
herewith (the “Contract Manufacturing Agreement”), the Loan Agreement of
even date herewith and the Investor Rights Agreement of even date herewith
(collectively, the “Transaction Documents”); and

WHEREAS, pursuant to the
transactions contemplated by the Transaction Documents, the Parties agreed to
enter into this Agreement.

NOW, THEREFORE, in
consideration of the premises and the mutual representations, agreements and
covenants set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.01           General.  As used herein, the following terms shall
have the following meanings:

“AE” shall mean, with
respect to use of any Product, any adverse event (within the meaning of
applicable FDA regulations, and including, without limitation, any unfavorable
and unintended sign (including, without limitation, an abnormal laboratory
finding), exacerbation of a pre-existing condition, intercurrent illness, drug
interaction, significant worsening of a disease under investigation or
treatment, significant failure of expected pharmacological or biological
action, or symptom or disease temporally associated with the use of such
Product, whether or not considered to be related to such Product), which event
is associated with the use of such Product (i) in clinical investigation;
or (ii) by a patient once such Product has been approved, whether or not
such event is considered to be drug-related. 
AE(s) shall include such events (i) occurring in the course of the
use of such Product in professional practice; (ii) occurring from drug
overdose whether accidental or intentional; (iii) occurring from drug
abuse; (iv) occurring from drug withdrawal; and (v) any significant
and consistent failure of expected pharmacological action.  Notwithstanding the foregoing, AEs shall
include any experience required to be reported to a relevant authority in any
such country.  For purposes of clarity,
the term AE(s) as used in this Agreement includes SAE(s).

 

 

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BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

“Act” means the
United States Food, Drug and Cosmetic Act and similar Laws in foreign
jurisdictions, all as may be amended from time to time.

“Action” means any
claim, lawsuit or other action.

“Affiliate” means any
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with another Person.

“Approvals” means
authorizations granted to a sponsor firm from a Regulatory Authority, including
BLA approvals, to distribute, for either investigational or commercial
purposes, a medical product.

“Bankruptcy Code”
shall have the meaning set forth in Section 8.13.

“BLA” means a
Biologies License Application filed with the FDA in respect of a Product in
order to manufacture, market, sell or use the Product in the United States.

“BSC Indemnitee”
means BSC, its Affiliates, and each of their respective directors, officers,
employees and agents.

“BSC Representative”
shall have the meaning set forth in Section 2.03.

“Budget” means the
budget for development of Products, the initial version of which is attached
hereto at Exhibit A.

“Business Day” means
any day that is not a Saturday, a Sunday or any other day on which banks are
required or authorized by Law to be closed in The City of New York.

“Change of Control”
shall have the meaning set forth in the License Agreement.

“Clinical Budget”
means that portion of the Budget that covers Clinical Development of a Product.

“Clinical Development”
means with respect to any Product, the research and development activities
performed pursuant to and as described in the R&D Plan upon completion of
Pre-Clinical Development of such Product, including, without limitation,
development of clinical protocol, clinical evaluation site selection, clinical
patient selection, clinical trial management, and Phase II efficacy
research testing and beyond.

“Clinical Trial Costs”
means site contract fees, investigator fees, IRB fees, patient laboratory
costs, other protocol-directed costs and the costs of contract research
organizations, and all other external study costs relating to the Clinical
Development of Products.  The term “Clinical
Trial Costs” also includes all external costs approved by the JSC and incurred
by BSC relating to Pre-Clinical Development of Products.

“Commercialize” shall
have the meaning set forth in the License Agreement.

“Commitment” shall
have the meaning set forth in the Loan Agreement.

 

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“Confidential Information”
means all nonpublic proprietary information and materials (whether or not
patentable), disclosed by one Party (the “Disclosing Party”) to the
other Party (the “Receiving Party”), irrespective of the manner in which
the Disclosing Party disclosed such information, in furtherance of this
Agreement, including, but not limited to, substances, formulations, techniques,
methodology, equipment, data, reports, correspondence, know-how, manufacturing
documentation and sources of supply, as well as the existence of this Agreement.

“FDA” means the
United States Food and Drug Administration.

“Field” means any and
all applications in the treatment of disease, dysfunction, injury or other
abnormalities of (i) the heart or (ii) the circulatory system.

“Final Product”
means, with respect to any Product and country, the version of the relevant
Product that is approved for marketing, distribution or sale in the relevant
country.

“First Product” shall
have the meaning set forth in Section 2.03.

“Intellectual Property”
shall have the meaning set forth in the License Agreement.

“Inventions” means
findings, discoveries, inventions, additions, modifications.  formulations, variations, enhancements,
refinements or derivative works.

“Joint Invention”
shall have the meaning set forth in Section 3.03.

“Joint Steering Committee”
or “JSC” shall have the meaning set forth in Section 2.03.

“Law” means any
United States or non-United States federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code,
order, requirement or rule of law.

“Licensed Technology”
shall have the meaning set forth in the License Agreement.

“Losses” means any
losses, liabilities, awards, interest, judgments, penalties, expenses
(including, without limitation, reasonable attorneys’ fees and expenses), costs
or damages.

“MSC” means
mesenchymal stem cells as described in Exhibit B.

“Non-Approved Product”
shall have the meaning set forth in Section 7.06.

“Osiris Indemnitee”
means Osiris, its Affiliates, and each of their respective directors, officers,
employees and agents.

“Osiris Representative”
shall have the meaning set forth in Section 2.03.

 

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COMMISSION.

 

“Person” means an
individual, partnership, joint venture, corporation, limited liability company,
trust, unincorporated organization or other entity (including, without
limitation, any “group” within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934).

“Pre-Clinical Budget”
means that portion of the Budget that covers Pre-Clinical Development of a
Product.

“Pre-Clinical Development”
means with respect to any Product, the research and development activities
performed pursuant to and as described in the R&D Plan to evaluate the
safety, use and efficacy of such Product, including without limitation, Phase I
research testing for safety, process development, animal studies, bench testing
and the collection of data in support of Regulatory Filings.  With respect to any Product, Pre-Clinical
Development is completed when the Phase I data for such Product meets the
primary end points.

“Products” shall have
the meaning set forth in the License Agreement.

“Product Specifications,”
for a Product, means those specifications and performance requirements for such
Product as mutually agreed by the Parties, including, without limitation,
clinical, manufacturing and marketing specifications.

“Project Director”
shall have the meaning set forth in Section 2.03.

“PSURs” means
periodic safety update reports.

“R&D Plan” means
the research and development plan setting forth activities, schedules,
milestones, specifications and requirements for development of Products, the
initial version of which covers the development of Products and is attached
hereto at Exhibit C, and as may be amended, supplemented or superseded in
accordance with this Agreement.

“R&D Purposes”
shall have the meaning set forth in Section 2.08.

“Regulatory Authority”
means any national, supra-national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity.  For purposes of clarity, the term “Regulatory
Authority” as used in this Agreement includes the FDA.

“Regulatory Filings”
means, for any country, the regulatory documents filed with a Regulatory
Authority necessary or helpful for obtaining all Approvals required for the
importation, exportation, promotion, pricing, marketing or sale of the Products
in such country.

“Remainder Amount”
shall have the meaning set forth in Section 2.11.

“SAE(s)” (Serious
Adverse Event(s)) shall mean (with respect to any Product) reference to any
adverse experience (within the meaning of the then current versions of ICH E6:
Good Clinical Practice: Consolidated guideline, CPMP/ICH/135/95 and ICH E2A:
Clinical Safety Data Management: Definitions and Standards for Expedited
Reporting

 

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CPMP/ICH/377/95), occurring
during clinical trials of the drug or thereafter, in connection with the
administration of such Product to a patient at any dose that results in any of
the following outcomes: death, a life-threatening adverse drug experience,
inpatient hospitalization or prolongation of existing hospitalization, a
persistent or significant disability/incapacity, or a congenital anomaly/birth
defect.  Important medical events that
may not result in death, be life-threatening or require hospitalization may be
considered an adverse experience for purposes of the foregoing sentence when,
based upon appropriate medical judgment, they may jeopardize the patient or
subject and may require medical or surgical intervention to prevent one of the
outcomes listed in this definition.

“Subsequent Products”
means applications of MSC Technology in the Field, other than Products.

“Term” shall have the
meaning set forth in Section 7.01.

“Third Party” means a
Person who is not a Party or an Affiliate of a Party.

ARTICLE II

PRODUCT DEVELOPMENT

Section 2.01           Responsibilities.  Subject to the terms and conditions of this
Agreement, the Parties shall use commercially reasonable efforts to cooperate
to develop the Products in accordance with (i) the R&D Plan,
(ii) the Budget and (iii) the terms of this Agreement.  Without limiting the performance obligations
of the Parties hereunder, Osiris shall principally be responsible for
Pre-Clinical Development of Products and Regulatory Filings, and BSC shall
principally be responsible for managing the Clinical Development of Products.

Section 2.02           License Grant.  Subject to the terms and conditions of this
Agreement, BSC hereby grants Osiris an exclusive (subject to BSC retained
rights described below), worldwide license under the Licensed Technology for
the sole purpose of performing its duties and fulfilling its obligations under
this Agreement.  The foregoing license
grant is nonsublicensable; provided, however, Osiris may
sublicense to Osiris’ Affiliates and Third Party contract manufacturers solely
for the purpose of fulfilling its obligations under this Agreement.  The exclusivity of the foregoing license is
subject in all respects to BSC’s retained right to (a) make, have made and
use MSCs subject to the terms and conditions of this Agreement and
(b) grant sublicenses to BSC’s Affiliates and Third Party contract
manufacturers to make, have made and use MSCs subject to the terms and
conditions of this Agreement.

Section 2.03           Project Management.

(a)           Establishment of the Joint Steering Committee.  As soon as practicable after the Effective
Date, but no later than April 1, 2003, each Party shall designate one
(1) individual as a member of a Joint Steering Committee (“Joint
Steering Committee” or “JSC”). 
The JSC shall be responsible for overseeing the development of the
Products.

(b)           Selection of the Project Director.  The JSC member designated by Osiris (“Osiris
Representative”) shall be responsible for selecting a Pre-Clinical Project
Director for each

 

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Product to be developed under the R&D Plan.  The JSC member designated by BSC (“BSC
Representative”) shall be responsible for selecting a Clinical Project
Director for each Product to be developed under the R&D Plan.  Within thirty (30) days after the members of
the JSC have been selected, the Osiris Representative shall select an
individual to serve as Pre-Clinical Project Director during the Pre-Clinical
Development phase for the first Product to be developed pursuant to the R&D
Plan (“First Product”).  The JSC
may appoint a Clinical Project Director, to be selected by the BSC
Representative, with respect to that First Product at any time that the JSC
deems appropriate, but in no event later than at the time of initiation of
Clinical Development for such First Product.

(c)           Meetings of the Joint Steering Committee.  The JSC shall meet in person or via
teleconference bi-monthly.  The JSC shall
keep written minutes at each bi-monthly meeting and provide copies of these
minutes to Osiris and BSC no later than seven (7) Business Days after the
meeting.

(d)           Duties of the Joint Steering Committee.  The JSC shall be responsible for overseeing
development of the Products.  The JSC
shall also be responsible for approving and overseeing all (i) further
development of the R&D Plan and amendments thereto and (ii) further
development of the Budget and amendments thereto.  The JSC shall also be responsible for
overseeing and reviewing the performance and conduct of the Clinical Project
Directors and Pre- Clinical Project Directors (collectively, “Project
Directors”).  A Project Director may
be removed and replaced upon decision of the JSC; provided, however,
in the event of a removal of a Pre-Clinical Project Director, the Osiris
Representative shall select a replacement Pre-Clinical Project Director and in
the event of a removal of a Clinical Project Director, the BSC Representative
shall select a replacement Clinical Project Director.  The members of the JSC shall work together to
oversee the development of the Products and make decisions in accordance with
the responsibilities assigned to the JSC; provided, however, the
Osiris Representative shall have final decision-making authority with respect
to all issues concerning the Pre-Clinical Development phase of a Product and
the Pre-Clinical Budget for a Product and the BSC Representative shall have
final decision-making authority with respect to all issues concerning the
Clinical Development phase of a Product and the Clinical Budget for a Product.
Notwithstanding anything in this Agreement to the contrary, (i) in the
event that the Pre-Clinical Development of the First Product is not completed
within two (2) years from the Effective Date, the BSC Representative shall have
final decision-making authority with respect to all issues concerning the
Pre-Clinical Development and Pre-Clinical Budget for the First Product, where
such issues arise after the two (2) year anniversary of the Effective Date and
(ii) in the event that the Pre-Clinical Development for any other Product
is not completed within two (2) years from the commencement of Pre-Clinical
Development for such Product, the BSC Representative shall have final
decision-making authority with respect to all issues concerning the
Pre-Clinical Development and Pre-Clinical Budget for such Product, where such
issues arise after the two (2) year anniversary of the commencement of
Pre-Clinical Development of such Product. 
Notwithstanding the foregoing, in the event that the BSC Representative
has final decision- making authority with respect to Pre-Clinical Development
of a Product, as set forth in this Section 2.03(d), (i) Osiris shall
not be obligated to apply any money in excess of the unused Commitment towards
Pre-Clinical Development of such Product during such time that the BSC
Representative has final decision-making authority with respect to Pre-Clinical
Development and

 

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(ii) any costs and expenses related to such
Pre-Clinical Development of such Product shall be Eligible Costs and Expenses
as such term is defined in the Loan Agreement.

(e)           Duties of the Project Directors.  Each Project Director shall devote one
hundred percent (100%) of his or her business time to activities under and in
accordance with the R&D Plan.  The
Project Directors shall act in accordance with the instructions of the
JSC.  The Project Director shall be
responsible for the day-to-day management of the development of the Products,
with the Pre-Clinical Project Director providing day-to-day management of the
Pre-Clinical Development of each Product and the Clinical Project Director
providing day-to-day management of the Clinical Development of each
Product.  In accordance with these
responsibilities, the Project Directors shall prepare and send to the JSC a
bi-monthly report on all aspects of the development and progress of the
Products.

Section 2.04           R&D Plan.  Attached hereto at Exhibit C is the
R&D Plan for the development of the Products.  All amendments, supplements and variations to
the R&D Plan may only be made upon approval by the JSC.

Section 2.05           Budget.  Attached hereto at Exhibit A is the
Budget for development of the Products. 
All amendments, supplements and variations to the Budget may only be
made upon approval by the JSC.

Section 2.06           Final Product Specifications.  As the Parties progress toward the
development of the Final Products, the marketing personnel from both Parties,
with consultation from the clinical, regulatory and research and development
personnel of both Parties, shall work together to develop Product Specifications
for the Final Products.  The JSC shall be
responsible for approving Product Specifications for such Final Products, which
Product Specifications, once approved by the JSC, shall become part of the
R&D Plan and may be updated from time to time by the JSC.  If Product Specifications developed by the
marketing personnel are not approved by the JSC then the marketing personnel
shall be responsible for revising such Product Specifications.

Section 2.07           Final Product Development.  Osiris, at its expense, shall devote
commercially reasonable efforts, subject to the terms and conditions of this
Agreement, to develop the Final Products in accordance with the Product
Specifications.

Section
2.08           Supply of MSC.

(a)           Supply bv Osiris. 
Osiris, at its expense, shall supply MSCs as required by BSC or Osiris
for research, development, and clinical trials of the Products (collectively “R&D
Purposes”).  BSC shall, on a monthly
basis, provide Osiris with a six (6) month non-binding forecast of the MSCs
needed for R&D Purposes, beginning with the third month following the month
in which the first forecast is delivered. 
Osiris shall ensure that it has a sufficient supply of MSCs to satisfy
BSC’s forecasted needs.

(b)           Failure to Supply by Osiris.  In the event Osiris is unable to supply MSCs
to BSC for R&D Purposes, as set forth in subsection (a), BSC may
manufacture and/or acquire MSCs from a Third Party; provided, however,
(i) BSC may only manufacture and/or acquire MSCs for

 

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R&D Purposes, (ii) BSC may only manufacture
and/or acquire MSCs in the amount forecasted and needed by BSC for R&D
Purposes less the amount of MSCs that Osiris was able to provide, and
(iii) BSC may manufacture or acquire MSCs only during and limited to the
time that Osiris is unable to provide BSC the MSCs necessary for R&D
Purposes.

Section 2.09           Supply of Delivery Catheters.  BSC, at its expense, shall supply Osiris with
delivery catheters as required by Osiris for R&D Purposes.  Osiris shall, on a monthly basis, provide BSC
with a six (6) month non-binding forecast of the delivery catheters required
for R&D Purposes, beginning with the third month following the month in
which the first forecast is delivered. 
BSC shall ensure that it has a sufficient supply of delivery catheters
to satisfy Osiris’ forecasted needs.

Section 2.10           Pre-Clinical Development.  Osiris, at its expense, and in accordance
with the R&D Plan and the Pre-Clinical Budget, shall devote commercially
reasonable efforts to complete Pre-Clinical Development of the Products.  BSC, at its expense, shall provide reasonable
cooperation to assist Osiris with Pre-Clinical Development of the Products; provided,
however, any Clinical Trial Costs incurred by BSC during Pre-Clinical
Development of the Products shall be borne by Osiris.

Section 2.11           Clinical Development.  BSC, in accordance with the R&D Plan and
the Clinical Budget, shall devote commercially reasonable efforts to complete
the Clinical Development of the Products. 
Osiris shall reimburse BSC for any and all Clinical Trial Costs incurred
in connection with the Pre-Clinical Development and Clinical Development of the
Products as set forth in Section 2.14; provided, however,
unless otherwise agreed to by the Parties, Osiris shall not be obligated to
reimburse BSC for any Clinical Trial Costs that exceed the difference between
(i) the unused Commitment and (ii) the amount of money applied by
Osiris, if any, to Pre-Clinical Development of a Product during the time, if
any, that the BSC Representative had final decision-making authority with
respect to Pre-Clinical Development of such Product, as set forth in
Section 2.03(d) (the “Remainder Amount”); provided, further,
in the event Clinical Trial Costs exceed the Remainder Amount, the Parties
shall work together in good faith to negotiate terms, reasonable to each Party
in its discretion, for additional funding of development of the Products.  Osiris, at its expense, shall provide
reasonable cooperation to assist BSC with Clinical Development of the Products;
provided, further, (i) in the event that the Loan Agreement
is terminated, BSC exercises its rights under Section 3.03 of the Loan
Agreement, or otherwise for any reason is no longer required or declines to
make an Advance or Deemed Advance under the Loan Agreement (including without
limitation because of the occurrence of an Event of Default but except as
specified in (ii) below), Osiris shall have no further obligation to
reimburse the Clinical Trial Costs of BSC, provided, however,
that notwithstanding the foregoing, all monies paid by BSC to Osiris pursuant
to the Loan Agreement before its termination shall be applied exclusively to
activities pursuant to the R&D Plan and in accordance with the Budget,
including without limitation to reimburse the Clinical Trial Costs of BSC and
(ii) in the event that BSC is not required to make an Advance under the
Loan Agreement due to the occurrence of a Default, Osiris shall have no
obligation, during the period commencing upon the occurrence of such Default
and ending (if applicable) upon the cure of such Default within the cure period
specified in Article VII of the Loan Agreement in respect of such Default,
to reimburse the Clinical Trial Costs of BSC, and the obligation to pay any
invoice

 

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submitted by BSC to Osiris pursuant to Section 2.14(a)
shall be stayed during such period, provided, however, that
notwithstanding the foregoing, all monies paid by BSC to Osiris pursuant to the
Loan Agreement before the occurrence of such Default shall be applied
exclusively to activities pursuant to the R&D Plan and in accordance with
the Budget, including without limitation to reimburse the Clinical Trial Costs
of BSC, and provided further that upon the cure of such Default within such
specified cure period, the obligation of Osiris to reimburse the Clinical Trial
Costs of BSC shall resume and the obligation to pay any invoice submitted by
BSC to Osiris pursuant to Section 2.14(a) shall resume (with the period in
which such invoice must be paid automatically extending for the period that the
obligation to pay any such invoice was stayed).

Section
2.12           Regulatory Filings.

(a)           Osiris, at its expense, and in accordance with the R&D
Plan and the Budget, shall be responsible for undertaking, completing and
obtaining, as soon as reasonably practicable. Regulatory Filings for each
Product.  BSC, at its expense, shall
provide reasonable cooperation to Osiris in connection with such filings.

(b)           The Parties agree that, in each country in which they have
mutually agreed to file for Approval, Osiris shall own and hold in its own name
(or in the name of one of its Affiliates) all Approvals relating to the Product
and shall maintain, at its sole expense, such Approvals.  Osiris hereby grants BSC a right of reference
to each Approval for each Product or the equivalent in that country.  Each Party, on behalf of itself and its
Affiliates, acknowledges and agrees that Osiris shall be and shall remain the
sole holder, and shall have all ownership interest in, the Approvals in all
countries, and that BSC shall have no rights in or to, or obligations under.
such Approvals, other than the rights and obligations specifically set forth
herein (or as otherwise required by Law).

Section 2.13           Training Advice and Assistance.  Osiris shall provide reasonable technical
assistance, materials and training regarding the Products and the Licensed
Technology for BSC’s representatives, including but not limited to training and
materials regarding the use, handling, storage and shipping of MSCs.  Osiris shall also provide to BSC other
services or other support information to assist BSC in marketing the Final
Products, including but not limited to, product handling manuals and other
applicable information relating to the Final Products, including such
information as is necessary or appropriate for BSC to formulate any other
manuals, promotional materials and warning labels deemed necessary or
appropriate by BSC.

Section
2.14           Payments to BSC and
Audit Rights.

(a)           With respect to Clinical Trial Costs, BSC shall invoice
Osiris on a quarterly basis for all such costs and expenses incurred by BSC and
Osiris shall pay such invoices within thirty (30) days of receipt of the
invoice.

(b)           BSC shall maintain accurate records and books of account
sufficient to substantiate costs, expenses and expenditures covered by invoices
submitted to Osiris under this Section 2.14 for purposes of reconciliation
with the Budget.  Upon reasonable notice
to BSC, Osiris shall have the right to conduct an audit, at its expense, not
more than once per calendar

 

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year, through an independent accounting firm
reasonably acceptable to BSC, of the costs, expenses and expenditures invoiced
by BSC, and to examine the records and books of account of BSC in connection
therewith.  If such audit determines that
payments are due to Osiris, BSC shall pay to Osiris any such additional amounts
within thirty (30) days of the date on which such auditor’s written report is
delivered to BSC and Osiris.  Osiris
shall bear the full cost and expense of such audit, unless a discrepancy in
excess of five percent (5%) in favor of Osiris is discovered, in which event
BSC shall bear the full cost and expense of such audit.

Section 2.15           Product Incidents.  Each Party shall promptly inform the other of
any material safety or health incidents related to any Product or MSC,
including the use of any of the foregoing. 
During the Term, each Party shall promptly inform the other upon
becoming aware of any unusual or unexpected reactions or events, malfunctions,
safety or efficacy of or attributable to any Product or MSC and/or any
Regulatory Authority action related thereto.

Section 2.16           Reporting Obligations.

(a)           Exchange of Drug Safety Information.  Each Party shall promptly inform the other
Party of any AEs of which such first Party, or any of its Affiliates becomes
aware.  BSC shall record, investigate,
summarize and review any AEs.  Each Party
shall, and shall require that its Affiliates, (i) adhere to all requirements
of applicable Laws which relate to the reporting and investigation of AEs, and
(ii) keep the other Party informed of such experiences.

(b)           Reporting of Adverse Events and Serious Adverse Events.  In order that each Party may be fully
informed, BSC shall notify Osiris in accordance with this Section of all AEs
anywhere in the world in accordance with the timelines established by BSC from
time to time (and reasonably acceptable to Osiris) and, together with such
notification, shall provide a summary of each such AE.  Notwithstanding the foregoing, BSC shall
report all SAEs to Osiris within such shorter time frame as may be necessary as
to allow Osiris sufficient time to evaluate, process and comply with worldwide
regulatory reporting relating to each Product as required by Law.

(c)           PSURs and Safety Requests from Health Authorities.  Each Party shall use the ICH-E2C format as
standard for the compilation of PSURs for which it is responsible under Law, or
as determined by the JSC in accordance with Law.  A Party preparing a PSUR for which it is responsible
pursuant to the foregoing sentence shall provide the other Party with copies of
any such PSUR at the time of its submission or such earlier time as the JSC may
agree.  During the preparation of the
PSUR, if significant safety issues arise, the JSC shall discuss and address
such issues.  The agreed reporting
intervals for PSURs shall be every six (6) months for the first two (2) years
following the first BLA approval, and thereafter at least annually, unless
applicable Laws governing PSURs require more frequent or different reporting
and unless otherwise agreed by the JSC.

(d)           Exchange of Drug Safety Requests.  The Parties shall immediately provide each
other with copies of all drug safety requests from all governmental and other
Regulatory Authorities.  Proposed answers
affecting a Product will be exchanged between the Parties before submission and
the Parties shall cooperate with respect to such answers; provided, however,
that Osiris shall have ultimate decision-making authority with respect to
answers relating to a

 

10

 

THIS EXHIBIT HAS BEEN REDACTED
AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED WITH A “*” AND
BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

Product, unless Law require otherwise.  The Parties shall exchange decisions received
from applicable Regulatory Authorities reasonably promptly after a Party
receives notice of such decision.

(e)           Regulatory Actions. 
Each Party shall advise the other Party of any regulatory action of
which it is aware, which would affect any Product in any country.

(f)            Safety Data Base; Medical Inquiries.  BSC shall be responsible for:

(i)            the creation of a master safety database which shall
include any AE relating to any Product
occurring anywhere; and

(ii)           responding to all medical inquiries.

BSC shall carry out the
responsibility referred to it by the JSC in connection with such safety
data-base or medical inquiries.  BSC
shall give Osiris access to such safety database and shall keep Osiris informed
of such medical inquiries.  Osiris shall
deliver copies of any and all reports and responses submitted by or on behalf
of Osiris to any Regulatory Authority in respect of any Product, to BSC.

(g)           Events Affecting Integrity or Reputation.  The Parties shall notify each other
immediately of any circumstances of which they are aware which arise whereby
the integrity and reputation of any Product or of the Parties are threatened by
the unlawful activity of any Third Party in relation to any Product, which
circumstances shall include, by way of illustration, deliberate tampering with
or contamination of any Product by any Third Party as a means of extorting
payment from the Parties or another Third Party.  In any such circumstances, the Parties shall,
to a reasonable extent, cooperate fully to limit any damage to the Parties
and/or to any Product.

(h)           Governmental Inspection.  Each Party shall advise the other of any
governmental communication, inspection or report of which it is aware and which
affects the Product or Law relating to the Product.  Any response to a regulatory notice relating
to the Product or such Law shall be prepared jointly by the Parties, with the
lead role taken by the Party to whom such notice is addressed (or, if addressed
to both Parties, with the lead role taken by Osiris); provided, however,
that each Party shall be entitled to take all such actions with respect to such
notice as are required of it by Law. 
Both Parties shall have the right to be present during any such
inspection.

(i)            Summary of Safety Information.  The JSC shall coordinate the preparation of
the investigators brochure and summary of safety information.  During the preparation of the documents, if
significant safety issues arise, the JSC shall discuss the safety issues
reasonably promptly.

Section 2.17           Discovery and Development of
Subsequent Products.

(a)           In the event either Party discovers any Subsequent
Products during the Term of this Agreement, that Party shall present such
Subsequent Products to the other Party and the

 

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COMMISSION.

 

Parties shall, in good faith, discuss the
possibility of jointly funding and developing such Subsequent Products.  Notwithstanding the foregoing, neither Party
shall be under any obligation to fund, develop, co-develop or in any way pursue
funding or development of any Subsequent Product.

(b)           In the event the Parties choose to jointly develop a
Subsequent Product, the Parties shall either revise this Agreement to provide
for such development or enter into another agreement regarding the development
of such Subsequent Product.  In either
case, the Parties acknowledge and agree that the license granted to BSC
pursuant to Section 2.01 of the License Agreement shall apply to such Subsequent
Product; provided, however, in the event that BSC breaches the
agreement governing the development of such Subsequent Product and such breach
occurred prior to Approval by the FDA of such Subsequent Product then the
licenses granted to BSC pursuant to Section 2.01 and Section 2.04 of
the License Agreement shall convert to a nonexclusive license with respect to
such Subsequent Product and Section 2.05(a) of the License Agreement shall
no longer have any force or effect in respect of such Subsequent Product.

ARTICLE III

INTELLECTUAL PROPERTY OWNERSHIP

Section 3.01           Pre-Existing Rights.  Each Party acknowledges that any and all
Intellectual Property of the other Party is and shall continue to be owned by
such other Party, subject only to the licenses granted under this Agreement,
the License Agreement and the Contract Manufacturing Agreement.

Section 3.02           New Inventions by Either Party.  Each Party shall retain all right, title and
interest in all Intellectual Property in and to Inventions conceived,
discovered or reduced to practice by that Party pursuant to performance under
this Agreement.

Section 3.03           Joint Inventions by Both Parties.  In the event that an Invention is conceived,
discovered or reduced to practice jointly by both Parties pursuant to
performance under this Agreement (a “Joint Invention”), the Parties
agree to reasonably assist each other in obtaining patent protection for such
Joint Invention.  Such Joint Inventions
shall be jointly owned by the Parties without any right or duty of accounting.  Expenses relating to any patent applications
covering Joint Inventions shall be shared equally by the Parties.  If either Party elects not to file or
maintain any such application or patent issuing from such application in any
country, then that Party shall promptly notify the other Party who then shall
have the right to file or maintain such application or patent in its own name
and at its sole expense.

ARTICLE IV

PAYMENTS

Section 4.01           Loan.  All monies paid by BSC to Osiris pursuant to
the Loan Agreement shall be applied exclusively to activities pursuant to the
R&D Plan and in accordance with the Budget.

 

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COMMISSION.

 

Section 4.02           Payment Currency.  Unless otherwise specified in this Agreement,
all references to money payments, currency, monetary values and dollars or U.S.
dollars mean United States dollars, and all payments hereunder shall be made in
United States dollars.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01           Mutual Representations.  Each Party hereby represents and warrants to
the other Party as follows:

(a)           The execution, delivery and performance of this Agreement
by such Party have been duly authorized by all necessary action on the part of
such Party.

(b)           This Agreement has been duly executed and delivered by
such Party and, assuming due authorization, execution and delivery by the other
Party, constitutes a legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms, subject to
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
and remedies generally, and (ii) the effect of general equitable
principles, regardless of whether asserted in a proceeding in equity or at law.

(c)           Such Party’s execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or by-laws (or similar
organizational documents) of such Party, (ii) conflict with or violate any
Law or governmental order applicable to such Party or its assets, properties or
businesses, or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any encumbrance on any of its
outstanding shares of common stock or preferred stock or any of the assets or
properties of such Party pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which it is a party or by which any of such Party’s
shares of common stock or preferred stock or any of the Party’s assets or
properties is bound or affected.

(d)           It is not a party to any litigation relating to, or that
could reasonably be expected to affect, its ability to perform its obligations
under this Agreement.

Section 5.02           DISCLAIMER.  EXCEPT AS EXPLICITLY PROVIDED IN THIS
ARTICLE, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND,
EXPRESS, IMPLIED, OR STATUTORY, AND THE PARTIES EXPRESSLY DISCLAIM ALL OTHER
WARRANTIES.

Section 5.03           Osiris Indemnity.  Osiris hereby agrees to indemnify and hold
harmless each BSC Indemnitee from and against any and all Losses incurred by
it, her or him arising from any Action made, brought or threatened against any
of the BSC Indemnitees by a Third Party as a result of (a) any negligent
or willful act or omission of Osiris in relation to its, her or his

 

13

 

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BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

obligations under this Agreement, (b) the
breach of any representation or warranty, covenant or agreement by Osiris
contained in this Agreement or (c) damage or injury to persons or property
arising as a result of any clinical trial conducted by Osiris with respect to
any Product.

Section 5.04           BSC Indemnity.  BSC agrees to indemnify, defend and hold harmless
each Osiris Indemnitee from and against any and all Losses incurred by it, her
or him arising from any Action made, brought or threatened against any of the
Osiris Indemnitees by a Third Party as a result of (a) any negligent or
willful act or omission of BSC in relation to its, her or his obligations under
this Agreement, (b) the breach of any representation or warranty, covenant
or agreement by BSC contained in this Agreement, or (c) damage or injury
to persons or property arising as a result of any clinical trial conducted by
BSC with respect to any Product unless such damage or injury is due to a cause
set forth in Section 5.03.

Section 5.05           Special Damages.  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
RELATED TO THIS AGREEMENT.

Section 5.06           Insurance.  Each Party shall maintain comprehensive
general liability insurance, including products liability, with a
minimum-liability coverage limit of two million dollars ($2,000,000) per
occurrence.

ARTICLE VI

CONFIDENTIALITY

Section 6.01           Confidentiality.  During the Term of this Agreement and for the
period of three (3) years thereafter, the Receiving Party shall maintain
Confidential Information in confidence, and shall not disclose, divulge or
otherwise communicate such Confidential Information to others, or use it for
any purpose, except pursuant to, and in order to carry out, the terms and
objectives of this Agreement.  The
Receiving Party hereby shall exercise every reasonable precaution to prevent
and restrain the unauthorized disclosure of such Confidential Information by
any of its directors, officers, employees, consultants, subcontractors, or
agents.  Upon termination of this
Agreement, each Party hereby shall return to the other Party, upon demand, all
Confidential Information in its possession or, upon demand, to destroy such
Confidential Information and provide a certificate to the other Party of such
destruction signed by an officer of the destroying Party.

Section 6.02           Release from Restrictions.  The provisions of Section 6.01 shall not
apply to any Confidential Information disclosed hereunder that:

(a)           is lawfully disclosed to the Receiving Party by an
independent, unaffiliated third Party rightfully in possession of the
Confidential Information and under no confidentiality or fiduciary obligation
not to make disclosure;

(b)           becomes published or generally known to the public through
no fault or omission on the part of the Receiving Party;

 

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COMMISSION.

 

(c)           is developed independently by the Receiving Party without
access to the Confidential Information of the Disclosing Party;

(d)           is legally required to be disclosed to the FDA; provided,
however, the Receiving Party shall continue to treat such Confidential
Information as confidential pursuant to Section 6.01 unless and until such
Confidential Information becomes published or generally known to the public
through no fault or omission on the part of the Receiving Party; or

(e)           a Party is legally compelled to disclose; provided,
however, that the Receiving Party shall provide prompt written notice of
such requirement to the Disclosing Party so that the Disclosing Party may seek
a protective order or other remedy or waive compliance with Section 6.01;
and provided  further that in the event that such protective order
or other remedy is not obtained or the Disclosing Party waives compliance with
Section 6.01, the Receiving Party shall be permitted to furnish only that
portion of such Confidential Information that is legally required to be
provided and the Receiving Party shall exercise its reasonable best efforts to
obtain assurances that confidential treatment shall be accorded such
information.

Section 6.03           Public Announcements and
Publications.  Except as required by
Law or by the requirements of any securities exchange on which the securities
of a Party hereto are listed, no Party to this Agreement shall make, or cause
to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other Party, and the
Parties shall cooperate as to the timing and contents of any such press release
or public announcement.

ARTICLE VII

TERM AND TERMINATION

Section 7.01           Expiration.  This Agreement shall remain in full force and
effect until the expiration or termination (with no survival) of all licenses
(whether exclusive or nonexclusive) granted to BSC under Article II of the
License Agreement (the “Term”), unless terminated earlier in accordance
with this Article VII.

Section 7.02           Mutual Agreement.  This Agreement may be terminated at any time
upon mutual written agreement of the Parties.

Section 7.03           Termination of Agreement Prior to
FDA Approval.  BSC may terminate this
Agreement at any time and for any reason prior to the first Approval by the FDA
of a Product upon one hundred twenty (120) days’ written notice to Osiris.  In the event BSC provides written notice of
termination pursuant to this Section 7.03 and FDA approval of the Product
is obtained during the notice period, this Agreement shall still terminate at
the end of the notice period and BSC shall have no obligation to take any
action towards development of such Product pursuant to Article II.

Section 7.04           Insolvency of Other Party.  This Agreement may be terminated by a Party
if the other Party should commence any case, proceeding or action
(i) under any existing or future Law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency,

 

15

 

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COMMISSION.

 

reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to adjudicate it as
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding up, liquidation, dissolution, composition or other relief with respect
to it or its debts or (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part
of its assets; or, there shall be commenced against the other Party any such
case, proceeding or other action which results in the entry of an order for
relief or any such adjudication or appointment remains undismissed,
undischarged or unbonded for a period of thirty (30) days.

Section 7.05           Termination for Cause.  This Agreement may be terminated by either
Party, if the other Party shall be in material breach of any provision
contained in this Agreement and any such breach shall not have been remedied
within forty-five (45) Business Days after receipt of written notice from any
other Party specifying (i) such breach and (ii) intention to
terminate if such breach is not cured within forty-five (45) Business Days.

Section
7.06           Effect of Termination.

(a)           In the event of termination of this Agreement pursuant to
Section 7.02, the effect of such termination will be as agreed to in
writing by the Parties.

(b)           In the event of termination of this Agreement pursuant to
Section 7.03 or by Osiris pursuant to Section 7.04 and BSC is subject
to a voluntary or involuntary petition under Chapter 7 of the Bankruptcy
Code as of such termination, all right, title and interest in and to the
Products shall be owned exclusively by Osiris and BSC shall have no right in or
to the Products.

(c)           In the event of termination of this Agreement by BSC
pursuant to Sections 7.04 or 7.05, BSC retains the right to develop
Products pursuant to the terms and conditions of the License Agreement.

(d)           In the event of termination of this Agreement by Osiris
pursuant to Section 7.05, (i) if the breach occurred prior to the
first Approval by the FDA of a Product, then the license granted by BSC to
Osiris pursuant to Section 2.02 of this Agreement shall survive; and
(ii) if the breach occurred after the first Approval by FDA of a Product
and in respect of another Product at a time prior to Approval by the FDA of
such other Product (“Non-Approved Product”), then (x) the licenses
granted pursuant to Section 2.01 and Section 2.04 of the License Agreement
shall convert to a nonexclusive license with respect to the Non-Approved
Product, (y) Section 2.05(a) of the License Agreement shall no longer
have any force or effect in respect of the Non- Approved Product, and
(z) the license granted by BSC to Osiris pursuant to Section 2.02 of
this Agreement shall survive.

(e)           Survival.  In
addition to any clause which by its express term survives termination or
expiration, the respective rights and obligations of the parties under the
provisions of Articles III (Intellectual Property Ownership), VI
(Confidentiality), VII (Term and Termination), and Sections 5.04, 5.05,
5.06, 8.01 and 8.09, and the rights to any amounts owed by one Party to the
other prior to termination or expiration, shall also survive any termination or
expiration of this Agreement.

 

16

 

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AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED WITH A “*” AND
BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

ARTICLE VIII

MISCELLANEOUS

Section 8.01           Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier service, by
telecopy or registered or certified mail (postage prepaid, return receipt
requested) to the respective Parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.01):

(a)           if to Osiris:

Osiris Acquisition II, Inc.

2001 Aliceanna Street

Baltimore, Maryland 21231-3043

Attention:  Chief Executive
Officer

Facsimile No: 
(410) 522-6999

with a copy to:

Wilmer, Cutler &
Pickering

2445 M Street, NW

Washington, D.C.  20037

Attention:  Michael R. Klein, Esq.

Facsimile No:  (202) 663-6000

(b)           if to BSC:

Boston Scientific Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Telecopy:  (508) 650-8956

Attention:  Lawrence C.  Best, Senior Vice President and CFO

with a copy to:

Boston Scientific
Corporation

One Boston Scientific Place

Natick, MA 01760-1537

Telecopy:  (508) 650-8956

Attention:  General Counsel

Section 8.02           Headings.  The descriptive headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of the Agreement.

Section 8.03           Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions

 

 

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COMMISSION.

 

of this Agreement shall nevertheless remain in full
force and effect for so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party.  Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner in order that the transactions
contemplated by this Agreement are consummated as originally contemplated to
the greatest extent possible.

Section 8.04           Entire Agreement.  The Transaction Documents constitute the
entire agreement of the Parties with respect to the subject matter thereof and
supersede all prior agreements and undertakings, both written and oral, among
the Parties with respect to the subject matter thereof.

Section 8.05           Assignment.  This Agreement shall be binding upon .and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns.  Neither Party may
assign this Agreement without the prior written consent of the other Party; provided,
however that a Party may assign to an Affiliate its rights and
obligations under this Agreement without the approval of the other Party.  No assignment by either Party permitted
hereunder shall relieve the applicable Party of its then-existing obligations
under this Agreement.

Section 8.06           No Third Party Beneficiaries.  This Agreement shall be binding upon and
inure solely to the benefit of the Parties and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever.

Section 8.07           Change of Control.  In the event of a Change of Control of Osiris
or BSC, this Agreement and all rights and obligations of each Party shall
survive such Change of Control unaffected.

Section 8.08           Amendment.  This Agreement may not be amended or modified
except by an instrument in writing signed by authorized representatives of
Osiris and BSC.

Section 8.09           Governing Law and Venue.  This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware.  The Parties unconditionally and irrevocably
agree and consent to the exclusive jurisdiction of the courts located in the
state of Delaware and waive any objection with respect thereto, for the purpose
of any action, suit or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby, and further agree not to commence any
such action, suit or proceeding except in any such court.

Section 8.10           Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different Parties in separate counterparts, each of which when executed shall
be deemed to be an original, but all of which taken together shall constitute
one and the same agreement.  Delivery of
an executed counterpart of a signature page to this Agreement by facsimile
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

18

 

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BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

Section 8.11           No Waiver.  The failure of either Party to enforce at any
time for any period the provisions of or any rights deriving from this
Agreement shall not be construed to be a waiver of such provisions or rights or
the right of such Party thereafter to enforce such provisions.

Section 8.12           Independent Contractor.  In performing under this Agreement, each
Party shall be acting as an independent contractor and shall not be considered
or deemed to be an agent, employee, joint venturer, or partner of the other
Party.  Each Party shall at all times
maintain complete control over its personnel and operations.  Neither Party shall have, or shall represent
that it has any power, right or authority to bind the other Party to any
obligation or liability, or to assume or create any obligation or liability on
behalf of the other Party.

Section 8.13           Statement of Intent With Respect
to Bankruptcy.  The Parties intend
that all rights and licenses granted under this Agreement with respect to
Licensed Technology are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the United States Bankruptcy Code, 111 U.S.C. § 101, et seq. (“Bankruptcy Code”),
licenses of rights to “intellectual property” as defined in the Bankruptcy
Code.  The Parties agree that Osiris, as
a licensee of intellectual property, shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code.

Section 8.14           Registration and Filing of this
Agreement.  To the extent, if any,
that a Party concludes in good faith that it is required to file or register
this Agreement or a notification thereof
with any governmental authority, including, without limitation, the U.S.
Securities and Exchange Commission, the Competition Directorate of the
Commission of the European Communities, the U.S. Department of Justice or the
U.S. Federal Trade Commission, in accordance with Law, such Party shall inform
the other Party thereof and both Parties shall cooperate each at its own
expense in such filing or notification and shall execute all documents reasonably required in connection therewith.  In such filing or registration, the Parties
shall request confidential treatment
of sensitive provisions of the Agreement, to the extent permitted by Law.  The Parties shall promptly inform each other
as to the activities or inquiries of any such governmental authority relating
to this Agreement, and shall cooperate to respond to any request for further
information therefrom on a timely basis.

Section 8.15           Force Majeure.  If any of the Parties is delayed or prevented
in fulfilling its undertakings in accordance with this Agreement by
unforeseeable circumstances beyond its control,
and without the fault or negligence of such Party such as, but not limited to,
acts of God, fire, flood, embargo or war, (a “Force Majeure”),
the Party shall be exempted from liability for delays due to such reasons; provided,
however, that it promptly notifies the other Party thereof after such a
circumstance has occurred.  Upon such
notification, the Parties shall agree upon a reasonable extension of the time
for performance, not to exceed an extension equal to the period the Force
Majeure condition continues to exist; provided, however the Party
so affected shall take whatever reasonable
steps are necessary to relieve the effect of such circumstance as rapidly as
possible.  For purposes of this
Agreement, the Parties agree that general shortages of transport, goods or energy and faults or delays in deliveries
from subcontractors or suppliers shall not constitute a Force Majeure.

 

19

 

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COMMISSION.

 

IN WITNESS WHEREOF, BSC and
Osiris have caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.

 

	
  BOSTON SCIENTIFIC CORPORATION

  	
   

  	
  OSIRIS ACQUISITION II, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Larry Best

  	
   

  	
  By:

  	
  /s/ William H. Pursley

  
	
   

  	
  Name:

  	
  Larry Best

  	
   

  	
  Name:

  	
  William H. Pursley

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  	
   

  	
  Title:

  	
  Executive Officer

  
							

 

 

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COMMISSION.

 

Exhibit
A: Budget

 

A-1

 

 

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R
& D Plan Budget

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

 

A-2

 

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BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

Exhibit
B

MSCs are non-embryonic stem
cells that are a predominantly homogeneous cell population, from any source,
that can differentiate to more than one mesenchymal lineage and potentially to ectodermal, neural, or endothelial
lineages.

 

 

B-1

 

THIS EXHIBIT HAS BEEN REDACTED
AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED WITH A “*” AND
BRACKETS AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

Exhibit
C: R&D Plan

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

 

C-1Exhibit 10.13

 

 

_____________________

INVESTMENT AGREEMENT

_____________________

Between

OSIRIS ACQUISITION II, INC.

And

BOSTON SCIENTIFIC CORPORATION

 

 

 

 

Dated as of March 5, 2003

 

 

 

Table of Contents

	
   

  	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  
	
  SECTION 1.01. Certain Defined Terms

  	
   

  	
  2

  
	
  SECTION 1.02. Definitions

  	
   

  	
  8

  
	
  SECTION 1.03. Interpretation and Rules of Construction

  	
   

  	
  9

  
	
  ARTICLE II

  	
   

  	
   

  
	
  INVESTMENT AGREEMENTS

  	
   

  	
   

  
	
  SECTION 2.01. Execution of Investment Agreements by the Company

  	
   

  	
  10

  
	
  SECTION 2.02. Execution of Investment Agreements by the Investor

  	
   

  	
  10

  
	
  ARTICLE III

  	
   

  	
   

  
	
  EQUITY INVESTMENT

  	
   

  	
   

  
	
  SECTION 3.01. Subscription for Shares at Closing

  	
   

  	
  10

  
	
  SECTION 3.02. Subsequent Subscriptions for Shares

  	
   

  	
  12

  
	
  SECTION 3.03. Certain Governmental Proceedings

  	
   

  	
  14

  
	
  SECTION 3.04. Subscriptions Following Automatic Conversion

  	
   

  	
  14

  
	
  ARTICLE IV

  	
   

  	
   

  
	
  COVENANTS OF THE COMPANY

  	
   

  	
   

  
	
  SECTION 4.01. Conduct of Business

  	
   

  	
  14

  
	
  SECTION 4.02. Termination of Certain Covenants

  	
   

  	
  16

  
	
  SECTION 4.03. Right of First Refusal

  	
   

  	
  16

  
	
  SECTION 4.04. Restrictions on Transfer

  	
   

  	
  16

  
	
  SECTION 4.05. Legend

  	
   

  	
  17

  
	
  SECTION 4.06. Voting Rights

  	
   

  	
  17

  
	
  SECTION 4.07. D&O Insurance

  	
   

  	
  17

  
	
  ARTICLE V

  	
   

  	
   

  
	
  CONDITIONS PRECEDENT

  	
   

  	
   

  
	
  SECTION 5.01. Conditions to Investor Obligations

  	
   

  	
  18

  
	
  SECTION 5.02. Conditions to Company Obligations

  	
   

  	
  18

  
	
  ARTICLE VI

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF
  THE COMPANY

  	
   

  	
   

  
	
  SECTION 6.01. Organization, Authority and Qualification of the Company

  	
   

  	
  19

  
	
  SECTION 6.02. Company Charter Documents

  	
   

  	
  19

  
	
  SECTION 6.03. Subsidiaries

  	
   

  	
  20

  
	
  SECTION 6.04. Capital Stock of the Company; Ownership of Shares

  	
   

  	
  20

  
	
  SECTION 6.05. Authority and Qualification of the Company

  	
   

  	
  20

  
	
  SECTION 6.06. No Conflict

  	
   

  	
  21

  
	
  SECTION 6.07. Governmental Consents and Approvals

  	
   

  	
  21

  
	
  SECTION 6.08. Conduct in Ordinary Course

  	
   

  	
  21

  
	
  SECTION 6.09. Corporate Books and Records

  	
   

  	
  22

  
	
  SECTION 6.10. Litigation

  	
   

  	
  22

  
	
  SECTION 6.11. Compliance with Laws

  	
   

  	
  22

  
	
  SECTION 6.12. Material Contracts

  	
   

  	
  23

  
	
  SECTION 6.13. Real Property

  	
   

  	
  24

  

 

i

 

	
  SECTION 6.14. Assets

  	
   

  	
  24

  
	
  SECTION 6.15. Brokers

  	
   

  	
  24

  
	
  SECTION 6.16. Key Employees

  	
   

  	
  24

  
	
  SECTION 6.17. Insurance

  	
   

  	
  24

  
	
  SECTION 6.18. Environmental and Other Permits and Licenses; Related
  Matters

  	
   

  	
  25

  
	
  SECTION 6.19. Regulatory Compliance

  	
   

  	
  25

  
	
  SECTION 6.20. Financial Statements and Records

  	
   

  	
  25

  
	
  SECTION 6.21. Absence of Undisclosed Liabilities

  	
   

  	
  25

  
	
  SECTION 6.22. Full Disclosure

  	
   

  	
  25

  
	
  ARTICLE VII

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF
  THE INVESTOR

  	
   

  	
   

  
	
  SECTION 7.01. Organization and Authority of the Investor

  	
   

  	
  26

  
	
  SECTION 7.02. No Conflict

  	
   

  	
  26

  
	
  SECTION 7.03. Governmental Consents and Approvals

  	
   

  	
  26

  
	
  SECTION 7.04. Brokers

  	
   

  	
  27

  
	
  SECTION 7.05. Investor Qualifications

  	
   

  	
  27

  
	
  SECTION 7.06. No Governmental Endorsement

  	
   

  	
  27

  
	
  SECTION 7.07. Legends

  	
   

  	
  27

  
	
  SECTION 7.08. Compliance with Legal Obligations

  	
   

  	
  28

  
	
  SECTION 7.09. Full Disclosure

  	
   

  	
  28

  
	
  SECTION 7.10. Risks

  	
   

  	
  28

  
	
  ARTICLE VIII

  	
   

  	
   

  
	
  INDEMNIFICATION

  	
   

  	
   

  
	
  SECTION 8.01. Survival of Representations, Warranties and Indemnities

  	
   

  	
  28

  
	
  SECTION 8.02. Indemnification by the Company

  	
   

  	
  29

  
	
  SECTION 8.03. Indemnification by the Investor

  	
   

  	
  30

  
	
  SECTION 8.04. Special Damages

  	
   

  	
  31

  
	
  SECTION 8.05. Treatment for Tax Purposes

  	
   

  	
  31

  
	
  ARTICLE IX

  	
   

  	
   

  
	
  TERMINATION

  	
   

  	
   

  
	
  SECTION 9.01. Termination

  	
   

  	
  31

  
	
  SECTION 9.02. Effect of Termination

  	
   

  	
  32

  
	
  ARTICLE X

  	
   

  	
   

  
	
  CONFIDENTIALITY

  	
   

  	
   

  
	
  SECTION 10.01. Confidentiality

  	
   

  	
  32

  
	
  SECTION 10.02. Release from Restrictions

  	
   

  	
  32

  
	
  SECTION 10.03. Public Announcements and Publications

  	
   

  	
  33

  
	
  ARTICLE XI

  	
   

  	
   

  
	
  GENERAL PROVISIONS

  	
   

  	
   

  
	
  SECTION 11.01. Further Action

  	
   

  	
  33

  
	
  SECTION 11.02. Expenses

  	
   

  	
  33

  
	
  SECTION 11.03. Notices

  	
   

  	
  34

  
	
  SECTION 11.04. Amendments

  	
   

  	
  34

  
	
  SECTION 11.05. Severability

  	
   

  	
  35

  
	
  SECTION 11.06. No Waiver

  	
   

  	
  35

  
	
  SECTION 11.07. Entire Agreement

  	
   

  	
  35

  
	
  SECTION 11.08. Assignment

  	
   

  	
  35

  
	
  SECTION 11.09. No Third Party Beneficiaries

  	
   

  	
  35

  
	
  SECTION 11.10. Governing Law

  	
   

  	
  35

  
	
  SECTION 11.11. Counterparts

  	
   

  	
  35

  
	
  SECTION 11.12. Waiver of Jury Trial

  	
   

  	
  35

  

 

 

ii

 

EXHIBITS

Exhibit A                Form
of Certificate of Amendment

Exhibit B                Company
Charter Documents

 

iii

INVESTMENT AGREEMENT (this “Agreement”), dated
as of March 5, 2003 (the “Signing Date”), between OSIRIS ACQUISITION II,
INC., a Delaware corporation (the “Company”), and BOSTON SCIENTIFIC
CORPORATION, a Delaware corporation (the “Investor” and, together with
the Company, the “Parties”).

WHEREAS, the Investor is engaged in the business of
developing, manufacturing and marketing, among other things, biomaterial
technology used to treat cardiac and vascular disease;

WHEREAS, the Company owns and wishes to pursue the
development and commercialization of certain inventions and technologies
involving the applications of MSCs (as defined below) to the treatment of
cardiac and vascular disease (the “Technology”);

WHEREAS, the Company desires to further develop the
Technology and make it available for use by the public, and the Investor
desires to provide funding to the Company for purposes of such development and
commercialization and to acquire an ownership interest in the Company;

WHEREAS, the Investor desires to subscribe for and
purchase certain shares in the capital stock of the Company, and the Company
desires to issue such shares to the Investor, in each case upon the terms and
subject to the conditions set forth herein;

WHEREAS, concurrently with the execution of this
Agreement, the Parties are entering into an Investor Rights Agreement to
provide, among other things, for certain rights of the Investor in connection
with its interest in the Company (the “Investor Rights Agreement”);

WHEREAS, the Investor desires to provide additional
funding to the Company to develop and commercialize the Technology by way of
loans, upon the terms and subject to the conditions set forth herein and in the
Loan Agreement to be entered into by the Company and the Investor concurrently
with the execution of this Agreement (the “Loan Agreement”): and

WHEREAS, concurrently with the execution and delivery
of this Agreement, the Company and the Investor are entering into (i) a
Development Agreement (the “Development Agreement”) whereby the Company
and the Investor will agree, among other things, as to the manner in which the
Technology will be developed by the Company, (ii) a License Agreement (the “License
Agreement”) pursuant to which the Company will grant to the Investor, among
other things, a worldwide license to the Technology and any other intellectual
property developed or licensed by the Company relating to the application of
MSCs to the treatment of cardiac or vascular disease, subject to the terms and
conditions set forth therein, and (iii) a Contract Manufacturing Agreement (the
“Contract Manufacturing Agreement”) pursuant to which, among other
things, the Company will supply to the Investor, and the Investor will purchase
from the Company, MSC Products (the Investor Rights Agreement, the Loan
Agreement, the Development Agreement, the License Agreement, the Contract
Manufacturing Agreement and the Note (as defined below) are hereinafter
collectively referred to as the “Investment Agreements”);

NOW, THEREFORE, in consideration of the premises and
the mutual representations and warranties, agreements and covenants hereinafter
set forth, the Parties hereby agree as follows:

 

 

 

ARTICLE I

DEFINITIONS

SECTION 1.01.   Certain
Defined Terms.  For purposes of this
Agreement:

“Action” means any claim, action, suit,
arbitration, inquiry, proceeding or investigation by or before any Governmental
Authority.

“Affiliate” means, with respect to any
specified Person, any other Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such specified Person.

“Aggregate Purchase Price” means, at any time,
the aggregate of all Subscription Purchase Prices the Investor has delivered,
or has become obliged to deliver, to the Company or its designee as of such
time.

“Applicable Closing Date” means, in relation to
any Share Subscription, the Subscription Closing Date for such Share
Subscription.

“Automatic Conversion” means the occurrence of
an automatic conversion of Preferred Stock into Common Stock as provided under
Section 3(a)(ii) of Article IV (or any successor provision) of the Certificate
of Amendment.

“Bankruptcy Code” means Title 11 of the United
States Code.

“Board of Directors” means the board of
directors of the Company.

“Business Day” means any day that is not a
Saturday, a Sunday or any other day on which banks are required or authorized
by Law to be closed in The City of New York.

“By-laws” means the by-laws of the Company.

“Capitalized Lease” means any obligation owed
by a person as lessee under leases that have been or should be, in accordance
with U.S. GAAP, recorded as capital leases.

“Certificate of Amendment” means the
Certificate of Amendment of the Certificate of Incorporation, to be filed with
the Secretary of State of the State of Delaware, in the form attached hereto as
Exhibit A, setting forth the designations, rights and preferences of the
Preferred Stock.

“Certificate of Incorporation” means the
certificate of incorporation of the Company.

“Claims” means any and all administrative,
regulatory or judicial actions, suits, petitions, appeals, demands, demand
letters, claims, liens, notices of noncompliance or violation, investigations,
proceedings, consent orders or consent agreements.

“Common Shares” means shares of Common Stock.

 

 

2

 

“Common Stock” means the common stock of the
Company, par value $0.001 per share.

“Company Account” means a bank account in the
United States designated in writing by the Company not less than two (2)
Business Days prior to the First Closing Date.

 “Company
Accountants” means KPMG.

“Company Charter Documents” means the
Certificate of Incorporation and the By-laws.

“Confidential Information” means all nonpublic
proprietary information and materials (whether or not patentable), disclosed by
a Disclosing Party to a Receiving Party, irrespective of the manner in which
the Disclosing Party disclosed such information to the Receiving Party, in
furtherance of this Agreement, including, without limitation, substances,
formulations, techniques, methodologies, equipment, data, reports,
correspondence, know-how, manufacturing documentation, financial information
and sources of supply, as well as the existence of this Agreement.

“control” (including the terms “controlled
by” and “under common control with”), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly or as trustee, personal representative or executor, of
the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee,
personal representative or executor, by contract, credit arrangement or
otherwise.

“Disclosing Party” means a Party disclosing
Confidential Information.

“Disclosure Schedule” means the Disclosure
Schedule attached hereto, dated as of the Signing Date.

“Encumbrance” means any security interest,
pledge, hypothecation, mortgage, lien (including, without limitation,
environmental and tax liens) or other encumbrance.

“Environmental Laws” means all Laws, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety, natural resources or Hazardous Materials.

“Environmental Permits” means all permits,
approvals, identification numbers, licenses and other authorizations required
under or issued pursuant to any applicable Environmental Law.

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.

“FDA” means the United States Food and Drug
Administration.

“Field” means any and all applications in the
treatment of disease, dysfunction, injury or other abnormalities of (i) the
heart or (ii) the circulatory system.

 

3

 

“First Milestone” means the enrollment of the
first patient in the first Phase III clinical trials for an MSC Product
developed pursuant to the Development Agreement.

“First Milestone Certificate” means a
certificate signed by a senior executive officer of the Company certifying that
the First Milestone has been duly and properly satisfied.

“First Subscription Amount” means an amount
equal to the First Subscription Purchase Price minus the Rahn & Bodmer
Amount.

“Governmental Authority” means any United
States or non-United States federal, national, supranational, state,
provincial, local, or similar government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.

“Governmental Order” means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.

“Indebtedness” means, with respect to any Person,
(a) all indebtedness of such Person, whether or not contingent, for borrowed
money, (b) all obligations of such Person for the deferred purchase price of
property or services, (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Capitalized
Leases, (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise acquire for value any
capital stock of such Person or any warrants, rights or options to acquire such
capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all indebtedness of others referred to in clauses (a)
through (g) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through
an agreement (i) to pay or purchase such indebtedness or to advance or supply
funds for the payment or purchase of such indebtedness, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
indebtedness or to assure the holder of such indebtedness against loss, (iii)
to supply funds to the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
indebtedness referred to in clauses (a) through (g) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such indebtedness.

“Indemnified Party” means an Investor
Indemnified Party or a Company Indemnified Party, as the case may be.

 

4

 

“Law” means any United States or non-United
States federal, national, supranational, state, provincial, local or similar
statute, law, ordinance, regulation, rule, code, order, requirement or rule of
law.

“Leased Real Property” means the real property
leased by the Company or any Subsidiary together with all buildings and other
structures, facilities or improvements currently located thereon.

“Liabilities” means any and all Indebtedness,
liabilities and obligations, whether contingent or otherwise, including,
without limitation, those arising under any Law (including, without limitation,
any Environmental Law), Action or Governmental Order and those arising under
any contract, agreement, commitment or undertaking.

“Material Adverse Change” means any
circumstance, change or effect that, individually or in the aggregate with all
other circumstances, changes or effects: (a) is materially adverse to the
business, assets, results of operations or the financial condition of the
Company and any Subsidiaries of the Company, taken as a whole, or (b) is
materially adverse to the ability of the Company to consummate the transactions
contemplated by this Agreement, other than, in each case, circumstances,
changes or effects that (i) are or result from occurrences relating to the
economy in general or the Company’s industry in general or (ii) are attributable
to the announcement of the execution of any of the Transaction Documents or the
consummation of the transactions contemplated thereby.

“MSC” has the meaning ascribed thereto in the
Development Agreement.

“MSC Product” has the meaning ascribed thereto
in the License Agreement.

“MSC Technology” has the meaning ascribed
thereto in the Development Agreement.

“Note” has the meaning ascribed thereto in the
Loan Agreement.

“Owned Intellectual Property” has the meaning
ascribed thereto in the License Agreement.

“Permitted Encumbrances” means (i) Encumbrances
securing purchase money Indebtedness under any lease of property that is
capitalized on the Company’s balance sheets in accordance with GAAP; (ii)
Encumbrances with respect to the payment of Taxes that are not yet due or that
are being contested in good faith; (iii) statutory Encumbrances of landlords
and Encumbrances of suppliers, mechanics, carriers, materialmen, warehousemen
or workmen and similar Encumbrances imposed by Law created in the ordinary
course of business for amounts that are not yet due or that are being contested
in good faith; (iv) Encumbrances incurred or deposits made in the ordinary
course of business in connection with worker’s compensation, unemployment
insurance or other types of social security benefits; (v) Encumbrances arising
with respect to zoning restrictions, easements, licenses, reservations,
covenants, rights-of-way, utility easements, building restrictions and other
similar charges or encumbrances on the use of real property; or (vi) any
interest or title of the lessor in the property subject to any operating lease
entered into by the Company in the ordinary course of business.

5

 

“Permitted Indebtedness” means (i) Indebtedness
of the Company or its Subsidiaries in favor of the Investor under any of the
Transaction Documents, (ii) interest rate and currency hedging agreements,
(iii) guarantees of any suppliers of the Company’s Subsidiaries in connection
with the purchase of supplies in the ordinary course of business, or (iv) trade
accounts payable in the ordinary course of business.

“Person” means any individual, partnership,
firm, corporation, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.

“Plan” means any (i) employee benefit plans (as
defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other contracts
or agreements, whether legally enforceable or not, to which the Company or any
Subsidiary is a party, with respect to which the Company or any Subsidiary has
any obligation, or which is maintained, contributed to or sponsored by the
Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary, (ii) employee benefit
plan for which the Company or any Subsidiary could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated,
or (iii) plan in respect of which the Company or any Subsidiary could incur
liability under Section 4212(c) of ERISA.

“Preferred Shares” means shares of Preferred
Stock.

“Preferred Stock” means the Series 2003
preferred stock of the Company, par value $0.001 per share, having the
designations, rights and preferences set forth in the Certificate of Amendment.

“Product” shall have the meaning ascribed
thereto in the Development Agreement.

“Public Offering” shall have the meaning
ascribed thereto in the Investor Rights Agreement.

“Rahn & Bodmer Account” means a bank
account in the United States in the name of Rahn & Bodmer designated in
writing by the Company not less than two (2) Business Days prior to the First
Closing Date.

“Rahn & Bodmer Amount” means (i)
$1,512,273.59 if the First Closing occurs on March 7, 2003 and (ii)
$1,513,517.88 if the First Closing occurs on March 10, 2003.

“Rahn & Bodmer Notes” means the promissory
notes made by the Company in favor of Rahn & Bodmer.

“Receiving Party” means a Party receiving
Confidential Information.

“Reference Statement Date” means December 31,
2002.

 

6

 

“Second Milestone” means the first approval by
the FDA of an MSC Product developed pursuant to the Development Agreement.

“Second Milestone Certificate” means a
certificate signed by a senior executive officer of the Company certifying that
the Second Milestone has been duly and properly satisfied.

“Securities” means any capital stock or other
equity interest or any securities convertible into or exchangeable for capital
stock or any other rights, warrants or options to acquire any of the foregoing
securities.

“Share Subscriptions” means the First
Subscription and the Subsequent Subscriptions.

“Shares” means, prior to the occurrence of an
Automatic Conversion, Preferred Shares, and thereafter, Common Shares.

“Subscription Closing Date” means, in respect
of the First Subscription, the First Closing Date, and, in respect of a
Subsequent Subscription, the Subsequent Subscription Closing Date for such
Subsequent Subscription.

“Subscription Purchase Prices” means the First
Subscription Purchase Price and the Subsequent Subscription Purchase Prices,
and “Subscription Purchase Price” means any of them.

“Subsequent Subscription Purchase Prices” means
the Second Subscription Purchase Price and the Third Subscription Purchase
Price.

“Subsequent Subscriptions” means the Second
Subscription and the Third Subscription.

“Subsidiary” of any Person means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership, or joint venture or (c)
the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more
of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Tax” or “Taxes” means all income, gross
receipts, gains, sales, use, employment, franchise, profits, excise, property,
value added and other taxes, fees, stamp taxes and duties, assessments or
charges of any kind, together with any interest and penalties, additions to tax
or additional amounts imposed by any taxing authority with respect thereto.

“Transaction Documents” means, collectively,
the Investment Agreements, the Certificate of Amendment, and any other document
or agreement to be entered into, executed or delivered pursuant to an
Investment Agreement and any other document agreed in writing by the Company
and the Investor to be a Transaction Document.

 

7

 

“Transfer” used as a noun means any direct or
indirect sale, assignment, transfer, pledge, hypothecation, exchange or other
disposition by any means whatsoever, whether by operation of Law or otherwise;
and, used as a verb, means any action or actions taken by or on behalf of a
Person, which result in a sale, assignment, transfer, pledge, hypothecation,
exchange or other disposition.

“Transferee” means a Person to whom Shares have
been Transferred by the Investor or any Transferee of such Shares.

“U.S. GAAP” means United States generally accepted
accounting principles applied on a consistent basis.

SECTION 1.02.   Definitions.  The following terms have the meanings set
forth in the Sections set forth below:

	
   Definition 

   	
   Location 

   
	
    

   	
    

   
	
  “Agreement” 

  	
  Preamble 

  
	
  “Applicable Closing Date”

  	
  3.03 

  
	
  “Approved Third Party Purchaser”

  	
  4.04(c) 

  
	
  “Assets”

  	
  6.14(a) 

  
	
  “Company”

  	
  Preamble 

  
	
  “Company Indemnified Party”

  	
  8.03(a) 

  
	
  “Contract Manufacturing Agreement”

  	
  Recitals 

  
	
  “Development Agreement”

  	
  Recitals 

  
	
  “Financial Statements”

  	
  6.20 

  
	
  “First Closing”

  	
  3.01(b) 

  
	
  “First Closing Date”

  	
  3.01(b) 

  
	
  “First Subscription”

  	
  3.01(a) 

  
	
  “First Subscription Purchase Price”

  	
  3.01(a) 

  
	
  “Indemnifiable Document”

  	
  8.02(a) 

  
	
  “Interim Financial Statements”

  	
  6.20 

  
	
  “Investment Agreements”

  	
  Recitals 

  
	
  “Investor”

  	
  Preamble 

  
	
  “Investor Indemnified Party”

  	
  8.02(a) 

  
	
  “Loan Agreement”

  	
  Recitals 

  
	
  “Loss”

  	
  8.02(a) 

  
	
  “Material Contracts”

  	
  6.12(a) 

  
	
  “Offered Shares”

  	
  4.04(a) 

  
	
  “OTI”

  	
  6.20 

  
	
  “Parties”

  	
  Preamble 

  
	
  “Potential Seller”

  	
  4.04(a) 

  
	
  “Potential Seller Offer”

  	
  4 04(a) 

  
	
  “Rules and Regulations”

  	
  7.05 

  
	
  “Second Subscription”

  	
  3.02(a)(i) 

  
	
  “Second Subscription Purchase Price”

  	
  3.02(a)(i) 

  
	
  “Securities Act”

  	
  7.05 

  

 

8

 

	
   Definition 

   	
   Location 

   
	
   

  	
   

  
	
  “Share Certificates”

  	
  3.01(c)(vi) 

  
	
  “Shares Offer”

  	
  4.04(a) 

  
	
  “Signing Date”

  	
  Preamble 

  
	
  “Subsequent
  Subscription Closing”

  	
  3.02(b) 

  
	
  “Subsequent
  Subscription Closing Dates”

  	
  3.02(b) 

  
	
  “Technology”

  	
  Recitals 

  
	
  “Third Party Claims”

  	
  8.02(b) 

  
	
  “Third Party
  Purchaser”

  	
  4.04(a) 

  
	
  “Third Subscription”

  	
  3.02(a)(ii) 

  
	
  “Third Subscription
  Purchase Price”

  	
  3.02(a)(ii) 

  
	
  “2003 Compensation”

  	
  6.16

  

 

SECTION 1.03.   Interpretation
and Rules of Construction.  In this
Agreement, except to the extent that the context otherwise requires:

(a)           when
a reference is made in this Agreement to an Article, Section, Exhibit or
Schedule, such reference is to an Article or Section of, or a Schedule to, this
Agreement unless otherwise indicated;

(b)           the
table of contents and headings in this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this Agreement;

(c)           whenever
the words “include”, “includes” or “including” are used in this Agreement, they
are deemed to be followed by the words “without limitation”;

(d)           the
words “hereof, “herein” and “hereunder” and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;

(e)           all
terms defined in this Agreement have such defined meanings when used in any
certificate or other document made or delivered pursuant hereto, unless otherwise
defined therein;

(f)            the
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms;

(g)           any
Law defined or referred to herein or in any agreement or instrument that is
referred to herein means such Law or statute as from time to time amended, modified
or supplemented, including by succession of comparable successor Laws;

(h)           references
to a Person are also to its permitted successors and assigns;

(i)            the
use of “or” is not intended to be exclusive unless expressly indicated
otherwise; and

 

9

 

(j)            all
references to currency, monetary values and dollars shall mean United States
(U.S.) dollars and all payments hereunder shall be made in United States
dollars.

 

ARTICLE II

INVESTMENT AGREEMENTS

SECTION 2.01.   Execution
of Investment Agreements by the Company. 
On or before the Signing Date, the Company shall enter into and execute
each of the Investment Agreements to which it is a party, and each other
Transaction Document it is required by the terms of an Investment Agreement to
enter into or execute on or before the Signing Date, and deliver such duly
executed Investment Agreements and other Transaction Documents to the Investor.

SECTION 2.02.   Execution
of Investment Agreements by the Investor. 
On or before the Signing Date, the Investor shall enter into and execute
each of the Investment Agreements to which it is a party, and each other
Transaction Document it is required by the terms of an Investment Agreement to
enter into or execute on or before the Signing Date, and deliver such duly
executed Investment Agreements and other Transaction Documents to the Company.

ARTICLE III

EQUITY INVESTMENT

SECTION 3.01.   Subscription
for Shares at Closing.  (a) First
Subscription.  Upon the basis of the
representations and warranties set forth in this Agreement and subject to the
terms and conditions set forth in this Agreement (including, without
limitation, those set forth in Section 3.01(e) and 3.04), the Investor agrees
to purchase from the Company, and the Company agrees to issue and sell to the
Investor, 2,000,000 Preferred Shares (or such number of Common Shares as
required under Section 3.04) (the “First Subscription”), for an
aggregate purchase price of U.S. $10 million (the “First Subscription
Purchase Price”).

(b)           First
Closing.  Subject to the terms and
conditions of this Agreement, the First Subscription shall take place at a
closing (the “First Closing”) to be held at the offices of Shearman
& Sterling, 599 Lexington Avenue, New York, New York at 10:00 A.M. (New
York City time) on the second Business Day following the satisfaction or waiver
of all conditions to the obligations of the parties to consummate the First
Subscription set forth in this Agreement, or at such other time and place that
the Company and the Investor shall agree (the “First Closing Date”).

(c)           First
Closing Deliveries of the Company.  At
the First Closing, the Company shall deliver or cause to be delivered to the
Investor:

(i)            the
Investment Agreements, duly executed by the Company;

(ii)           a true and complete copy, certified
by the Secretary of the Company, of the resolutions duly and validly adopted by
the Board of Directors evidencing its authorization of the execution and
delivery of the Investment Agreements, the 

10

 

consummation of the transactions contemplated thereby,
the filing of the Certificate of Amendment with the Secretary of State of the
State of Delaware and the issuance of the Shares;

(iii)          the opinion of the Company’s outside
counsel, dated as of the First Closing Date, in a form reasonably satisfactory
to the Investor;

(iv)          a copy of (A) the Certificate of
Incorporation, as amended, certified by the Secretary of State of the State of
Delaware, as of a date not earlier than five (5) Business Days prior to the
First Closing Date and accompanied by a certificate of the Secretary of the
Company, dated as of the First Closing Date, stating that no amendments, other
than the filing of the Certificate of Amendment, have been made to such
Certificate of Incorporation since such date, and (B) the By-laws, certified by
the Secretary of the Company;

(v)           a good standing certificate for the
Company issued by the Secretary of State of the State of Delaware dated as of a
date not earlier than five (5) Business Days prior to the First Closing Date;

(vi)          certificates evidencing the Shares
issued and sold by the Company to the Investor pursuant to the First
Subscription duly and properly registered in the name of the Investor (or its
designee) (the “Share Certificates”);

(vii)         a certificate, dated as of the Closing
Date, signed by the Chief Executive Officer of the Company, to the effect that
the conditions set forth in Sections 5.01(a) and 5.0l(b) have been duly and
properly satisfied;

(viii)        a receipt for the First Subscription
Amount; and

(xi)           a pay-off letter, in a form
reasonably satisfactory to the Investor, duly executed by Rahn & Bodmer,
acknowledging the discharge of any and all security interests in the assets of
the Company under the Rahn & Bodmer Notes upon receipt of the Rahn &
Bodmer Amount on the First Closing Date.

(d)           First
Closing Deliveries of the Investor.  At
the First Closing, the Investor shall deliver or cause to be delivered to the
Company:

(i)            the First Subscription Amount by
wire transfer of immediately available funds to the Company Account;

(ii)           the Rahn & Bodmer Amount by wire
transfer of immediately available funds to the Rahn & Bodmer Account; and

(iii)          the Investment Agreements, duly
executed by the Investor.

(e)           Investor
Conditions to First Closing.  The
obligations of the Investor to consummate the First Subscription and pay the
First Subscription Purchase Price shall be subject

 

11

 

to the fulfillment (or waiver thereof by the
Investor), at or prior to the First Closing, of each of the following
conditions:

(i)            the satisfaction, or waiver by the
Investor, of the conditions set forth in Section 5.01; and

(ii)           the deliveries of the Company
contemplated in Section 3.01(c).

(f)            Company
Conditions to First Closing.  The
obligations of the Company to consummate the First Subscription and deliver any
Shares required to be delivered to the Investor in connection therewith shall
be subject to the fulfillment (or waiver thereof by the Company), at or prior
to the First Closing, of each of the following conditions:

(i)            the satisfaction, or waiver by the
Company, of the conditions set forth in Section 5.02; and

(ii)           the deliveries of the Investor
contemplated in Section 3.01(d).

SECTION 3.02.   Subsequent
Subscriptions for Shares.  (a) Subsequent
Subscription.  Upon the basis of the
representations and warranties set forth in this Agreement and subject to the
terms and conditions set forth in this Agreement (including, without
limitation, those set forth in Section 3.02(e) and 3.04):

(i)            the Investor agrees, upon the
occurrence of the First Milestone, to purchase from the Company, and the Company
agrees to issue and sell to the Investor, 666,667 Preferred Shares (or such
number of Common Shares as required under Section 3.04) (the “Second
Subscription”), for an aggregate purchase price of U.S. $10 million (the “Second
Subscription Purchase Price”); and

(ii)           the Investor agrees, upon the
occurrence of the Second Milestone, to purchase from the Company, and the
Company agrees to issue and sell to the Investor, 357,143 Preferred Shares (or
such number of Common Shares as required under Section 3.04) (the “Third
Subscription”), for an aggregate purchase price of U.S. $10 million (the “Third
Subscription Purchase Price”).

(b)           Subsequent
Subscription Closings.  Subject to
the terms and conditions of this Agreement, each Subsequent Subscription shall
take place at a closing (a “Subsequent Subscription Closing”) to be held
at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New
York on the second Business Day following the satisfaction or waiver of all conditions
to the obligations of the parties to consummate that Subsequent Subscription
set forth in this Agreement, or at such other time and place that the Company
and the Investor shall agree (the date and time of Subsequent Subscription
Closings are referred to herein as the “Subsequent Subscription Closing
Dates”).

(c)           Subsequent
Subscription Closing Deliveries of the Company.  At a Subsequent Subscription Closing, the
Company shall deliver or caused to be delivered to the Investor:

 

12

 

(i)            certificates evidencing the Shares
issued and sold by the Company to the Investor pursuant to the relevant
Subsequent Subscription duly and properly registered in the name of the
Investor (or its nominee);

(ii)           a certificate of the Chief Executive
Officer on behalf of the Company, dated as of the applicable Subsequent
Subscription Closing Date, stating that the conditions set forth in Section
5.01(a) and 5.01(b) have been duly and properly satisfied as of such Subsequent
Subscription Closing Date;

(iii)          in respect of the Second Subscription,
the First Milestone Certificate and in respect of the Third Subscription, the
Second Milestone Certificate, in each case dated as of the date of the
applicable Subsequent Subscription Closing Date; and

(iv)          a receipt for the Subsequent
Subscription Purchase Price for the applicable Subsequent Subscription.

(d)           Subsequent
Subscription Closing Deliveries of the Investor.  At each Subsequent Subscription Closing, the
Investor shall deliver or cause to be delivered to the Company the Subsequent
Subscription Purchase Price for the applicable Subsequent Subscription by wire
transfer of immediately available funds to the Company Account.

(e)           Investor
Conditions to Subsequent Subscriptions. 
The obligations of the Investor to consummate a Subsequent Subscription
and pay the related Subsequent Subscription Purchase Price shall be subject to
the fulfillment (or waiver thereof by the Investor), at or prior to the
Subsequent Subscription Closing for that Subsequent Subscription, of each of
the following conditions:

(i)            in the case of the Second
Subscription, the occurrence of the First Milestone, and in the case of the
Third Subscription, the occurrence of the Second Milestone;

(ii)           the satisfaction (or waiver thereof
by the Investor) of the conditions set forth in Section 5.01 (provided, however,
that in the event that, on the Applicable Closing Date, the Company is subject
to an involuntary petition under Chapter 7 of the Bankruptcy Code, the
applicable Subsequent Subscription shall occur on the fifth Business Day
following the date that the bankruptcy court either dismisses the petition or
enters an order for relief under Chapter 11 of the Bankruptcy Code); and

(iii)          the deliveries of the Company
contemplated in Section 3.02(c).

(f)            Company
Conditions to Subsequent Subscriptions. 
The obligations of the Company to consummate a Subsequent Subscription
and deliver any Shares required to be delivered to the Investor in connection
therewith shall be subject to the fulfillment (or waiver thereof by the
Company), at or prior to the Subsequent Subscription Closing for that
Subsequent Subscription, of each of the following conditions:

 

13

 

(i)            in the case of the Second
Subscription, the occurrence of the First Milestone, and in the case of the
Third Subscription, the occurrence of the Second Milestone;

(ii)           the satisfaction, or waiver by the
Company, of the conditions set forth in Section 5.02; and

(iii)          the delivery of the Investor
contemplated in Section 3.02(d).

SECTION 3.03.   Certain
Governmental Proceedings.  (a) In the
event that, upon any Subscription Closing Date, there shall be pending any
Governmental Order or Action by a Governmental Authority, in each case seeking
to materially and adversely alter the consummation of any of the transactions
contemplated by the Investment Agreements (but where such Action or
Governmental Order does not seek to restrain the consummation of such
transactions), then the number of Shares to be issued to the Investor in such
Subsequent Subscription shall be reduced by 50% and the applicable Subscription
Purchase Price shall also be reduced by 50%, but otherwise the applicable
Subsequent Subscription Closing (the “Applicable Closing”) shall proceed
in accordance with the provisions of Section 3.02.  Within five (5) Business Days following such
Action or Governmental Order having been dismissed or withdrawn, the balance of
such number of Shares to be issued to the Investor in such Subsequent
Subscription shall be issued to the Investor, and the balance of such
applicable Subscription Purchase Price shall be paid by the Investor to the
Company, and such transactions shall be consummated at a closing which shall
otherwise proceed in accordance with the provisions of Section 3.02 (including
conditions to closing), mutatis mutandis, and such balance of such number of
Shares shall be deemed to have been issued, and such balance of such applicable
Subscription Purchase Price shall be deemed to have been paid, at the Applicable
Closing.

(b)           Each
of the Parties shall promptly advise the other Party of the existence of the
commencement of any Action or the existence of any Governmental Order, in each
case of which such Party is or becomes aware, which Action would reasonably be
expected to affect the legality, validity or enforceability of this Agreement
or any other Transaction Document or the consummation of any of the
transactions contemplated by this Agreement or thereby.

SECTION 3.04.   Subscriptions
Following Automatic Conversion.  In
the event that an Automatic Conversion has occurred prior to a Share
Subscription, then, in lieu of the Preferred Shares required to be issued to
the Investor in such Share Subscription, the Company shall issue to the
Investor such number of Common Shares as would result from the conversion, as
of the applicable Subscription Closing Date, into Common Shares of such
Preferred Shares required to be issued to the Investor in such Share
Subscription, and the provisions of this Section 3.04 shall apply to any
Subsequent Share Subscription.

ARTICLE IV

COVENANTS OF THE COMPANY

SECTION 4.01.   Conduct
of Business.  As of and from the date
hereof, and until such time as is specified under Section 4.02, the Company
shall conduct its business and the business

 

14

 

of its Subsidiaries in the ordinary course and
consistent with past practice.  Without
limiting the generality of the foregoing, and until such time as is specified
under Section 4.02, neither the Company nor any Subsidiary thereof shall,
without the prior written consent of the Investor, take any of the following
actions:

(a)           consummate
any sale, directly or indirectly, of all or substantially all of the assets or
business of the Company and its Subsidiaries relating to the use of MSCs in the
Field or MSC Technology in the Field (whether by stock sale, asset sale or
merger whereby the Company is not the surviving entity following such merger);

(b)           until
such time as the Investor ceases to hold a majority of the Preferred Shares
outstanding at any time (or such earlier time as may be provided under Section 4.02),
amend the Company Charter Documents in a manner that changes the rights, preferences
or privileges of the Preferred Shares or otherwise adversely affects the rights
of the Preferred Shares (other than the authorization, creation or issuance of
any new class or series of stock or any other securities convertible into
equity securities of the Company having preferences, rights or powers senior
to, or on a parity with, those of the Preferred Shares);

(c)           take
any action towards the voluntary liquidation or dissolution of the Company;

(d)           apply
any Company assets to the redemption, retirement, purchase or acquisition of
any equity in the Company, without having first obtained the unanimous approval
of the Board of Directors (other than (i) any redemption or repurchase of the Preferred
Shares pursuant to the Investor Rights Agreement, (ii) repurchases of equity from
(A) former employees of the Company or any Subsidiary thereof or (B) members of
the board of directors or current employees of the Company or any Subsidiary
pursuant to arrangements approved by the unanimous consent of the Board of
Directors, or (iii) any other redemptions, retirements, purchases or
acquisitions not otherwise covered by (i) or (ii) above which do not, in the
aggregate for any fiscal year of the Company, exceed $500,000 during such
fiscal year);

(e)           enter
into any agreement, arrangement or transaction, in each case material to the
Company, with any of its directors, officers, employees or stockholders (or
with any relative, beneficiary, spouse or Affiliate of such Person), other than
(i) any employment agreement or arrangement between the Company and its
officers or employees made in the ordinary course of business, consistent with
past practice and on arm’s-length terms or (ii) on terms substantively similar
to those that would be obtained if such agreement or arrangement had been
negotiated between parties having an arm’s length relationship;

(f)            make
any loan to, guarantee any Indebtedness of, or otherwise incur any Indebtedness
on behalf of any Person in an amount greater than $500,000 in respect of any
single transaction or series of related transactions, other than (i) Permitted Indebtedness
or (ii) Indebtedness existing as of the Signing Date, provided that the principal
amount thereof is not increased and the terms thereof are not modified to impose
more burdensome terms upon the Company or any of its Subsidiaries;

(g)           issue
any Preferred Shares to any Person other than the Investor; or

 

15

 

(h)           agree,
whether in writing or otherwise, to take any of the actions specified in
clauses (a) to (g) of this Section 4.01 or grant any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in clauses (a) to (g)
of this Section 4.01, except as expressly contemplated by the Transaction
Documents.

SECTION 4.02.   Termination
of Certain Covenants.  Unless no longer
applicable in accordance with the terms of Section 4.01(b), each of the
covenants of the Company set forth in Section 4.01 shall in any event terminate
on the earliest of:

(a)           the
redemption (in accordance with the Investor Rights Agreement) or repurchase in
full by the Company of all of the Preferred Shares;

(b)           any
sale or other Transfer by the Investor, in any single transaction or in a series
of transactions, as a result of which the Investor ceases to hold more than 50%
of the outstanding Preferred Shares;

(c)           the
closing of a Public Offering; and

(d)           an
Automatic Conversion.

SECTION 4.03.   Right
of First Refusal.  Until such time as
the Shares are freely tradable without registration or other restriction under
federal and state securities laws, neither the Investor nor any Transferee of
Shares may Transfer all or any portion of the Shares except as expressly
provided in this Agreement and the Investor Rights Agreement.  A Transfer of the whole or any portion of the
Shares in violation of the provisions of this Agreement and the Investor Rights
Agreement shall be null and void ab initio and shall be of no effect.

SECTION 4.04.   Restrictions
on Transfer.  (a) In the event that
the Investor or any Transferee (the “Potential Seller”) receives a bona
fide offer (the “Shares Offer”) from an independent third party (the “Third
Party Purchaser”) to purchase all or any of the Shares held by the Investor
or such Transferee, such Potential Seller shall first offer in writing (the “Potential
Seller Offer”) such Shares to the Company at the same price and upon the
same terms provided in the Shares Offer. 
The Potential Seller Offer shall set forth (i) the number of Shares
proposed to be purchased in the Shares Offer (the “Offered Shares”), (ii)
the name and address of the proposed Third Party Purchaser, (iii) the amount of
consideration to be received by the Potential Seller in the Shares Offer and (iv)
the proposed method of payment.  The
Company shall have the right, upon written notice to the Potential Seller
within ten (10) Business Days following receipt of the Potential Seller Offer,
to purchase from the Potential Seller all of the Offered Shares within thirty
(30) days following receipt of the Potential Seller Offer.

(b)           If
the Company gives notice in accordance with Section 4.04(a) above of its
election to purchase all of the Offered Shares, the Company shall, within
thirty (30) days following receipt of the Potential Seller Offer, purchase such
Offered Shares at the price and upon the terms contained in the Potential
Seller Offer.  The Potential Seller shall
continue to be subject to the terms and conditions of this Agreement until the
conditions set forth in Section 4.04(c) below have been satisfied.

 

16

 

(c)           In
the event that (i) the Potential Seller complies with the provisions of Section
4.04(a) and (ii) the Company fails to elect to purchase all of the Offered
Shares in accordance with Section 4.04(a), then the Offered Shares that the
Company has not so elected to purchase may be transferred to the Third Party
Purchaser named in the Potential Seller Offer (the “Approved Third Party
Purchaser”); provided, however, that (w) such Offered Shares
are sold at the price and upon the same terms set forth in the Potential Seller
Offer, (x) such sale is made within ninety (90) days after the expiration of
the option period provided in Section 4.04(a), (y) the sale of such
Offered Shares is not made in such a manner that would result in the Company being
obligated to register its securities under the Securities Act, and (z) the
Approved Third Party Purchaser unconditionally assumes all of the Investor’s
rights, duties and obligations with respect to the Shares under this Agreement,
the Investor Rights Agreement and applicable Law. Any of the Offered Shares not
transferred to the Approved Third Party Purchaser by the Potential Seller
within the ninety (90) days provided in the foregoing sentence shall remain
subject to all of the provisions of this Agreement (including, without
limitation, Section 4.03 and this Section 4.04).

SECTION 4.05.   Legend.  The certificates held by the Investor or any
Transferee that are subject to the right of first refusal set forth in this
Article IV shall have endorsed thereon, in addition to such other legends as
required to be imprinted thereon pursuant to this Agreement or to applicable
Law, a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL, A RIGHT OF REDEMPTION AND CERTAIN OTHER
RESTRICTIONS ON TRANSFER AS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT AND AN
INVESTMENT AGREEMENT, EACH ENTERED INTO BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON REQUEST TO THE HOLDER OF RECORD OF THE SHARES
REPRESENTED BY THIS CERTIFICATE.

SECTION 4.06.   Voting
Rights.  For so long as (i) the
Investor holds at least ten percent (10%) of the Preferred Shares outstanding
at any time and (ii) the Investor retains the right to the license granted
pursuant to the License Agreement (including to the extent the Investor retains
such right following termination of the License Agreement), then any transfer
of the Preferred Shares to any third party (including Affiliates and
Subsidiaries of the Investor or any third party) is subject to the requirement
that the Transferee agree in writing with the Company and the Investor to take
all actions necessary in order to cause the election to the Board of Directors
of one (1) representative designated by the Investor pursuant to the
Certificate of Incorporation for so long as the Investor continues to meet the
requirements of subsections (i) and (ii) hereof.

SECTION 4.07.   D&O
Insurance.  Promptly after the
Signing Date, the Company shall obtain and thereafter continue to maintain
directors and officers liability insurance on commercially customary terms.

 

17

 

ARTICLE V

CONDITIONS PRECEDENT

 

SECTION 5.01.   Conditions
to Investor Obligations.  The
obligations of the Investor to consummate any Share Subscription or pay or
deliver any Subscription Purchase Price are subject to the satisfaction, or
waiver by the Investor, on the Applicable Closing Date, of each of the
following conditions:

(a)           Representations
and Warranties.  The representations
and warranties of the Company contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Applicable Closing Date, with the same force
and effect as if made as of the Applicable Closing Date (other than such
representations and warranties as are made as of another date, which need only
be true and correct in all material respects when made and true and correct in
all material respects as of such other date, with the same force and effect as
if made as of such other date); provided, however, that the only representations
and warranties that shall be required to be true and correct in all material
respects as of any Subsequent Subscription Closing Date shall be the
representations and warranties set forth in Sections 6.01, 6.04, 6.05 and 6.06
(other than such representations and warranties therein as are made as of
another date, which need only have been true and correct in all material
respects as of such other date);

(b)           Covenants.  All of the covenants contained in this
Agreement to be complied with by the Company on or before the Applicable
Closing Date shall have been complied with in all material respects;

(c)           No
Governmental Proceeding.  No
Governmental Order shall be in effect, and no Action shall be pending, in each
case against the Company or the Investor, seeking to restrain the consummation
of the applicable Share Subscription;

(d)           No
Prohibition.  The purchase of the
Shares by the Investor pursuant to the relevant Share Subscription shall not be
prohibited by any applicable Law; and

(e)           No
Chapter 7 Event.  Neither the Company
nor any Subsidiary thereof shall be subject to a voluntary or an involuntary
petition under Chapter 7 of the Bankruptcy Code which has not been dismissed or
with respect to which an order for relief under Chapter 7 of the Bankruptcy
Code has been entered; for the avoidance of doubt, notwithstanding that the
Company and/or any Subsidiary thereof may be, at or prior to the Applicable
Closing Date, (x) subject to a voluntary or an involuntary petition under
Chapter 11 of the Bankruptcy Code, (y) subject to an involuntary petition
under Chapter 7 of the Bankruptcy Code which has been dismissed or with respect
to which an order of relief under Chapter 11 of the Bankruptcy Code has been
entered or (z) the subject of any other insolvency related proceeding not
referenced in the preceding sentence, the condition set forth in this Section
5.01 (e) shall be deemed satisfied.

SECTION 5.02.   Conditions
to Company Obligations.  The
obligations of the Company to consummate any Share Subscription or deliver any
Shares to the Investor in connection 

 

18

 

therewith are subject to
the satisfaction, or waiver by the Company, on the Applicable Closing Date, of
each of the following conditions:

(a)           Representations
and Warranties.  The representations
and warranties of the Investor contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Applicable Closing Date, with the same force
and effect as if made as of the Applicable Closing Date (other than such
representations and warranties as are made as of another date, which need only
be true and correct in all material respects as of such other date);

(b)           Covenants.  All of the covenants contained this Agreement
to be complied with by the Investor on or before the Applicable Closing Date
shall have been complied with in all material respects;

(c)           No
Governmental Proceeding.  No
Governmental Order shall be in effect, and no Action shall be pending, in each
case against the Company or the Investor, seeking to restrain the consummation
of the applicable Share Subscription; and

(d)           No
Prohibition.  The purchase of the
Shares by the Investor pursuant to the relevant Shares Subscription shall not
be prohibited by any applicable Law.

(e)           No
Insolvency Event.  The Investor shall
not have made a general assignment for the benefit of creditors, nor shall any
proceeding have been instituted by or against the Investor seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investor as
follows:

SECTION 6.01.   Organization,
Authority and Qualification of the Company. 
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
corporate power and authority to own, operate or lease the properties and
assets now owned, operated or leased by it and to carry on its business as it
has been and is currently conducted.  The
Company is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not materially
adversely affect the financial condition of the Company.

SECTION 6.02.   Company
Charter Documents.  True and correct
copies of the Company Charter Documents are attached hereto as Exhibit B, each
as in effect on the Signing Date.

 

19

 

SECTION 6.03.   Subsidiaries.  There are no corporations, partnerships,
joint ventures, associations or other entities in which the Company owns, of
record or beneficially, any direct or indirect equity interest or any right
(contingent or otherwise) to acquire the same. 
The Company is not a member of (nor is any part of its business
conducted through) any partnership.

SECTION 6.04.   Capital
Stock of the Company; Ownership of Shares. 
As of the Signing Date, the authorized capital stock of the Company
consists of (A) 60,000,000 shares of Common Stock, of which (y) 3,500,000
shares are reserved for issuance upon the exercise of stock options issued or
to be issued by the Company and (z) 3,500,000 shares are reserved for issuance
upon the exercise of warrants issued by the Company under the terms of various
warrant agreements; and (B) 8,000,000 shares of Preferred Stock.  All of the outstanding shares of the Company’s
capital stock are duly and validly issued, fully paid and nonassessable.  None of the issued and outstanding shares of
capital stock of the Company was issued in violation of any preemptive rights.  As of the Signing Date, except as provided in
the Investment Agreements and as set forth in the first sentence of this
Section, there are no options, warrants, subscriptions, calls, convertible
securities or other rights, agreements, arrangements or commitments relating to
the capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or any other equity interest in, the Company.  As of the Signing Date, there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other Person, except as provided under the Investor Rights Agreement.  The Shares to be issued and sold pursuant to
the Share Subscriptions have been duly and validly authorized by the Company
and, upon consummation of a Share Subscription, the applicable Shares issued to
and purchased by the Investor will have been duly and validly issued, fully
paid and nonassessable, the issuance of such Shares shall not be subject to
preemptive or other similar rights, and upon registration of such Shares in the
name of the Investor in the records of the Company, the Investor will hold good
and valid title to such Shares, free and clear of all Encumbrances, subject to
restrictions on Transfer under this Agreement and the Investor Rights Agreement
and under applicable state and federal securities laws.

SECTION 6.05.   Authority and Qualification of the Company.  The Company has all necessary corporate power
and authority to enter into the Transaction Documents to which it is a party,
to carry out its obligations thereunder and to consummate the transactions
contemplated thereby.  The execution and
delivery by the Company of the Transaction Documents to which it is a party,
the performance by the Company of its obligations thereunder and the
consummation by the Company of the transactions contemplated thereby have been
duly authorized by all requisite action on the part of the Company.  Each Transaction Document to which the
Company is a party has been, or upon its execution shall be, duly executed and
delivered by the Company, and (assuming due execution and delivery thereof by
each other party thereto, if applicable) each Transaction Document constitutes,
or upon its execution shall constitute, the legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
subject to (a) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights and remedies generally, and (b) the effect of general
equitable principles, regardless of whether asserted in a proceeding in equity
or at law.

 

20

 

SECTION 6.06.   No
Conflict.  The execution, delivery
and performance by the Company of the Transaction Documents to which it is a
party does not (a) violate, conflict with or result in the breach of any
provision of the Company Charter Documents, (b) conflict with or violate (or
cause a Material Adverse Change as a result of) any Law or Governmental Order
applicable to the Company, or any of its assets, properties or businesses, or (c)
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Securities of the Company
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to
which the Company is a party or by which any of its Securities or any of such
assets or properties is bound or affected, except in the case of each of
subsections (a) through (c) above as would not materially adversely affect the
financial condition of the Company.

SECTION 6.07.   Governmental Consents and Approvals.  The execution, delivery and performance of
this Agreement and the Investor Rights Agreement (and any certificate or other
document to be delivered pursuant to either of the foregoing, other than the
License Agreement, the Development Agreement and the Contract Manufacturing
Agreement) by the Company does not require any consent, approval, authorization
or other order of, action by, filing with or notification to, any Governmental
Authority, other than filings pursuant to state securities laws, if any.

SECTION 6.08.   Conduct
in Ordinary Course.  Except as set
forth in Section 6.08 of the Disclosure Schedule, since the Reference Statement
Date, the business of the Company has been conducted in the ordinary course and
consistent with past practice.  As
amplification and not limitation of the foregoing, since the Reference
Statement Date, none of the Company or any Subsidiary has:

(a)           issued
or sold any capital stock, notes, bonds or other securities, or any warrant,
option or right to acquire the same, of the Company or any Subsidiary, except
as provided under the Transaction Documents;

(b)           redeemed
any of the capital stock or declared, made or paid any dividends or
distributions (whether in cash, securities or other property) to the holders of
capital stock of the Company or any Subsidiary or otherwise;

(c)           made
any acquisitions for consideration in excess of $200,000 in the case of an
individual acquisition or $500,000 in the aggregate;

(d)           incurred
any Indebtedness (other than Permitted Indebtedness) in excess of $200,000
individually or $500,000 in the aggregate;

(e)           made
any loan to, guaranteed any Indebtedness of or otherwise incurred any
Indebtedness (other than Permitted Indebtedness) on behalf of any Person;

(f)            failed
to pay any creditor any amount material to the financial condition of the
Company owed to such creditor when due;

 

21

 

(g)           taken
any voluntary action towards liquidation or dissolution of the Company or any
Subsidiary;

(h)           (i)
granted any increase, or announced any increase, in the wages, salaries,
compensation, bonuses, incentives, pension or other benefits payable by the
Company or any Subsidiary to any employee thereof, including, without
limitation, any increase or change pursuant to any Plan, or (ii) established or
increased or promised to increase any benefits under any Plan, in either case
of (i) or (ii) except as required by Law or any collective bargaining agreement
or involving ordinary increases consistent with past practices of the Company
or such Subsidiary;

(i)            entered
into any agreement, arrangement or transaction with any of its directors,
officers, employees or stockholders (or with any relative, beneficiary, spouse
or Affiliate of such Persons), in each case, in excess of $100,000;

(j)            amended,
modified or consented to the termination of any Material Contract or the rights
of the Company or of any Subsidiary thereunder, which would result in a loss or
creation of an obligation greater than $100,000;

(k)           suffered
any Material Adverse Change; or

(l)            agreed,
whether in writing or otherwise, to take any of the actions specified in
clauses (a) to (k) of this Section 6.08 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in clauses (a) to (k)
of this Section 6.08, except as expressly contemplated by the Transaction
Documents.

SECTION 6.09.   Corporate
Books and Records.  The minute books
of the Company contain accurate records of all Board of Director and
stockholder meetings and accurately reflect all other actions taken by the
stockholders, the Board of Directors and all committees thereof.  Complete and accurate copies of all such
minute books and of the stock register of the Company have been provided by the
Company to the Investor.

SECTION 6.10.   Litigation.  Except as set forth on Section 6.10 of the
Disclosure Schedule, there is no Action pending (or, to the best knowledge of
the Company after due inquiry, threatened to be brought) by or against the
Company or any Subsidiary.  Neither the
Company nor any Subsidiary is subject to any Governmental Order (nor, to the
best knowledge of the Company after due inquiry, are there any Governmental
Orders threatened to be imposed by any Governmental Authority) which has
resulted or would reasonably be expected to have a Material Adverse Change.

SECTION 6.11.   Compliance
with Laws.  Except as would not
materially adversely affect the financial condition of the Company, (a) the
Company and its Subsidiaries, if any, have conducted and continue to conduct
their business in all respects in accordance with all Laws and Governmental
Orders applicable to the Company and such Subsidiaries, and (b) neither the
Company nor any Subsidiary is in violation of any such Law or Governmental
Order.

 

22

 

SECTION 6.12.   Material
Contracts.  (a) Section 6.12 of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral agreements) of the Company (such contracts
and agreements, together with all contracts, agreements, leases and subleases
concerning the use, occupancy, management or operation of any Leased Real
Property (including, without limitation, all contracts, agreements, leases and
subleases listed in Sections 6.13(b) of the Disclosure Schedule) being “Material
Contracts”):

(i)            each contract, agreement, invoice,
purchase order and other arrangement for the purchase of personal property,
with any supplier or for the furnishing of services to the Company under the
terms of which the Company (A) is likely to pay or otherwise give consideration
of more than $200,000 in the aggregate during the calendar year ended December
31, 2003, or (B) is likely to pay or otherwise give consideration of more than
$200,000 in the aggregate over the remaining term of such contract;

(ii)           each contract, agreement, invoice,
sales order and other arrangement, for the sale of personal property or for the
furnishing of services by the Company which (A) is likely to involve
consideration of more than $200,000 in the aggregate during the calendar year
ended December 31, 2003, or (B) is likely to involve consideration of more than
$200,000 in the aggregate over the remaining term of the contract;

(iii)          all contracts and agreements (other
than the Transaction Documents) under which the Company has incurred, or has
agreed to incur, Indebtedness of more than $200,000;

(iv)          all contracts and agreements with any
Governmental Authority to which the Company is a party, other than contracts
and agreements relating to the provision of services, the purchase or sale of
goods, or grants, which in each case do not involve the payment of aggregate
consideration in excess of $200,000;

(v)           all contracts and agreements that
limit or purport to limit the ability of the Company to compete in any line of
business or with any Person or in any geographic area or during any period of
time; and

(vi)          all contracts and agreements between
or among the Company and any holder of securities of the Company (other than
confidentiality, non-competition and non-solicitation agreements with
employees, independent contractors or consultants, or employment agreements).

For purposes of this Sections 6.12, 6.13 and 6.14, the term “lease”
shall include any and all leases, subleases, sale/leaseback agreements or
similar arrangements.

(b)           To
the best knowledge of the Company after due inquiry, each Material Contract: (i)
is valid and binding on the parties thereto and is in full force and effect;
and (ii) upon consummation of the transactions contemplated by this Agreement
and the other Transaction Documents, shall continue in full force and effect
without penalty or other adverse consequence, except, in each case, as would
not materially adversely affect the financial condition of the Company.  To the best knowledge of the Company after
due inquiry, the Company is not in breach of, or default under, any Material
Contract, and no other party to any Material Contract is 

 

23

 

in breach thereof or default thereunder and the
Company has not received any notice of termination, cancellation, breach or
default under any Material Contract, except in each case as would not
materially adversely affect the financial condition of the Company.

(c)           The
Company has made available to the Investor true and complete copies of all
written Material Contracts.

SECTION 6.13.   Real
Property.  (a) The Company does not
own any real property.

(b)           Section
6.13(b) of the Disclosure Schedule lists: (i) the street address of each parcel
of Leased Real Property, and (ii) the identity of the lessor, lessee and
current occupant (if different from the lessee) of each such parcel of Leased Real
Property.

SECTION 6.14.   Assets. (a) The Company owns, leases or has the
legal right to use all the properties and assets, including, without
limitation, the Owned Intellectual Property, used or intended to be used in the
conduct of the business of the Company or otherwise owned, leased or used by
the Company (collectively, the “Assets”), except where a failure to so
own, lease or have such legal right would not materially adversely affect the
financial condition of the Company.

(b)           The
Assets constitute all the properties, assets and rights forming a part of, used
or held in, and all such properties, assets and rights as are necessary in the
conduct of, the business of the Company.

(c)           As
of the Signing Date, the Company is the sole and exclusive owner of the entire
right, title and interest in and to, or holds an exclusive license under, the
Licensed Technology, free and clear of all Encumbrances.

SECTION 6.15.   Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by the Investment Agreements based upon
arrangements made by or on behalf of the Company.

SECTION 6.16.   Key
Employees.  (a) Prior to the Signing
Date, the Company has delivered to the Investor a list setting forth (i) the
name, (ii) expected annual salary and bonus for 2003 (“2003 Compensation”)
and (iii) deferred or contingent compensation (in cash or other consideration)
of the five (5) employees, officers, directors, consultants or agents of the
Company earning the greatest amounts of 2003 Compensation,

(b)           All
directors, officers, management employees, and technical and professional
employees of the Company are under written obligation to the Company to
maintain in confidence all confidential or proprietary information acquired by
them in the course of their employment and to assign to the Company all
inventions made by them within the scope of their employment during such
employment and for a reasonable period (as determined by the Board of Directors
in good faith) thereafter.

SECTION 6.17.   Insurance.  The Company maintains comprehensive general
liability insurance, including products liability, with a minimum liability
coverage limit of two million dollars ($2,000,000) per occurrence.

 

24

 

SECTION 6.18.   Environmental
and Other Permits and Licenses; Related Matters.  Except as set forth in Section 6.18 of the
Disclosure Schedule, to the best knowledge of the Company after due inquiry, (i)
the Company is currently in compliance with all applicable Environmental Laws
and all Environmental Permits, (ii) all past noncompliance with Environmental
Laws or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability, and (iii) there is no requirement
proposed for adoption or implementation under any Environmental Law or
Environmental Permit that is reasonably expected to result in a Material
Adverse Change.

SECTION 6.19.   Regulatory
Compliance.  Each product candidate,
if any, that is tested or created by the Company is being tested or created in
compliance with all material requirements of applicable Law.  The Company has not received any notice from
the FDA or any other Governmental Authority alleging any violation by the
Company of any Law.  The Company has not
received any written notice that the FDA or any other Governmental Authority
has threatened to investigate or suspend any research activities, pre-clinical
programs or clinical trials being conducted by the Company.

SECTION 6.20.   Financial
Statements and Records.  True and
complete copies of (a) the audited consolidated balance sheet of the Osiris
Therapeutics, Inc.  (“OTI”) for
each of the three (3) fiscal years ended as of December 31, 2001, and the
related audited statements of income, retained earnings, stockholders’ equity
and changes in financial position of OTI, together with all related notes and
schedules thereto (if any), accompanied by the reports thereon of OTI’s accountants
(collectively, the “Financial Statements”) and (b) the unaudited balance
sheet of OTI as of December 31, 2002, and the related statements of income,
retained earnings, stockholders’ equity and changes in financial position of
OTI (collectively, the “Interim Financial Statements”) have been
provided to the Investor by the Company prior to the Signing Date.  Except as may be indicated in the notes
thereto, the Financial Statements and the Interim Financial Statements (i) were
prepared in accordance with the books of account and other financial records of
OTI, (ii) present fairly the financial condition and results of operations
of OTI as of the dates thereof or for the periods covered thereby, (iii) have
been prepared in accordance with U.S. GAAP applied on a basis consistent with
the past practices of OTI and (iv) include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the
financial condition of OTI and the results of operations of OTI as of the dates
thereof or for the periods covered thereby, subject, in the case of each clause
with respect to the Interim Financial Statements, to year-end audit adjustments
and the addition of, and any changes to, the notes thereto in connection with
such year-end audit adjustments.

SECTION 6.21.   Absence
of Undisclosed Liabilities.  To the
best knowledge of the Company after due inquiry, there are no Liabilities of
the Company other than (a) those Liabilities reflected or reserved against on
the Interim Financial Statements, (b) those Liabilities set forth in Section
6.21 of the Disclosure Schedule, (c) those Liabilities that are the subject of
another representation or warranty under this Article VI or are permitted to be
incurred under Article IV or (d) such Liabilities, other than as described in
(a) through (d) above, as would not materially adversely affect the financial
condition of the Company.

SECTION 6.22.   Full
Disclosure.  (a) No representation or
warranty of the Company in this Agreement, nor any statement or certificate
furnished or to be furnished by the Company to 

 

25

 

the Investor pursuant to this Agreement, or in connection with the
transactions contemplated thereby, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

The Investor hereby represents and warrants to the
Company as follows:

SECTION 7.01.   Organization
and Authority of the Investor.  The
Investor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all necessary corporate power
and authority to enter into the Transaction Documents to which it is party, to
carry out its obligations thereunder and to consummate the transactions
contemplated thereby.  The execution and
delivery by the Investor of the Transaction Documents to which the Investor is
a party, the performance by the Investor of its obligations thereunder and the
consummation by the Investor of the transactions contemplated thereby have been
duly authorized by all requisite corporate action on the part of the Investor.  Each Transaction Document to which the
Investor is a party has been, or upon its execution shall be, duly executed and
delivered by the Investor, arid (assuming due execution and delivery thereof by
each other party thereto, if applicable) each Transaction Document constitutes,
or upon its execution, shall constitute, the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance
with its terms, subject to (b) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws relating to or
affecting creditors’ rights and remedies generally, and (b) the effect of
general equitable principles, regardless of whether asserted in a proceeding in
equity or at law.

SECTION 7.02.   No
Conflict.  The execution, delivery
and-performance by the Investor of the Transaction Documents to which it is a
party does not (a) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or the by-laws of the Investor,
(b) conflict with or violate any Law or Governmental Order applicable to
the Investor or any of its assets, properties or businesses or (c) conflict
with, or result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Investor is a party,
which would adversely affect the ability of the Investor to carry out its
obligations under, and to consummate the transactions contemplated by, the
Transaction Documents.

SECTION 7.03.   Governmental
Consents and Approvals.  The
execution, delivery and performance by the Investor of this Agreement and the
Investor Rights Agreement (and any certificate or other document to be
delivered pursuant to either of the foregoing, other than the License
Agreement, the Development Agreement and the Contract Manufacturing Agreement)
does not require any consent, approval, authorization or other order of, action
by, filing with, or notification to any Governmental Authority.

 

26

 

SECTION 7.04.   Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by the Investment Agreements based upon
arrangements made by or on behalf of the Investor.

SECTION 7.05.   Investor
Qualifications.  The Investor is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares representing an
investment decision like that involved in the purchase of the Shares.  The Investor is acquiring the Shares in the
ordinary course of its business and for its own account for investment purposes
only and with no present intention of distributing any of such Shares, and no
arrangement or understanding exists with any other persons regarding the
distribution of such Shares.  The
Investor will not, directly or indirectly, offer, sell, pledge, Transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act of 1933, as amended (the “Securities Act”), and the rules
and regulations promulgated thereunder (the “Rules and Regulations’”)
nor will the Investor engage in any short sale that results in a disposition of
any of the Shares by the Investor in violation of the Securities Act or the
Rules and Regulations.  The Investor is a
corporation (b) which in the aggregate owns and invests on a discretionary
basis at least $100 million in securities, or capital to be invested in
securities, of issuers that are not affiliated with it and is a “qualified
institutional Investor” within the meaning of Rule 144A promulgated under the
Securities Act, or (b) is an “accredited investor” as defined in Rule 501(a) of
Regulation D of the Securities Act and is a sophisticated investor, experienced
in investing in securities and non-public and emerging growth companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
the investment and has such knowledge and experience in financial matters that
it is capable of evaluating the merits and risks of the investment in the
Shares.  The Investor agrees to notify
the Company immediately of any change in any of the foregoing information prior
to the First Closing or any Subsequent Subscription Closing, as applicable.

SECTION 7.06.   No
Governmental Endorsement.  The
Investor understands that no Governmental Authority has passed upon or made any
recommendation or endorsement of the Shares.

SECTION 7.07.   Legends. 
The Investor understands that, until such time as the Shares may be sold
by non-affiliates of the Company pursuant to Rule 144 under the Securities Act
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):

“The securities
represented by this certificate have not been registered under the Securities
Act of 1933, as amended (the “Act”), or under the securities laws of any other
jurisdiction.  The securities may not be
sold, transferred or assigned in the absence of an effective registration
statement for the securities under the Act and applicable state securities
laws, or an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required under the Act or
any applicable state securities laws or unless sold pursuant to Rule 144 under
the Act.”

 

27

 

SECTION 7.08.   Compliance
with Legal Obligations.  The Investor
understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of the Securities Act,
the Rules and Regulations and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the Shares.

SECTION 7.09.   Full
Disclosure.  No representation or
warranty of the Investor in this Agreement, nor any statement or certificate
furnished or to be furnished by the Investor to the Company pursuant to this
Agreement, or in connection with the transactions contemplated thereby, contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements contained herein or therein not misleading.

(a)           As
of the date hereof, the Investor has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the sale
and issuance of the Shares and the business, properties and financial condition
of the Company, and to make requests for additional information about the
business and financial condition of the Company, and, to the knowledge of the
Investor, the Company has responded to such requests.

SECTION 7.10.   Risks.  The Investor understands the fact that a
significant portion of the Company’s business consists of development of new
products as to which there is no guarantee of commercial success or that
existing business will be renewed.

ARTICLE VIII

INDEMNIFICATION

 

SECTION 8.01.   Survival
of Representations, Warranties and Indemnities.  (a) Unless this Agreement is earlier
terminated pursuant to Article IX, the representations, warranties and
indemnities of the Company contained in this Agreement shall survive the last
Subscription Closing Date and remain in full force and effect until eighteen
(18) months following such last Subscription Closing Date.  Neither the period of survival nor the
liability of the Company with respect to its representations, warranties and
indemnities shall be reduced by any investigation made at any time by or on
behalf of the Investor.  If written
notice of a claim has been given prior to the expiration of the applicable
representations, warranties and indemnities by the Investor to the Company,
then the relevant representations, warranties and indemnities shall survive as
to such claim, until such claim has been finally resolved.

(b)           Unless
this Agreement is earlier terminated pursuant to Article IX, the
representations, warranties and indemnities of the Investor contained in this
Agreement shall survive the last Subscription Closing Date and remain in full
force and effect until the first anniversary thereof.  Neither the period of survival nor the
liability of the Investor with respect to the Investor’s representations,
warranties and indemnities shall be reduced by any investigation made at any
time by or on behalf of the Company.  If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by the Company to the 

 

28

 

Investor, then the relevant representations, warranties
and indemnities shall survive as to such claim, until such claim has been
finally resolved.

SECTION 8.02.   Indemnification by the Company.  (a) The Investor and its Affiliates, officers,
directors, employees, agents, successors and assigns (each, an “Investor
Indemnified Party”) shall be indemnified and held harmless by the Company
for and against any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys’ and consultants’ fees and expenses) actually
suffered or incurred by them (including, without limitation, any Action brought
or otherwise initiated by any of them) (hereinafter a “Loss”), arising
out of or resulting from (i) the breach of any representation or warranty,
covenant or agreement made by the Company contained in this Agreement or any
certificate or other document to be delivered pursuant thereto, other than the
License Agreement, the Development Agreement, the Contract Manufacturing Agreement
and the Investor Rights Agreement (an “Indemnifiable Document”) or (ii) a
Claim by third parties with respect to any violation by the Company of any
federal or state securities laws in connection with the transactions
contemplated by any Indemnifiable Document. 
To the extent that the undertakings of the Company set forth in this
Section 8.02 may be unenforceable, the Company shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Losses incurred by the Investor Indemnified Parties.

(b)           An
Investor Indemnified Party shall give the Company notice of any matter which
such Investor Indemnified Party has determined has given or could give rise to
a right of indemnification under this Agreement, within ten (10) days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of the
Indemnifiable Document in respect of which such right of indemnification is
claimed or arises.  The obligations and
liabilities of the Company under this Article VIII with respect to Losses
arising from claims of any third party which are subject to the indemnification
provided for in this Article VIII (“Third Party Claims”) shall be
governed by and be contingent upon the following additional terms and
conditions: if an Investor Indemnified Party shall receive notice of any Third
Party Claim, such Investor Indemnified Party shall give the Company notice of
such Third Party Claim within ten (10) days of the receipt by the Investor
Indemnified Party of such notice; provided, however, that the
failure to provide such notice shall not release the Company from any of its
obligations under this Article VIII except to the extent that the Company is
actually prejudiced by such failure and shall not relieve the Company from any
other obligation or liability that it may have to any Investor Indemnified
Party otherwise than under this Article VIII. 
If the Company acknowledges in writing its obligation to indemnify the
Investor Indemnified Party hereunder against any Losses that may result from
such Third Party Claim, then the Company shall be entitled to assume and
control the defense of such Third Party Claim at its expense and through counsel
of its choice if it gives notice of its intention to do so to the Investor
Indemnified Party within five (5) days of the receipt of such notice from the
Investor Indemnified Party; provided, however, that if there
exists or is reasonably likely to exist a conflict of interest that would make
it inappropriate for the same counsel to represent both the Investor
Indemnified Party and the Company, then the Investor Indemnified Party shall be
entitled to retain its own counsel in each jurisdiction for which the Investor
Indemnified Party determines counsel is required, at the expense of the Company.  In the event that the Company exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Investor Indemnified Party shall cooperate with the Company
in such defense and 

 

29

make available to the Company, at the Company’s
expense, all witnesses, pertinent records, materials and information in the
Investor Indemnified Party’s possession or under the Investor Indemnified Party’s
control relating thereto as is reasonably required by the Company.  Similarly, in the event the Investor
Indemnified Party is, directly or indirectly, conducting the defense against
any such Third Party Claim, the Company shall cooperate with the Investor
Indemnified Party in such defense and make available to the Investor
Indemnified Party, at the Company’s expense, all such witnesses, records,
materials and information in the Company’s possession or under the Company’s
control relating thereto as is reasonably required by the Investor Indemnified
Party.  No such Third Party Claim may be
settled (i) by the Company without the prior written consent of the Investor
Indemnified Party unless such settlement requires only the payment of money
damages for which the Company has agreed to be responsible, or (ii) by the
Investor Indemnified Party without the prior written consent of the Company.

SECTION 8.03.   Indemnification by the Investor.  (a) The Company and its Affiliates, officers,
directors, employees, agents, successors and assigns (each a “Company
Indemnified Party”) shall be indemnified and held harmless by the Investor
for and against any and all Losses, arising out of or resulting from (i) the
breach of any representation or warranty, covenant or agreement made by the
Investor contained in any Indemnifiable Document or (ii) a Claim by third
parties with respect to any violation by the Investor of any federal or state
securities laws in connection with the transactions contemplated by any
Indemnifiable Document.  To the extent
that the Investor’s undertakings set forth in this Section 8.03 may be
unenforceable, the Investor shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Company Indemnified Parties.

(b)           A
Company Indemnified Party shall give the Investor notice of any matter which
such Company Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement, within ten (10) days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of the
Indemnifiable Document in respect of which such right of indemnification is
claimed or arises.  The obligations and
liabilities of the Investor under this Article VIII with respect to Losses
arising from Third Party Claims shall be governed by and be contingent upon the
following additional terms and conditions: if a Company Indemnified Party shall
receive notice of any Third Party Claim, such Company Indemnified Party shall
give the Investor notice of such Third Party Claim within ten (10) days of the
receipt by the Company Indemnified Party of such notice; provided, however,
that the failure to provide such notice shall not release the Investor from any
of its obligations under this Article VIII except to the extent that the
Investor is actually prejudiced by such failure and shall not relieve the
Investor from any other obligation or liability that it may have to any Company
Indemnified Party otherwise than under this Article VIII.  If the Investor acknowledges in writing its
obligation to indemnify a Company Indemnified Party hereunder against any
Losses that may result from such Third Party Claim, then the Investor shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention
to do so to such Company Indemnified Party within five (5) days of the receipt
of such notice from the Company Indemnified Party; provided, however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate for the same counsel to represent both the
Company Indemnified Party and the Investor, then the Company Indemnified Party
shall be 

 

30

 

entitled to retain its own counsel, in each
jurisdiction for which the Company Indemnified Party determines counsel is
required, at the expense of the Investor. 
In the event that the Investor exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Company
Indemnified Party shall cooperate with the Investor in such defense and make
available to the Investor, at the Investor’s expense, all witnesses, pertinent
records, materials and information in the Company Indemnified Party’s
possession or under the Company Indemnified Party’s control relating thereto as
is reasonably required by the Investor.  Similarly,
in the event the Company Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Investor shall
cooperate with the Company Indemnified Party in such defense and make available
to the Company Indemnified Party, at the Investor’s expense, all such
witnesses, records, materials and information in the Investor’s possession or
under the Investor’s control relating thereto as is reasonably required by the
Company Indemnified Party.  No such Third
Party Claim may be settled (i) by the Investor without the prior written
consent of the Company Indemnified Party unless such settlement requires only
the payment of money damages for which the Investor has agreed to be
responsible, or (ii) by the Company Indemnified Party without the prior written
consent of the Investor.

SECTION 8.04.   Special
Damages.  IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR RELATED TO THIS AGREEMENT.

SECTION 8.05.   Treatment
for Tax Purposes.  To the extent
permitted by law, the Parties agree, solely for Tax purposes, to treat all
payments made under this Article VIII, under any other indemnity provision
contained in this Agreement, and for any misrepresentations or breach of
warranties or covenants, as adjustments to the Aggregate Purchase Price for all
Tax purposes, except to the extent the Law of a particular jurisdiction provides
otherwise.

ARTICLE IX

TERMINATION

 

SECTION 9.01.   Termination.  This Agreement shall terminate:

(a)           upon
the mutual written agreement of the Company and the Investor;

(b)           at
the option of the Investor, upon any material breach by the Company of any of
the terms and conditions of this Agreement, which breach has not been cured within
thirty (30) days of written notice thereof by the Investor to the Company;

(c)           automatically
upon the termination of the Development Agreement pursuant to Section 7.03
(Termination of Agreement Prior to FDA Approval) thereof (provided, however,
that as of and from the date upon which the Company receives a notice of
termination under Section 7.03 of the Development Agreement, the Investor shall
have no obligation to consummate any of the Share Subscriptions, and provided
further, that in the event this Agreement is terminated pursuant to this
Section 9.01(c), each of the other Investment Agreements shall terminate as of
the expiration of such 120 day period); or

 

31

 

(d)           at
the option of the Company, upon any material breach by the Investor of any of
the terms and conditions of this Agreement, which breach has not been cured within
thirty (30) days of written notice thereof by the Company to the Investor.

SECTION 9.02.   Effect
of Termination.  If this Agreement is
terminated pursuant to Section 9.01, all further obligations of the Parties
under this Agreement shall terminate, except for those set forth in Article VIII,
Article X and Article XI (other than Section 11.01); provided, however,
that if this Agreement is terminated by a Party pursuant to Section 9.01(b),
9.01(c) or 9.01(d), the terminating Party’s right to pursue all legal remedies
shall survive such termination unimpaired; and provided  further
that if this Agreement is terminated by the Company pursuant to Section
9.01(d), an Automatic Conversion shall be deemed to have occurred, and any Preferred
Shares held by the Investor or its Affiliates automatically will be converted
upon such termination into Common Shares, in accordance with the terms of
Section 3(a)(ii) of Article IV (or any successor provision) of the Certificate
of Amendment.

ARTICLE X

CONFIDENTIALITY

 

SECTION 10.01.  
Confidentiality.  During
the term of this Agreement and for a period of three (3) years thereafter, the
Receiving Party shall maintain Confidential Information in confidence, and
shall not disclose, divulge or otherwise communicate such Confidential
Information to others, or use it for any purpose, except pursuant to, and in
order to carry out, the terms and objectives of this Agreement.  The Receiving Party hereby shall exercise
every reasonable precaution to prevent and restrain the unauthorized disclosure
of such Confidential Information by any of its directors, officers, employees,
consultants, subcontractors, or agents.  Upon
termination of this Agreement, each Party hereby shall return to the other
Party, upon demand, all Confidential Information in its possession or, upon
demand, to destroy such Confidential Information and provide a certificate to
the other Party of such destruction signed by an officer of the destroying
Party.

SECTION 10.02.  
Release from Restrictions. 
The provisions of Section 10.01 shall not apply to any Confidential
Information disclosed hereunder that:

(a)           is
lawfully disclosed to the Receiving Party by an independent, unaffiliated third
Party rightfully in possession of the Confidential Information and under no
confidentiality or fiduciary obligation not to make disclosure;

(b)           becomes
published or generally known to the public through no fault or omission on the
part of the Receiving Party;

(c)           is
developed independently by the Receiving Party without access to the Confidential
Information of the Disclosing Party;

(d)           is
legally required to be disclosed to the FDA; provided, however,
the Receiving Party shall continue to treat such Confidential Information as
confidential pursuant to Section 

 

32

 

10.01 unless and until such Confidential Information
becomes published or generally known to the public through no fault or omission
on the part of the Receiving Party;

(e)           a
Party is legally compelled to disclose; provided, however, that
the Receiving Party shall provide prompt written notice of such requirement to
the Disclosing Party so that the Disclosing Party may seek a protective order
or other remedy or waive compliance with Section 10.01; and provided  further
that in the event that such protective order or other remedy is not obtained or
the Disclosing Party waives compliance with Section 10.01, the Receiving Party
shall be permitted to furnish only that portion of such Confidential
Information that is legally required to be provided and the Receiving Party
shall exercise its reasonable best efforts to obtain assurances that
confidential treatment shall be accorded such information, including, without
limitation, specifically with respect to all information contained in any
Disclosure Schedule or Exhibit to this Agreement; or

(f)            subject
to Article VIII (to the extent applicable) is disclosed by a Receiving Party in
connection with an Action commenced by or against such Receiving Party in
connection with an alleged material breach of any of the Transaction Documents
(to the extent such Confidential Information is utilized solely for the purpose
of supporting such Receiving Party’s allegations in such Action or disproving
allegations made against such Receiving Party).

SECTION 10.03.   Public Announcements and Publications.  Except as required by Law or by the
requirements of any securities exchange on which the securities of a Party
hereto are listed, no Party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without the prior written consent of the other Party, and the Parties shall
cooperate as to the timing and contents of any such press release or public
announcement.

ARTICLE XI

GENERAL PROVISIONS

 

SECTION 11.01.  
Further Action.  Each of
the Parties shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, do or cause to be done all things necessary,
proper or advisable under applicable Law, and to execute and deliver such
documents and other papers, as may be required to carry out the provisions of
the Investment Agreements and consummate and make effective the transactions
contemplated by the Investment Agreements. 
In furtherance of the foregoing, the Company agrees to use its
commercially reasonable efforts to obtain and, as soon as reasonably
practicable following the First Closing, deliver to the Investor a written
receipt signed by Rahn & Bodmer evidencing payment of the Rahn & Bodmer
Amount.

SECTION 11.02.  
Expenses.  Except as
otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the Party incurring such costs
and expenses.

 

33

 

SECTION 11.03.  
Notices.  All notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be given or made (and shall be deemed to have been duly given
or made upon receipt) by delivery in person, by an internationally recognized
overnight courier service, by telecopy or registered or certified mail (postage
prepaid, return receipt requested) to the respective Parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.03):

	
  (a)

  	
   

  	
  if
  to the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Osiris Acquisition II, Inc.

  
	
   

  	
   

  	
  2001 Aliceanna Street

  
	
   

  	
   

  	
  Baltimore, Maryland 21231-3043

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
  Facsimile No: (410) 522-6999

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wilmer, Cutler & Pickering

  
	
   

  	
   

  	
  2445 M Street, NW

  
	
   

  	
   

  	
  Washington, D.C. 20037

  
	
   

  	
   

  	
  Attention: Michael R.
  Klein, Esq.

  
	
   

  	
   

  	
  Facsimile No: (202) 663-6000

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  if to the Investor:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Boston Scientific Corporation

  
	
   

  	
   

  	
  One Boston Scientific Place

  
	
   

  	
   

  	
  Natick, MA 01760-1537

  
	
   

  	
   

  	
  Telecopy: (508) 650-8956

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shearman & Sterling

  
	
   

  	
   

  	
  599 Lexington Ave.

  
	
   

  	
   

  	
  New York, New York 10022-6069

  
	
   

  	
   

  	
  Telecopy: (212) 848-7179

  
	
   

  	
   

  	
  Attention: Clare O’Brien, Esq.

  

 

Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when the confirmation of transmission thereof is received
by the transmitter.

SECTION 11.04.  
Amendments.  No amendments
of any provision of this Agreement shall be effective unless the same shall be
in writing and signed by each of the Parties.

 

34

 

SECTION 11.05.  
Severability.  If any term
or other provision of this Agreement is invalid, illegal or incapable of being
enforced by any Law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect for so long as the
economic or legal substance of the transactions contemplated by this Agreement
is not affected in any manner materially adverse to any party.  Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner
in order that the transactions contemplated by this Agreement are consummated
as originally contemplated to the greatest extent possible.

SECTION 11.06.  
No Waiver.  The delay or
failure of either Party to enforce at any time for any period the provisions of
or any rights deriving from this Agreement shall not be construed to be a
waiver of such provisions or rights or the right of such Party thereafter to
enforce such provisions.

SECTION 11.07.  
Entire Agreement.  The
Transaction Documents constitute the entire agreement of the Parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and undertakings, both written and oral, among the Parties with
respect to the subject matter hereof and thereof.

SECTION 11.08.  
Assignment.  This Agreement
may not be assigned (by operation of Law or otherwise) by either Party without
the prior written consent of the other Party.

SECTION 11.09.  
No Third Party Beneficiaries. 
This Agreement shall be binding upon and inure solely to the benefit of
the Parties and their permitted assigns and nothing herein, express or implied,
is intended to or shall confer upon any other Person any legal or equitable
right, benefit or remedy of any nature whatsoever.

SECTION 11.10.  
Governing Law.  This
Agreement shall be governed by, and construed in accordance with, the Laws of
the State of Delaware.  The Parties
unconditionally and irrevocably agree and consent to the exclusive jurisdiction
of the courts located in the State of Delaware and waive any objection with
respect thereto, for the purpose of any action, suit or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, and
further agree not to commence any such action, suit or proceeding except in any
such court.

SECTION 11.11.  
Counterparts.  This
Agreement may be executed and delivered (including by facsimile transmission)
in one or more counterparts, and by the different Parties in separate
counterparts, each of which when executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a
signature page to this Agreement by facsimile shall be effective as delivery of
a manually executed counterpart of this Agreement.

SECTION 11.12.  
Waiver of Jury Trial.  Each
of the Company and the Investor hereby knowingly, voluntarily and irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or any course of conduct, course of dealing or statements
(whether oral or written) or 

 

35

 

actions of the Company or
the Investor in the negotiation, administration, performance or enforcement
thereof.

[Signature Page Follows]

 

36

 

IN WITNESS WHEREOF, each of the Parties has executed,
or has caused to be executed by its duly authorized representative, this
Agreement as of the date first written above.

OSIRIS ACQUISITION II, INC.

 

	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William H. Pursley

  
	
   

  	
  Name: William H.
  Pursley

  
	
   

  	
  Title: President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOSTON SCIENTIFIC
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry Best

  
	
   

  	
  Name:

  	
  Larry Best

  
	
   

  	
  Title:

  	
  Senior Vice President
  and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  

 

 

37

 

INVESTMENT AGREEMENT

Section 6.08 of the Disclosure Schedule - Conduct in Ordinary Course

Since the December 31, 2002
(Reference Statement Date):

Merger of Osiris Therapeutics, Inc. 
(“OTI”) into Osiris Acquisition II, Inc. 
(surviving entity doing business as Osiris Therapeutics, Inc.) (“OAII”).

•               All common shares of OTI were
converted into common shares of OAII.

•               All outstanding option and
warrants exercisable into common shares of OTI have been converted into options
and warrants exercisable into common shares of OAII.

•               All long-term debt of the Company
shown on the Interim Financial Statements has either been exchanged for or
converted into capital stock of the Company or cancelled pursuant to the merger
of OTI and OAII.

Rahn & Bodmer Notes:

•               Promissory Note dated January 20,
2003 in the principal of $500,000, due February 28, 2003.

•               Promissory Note dated February 3,
2003 in the principal of $500,000, due February 28, 2003.

•               Promissory Note dated February
24, 2003 in the principal of $500,000, due March 15, 2003.

Various invoices, due to financial condition, have been delayed causing
invoices to be past due, but no payments due under the Company’s building lease
or any capital leases are more than 30 days overdue.

 

 

INVESTMENT AGREEMENT

Section 6.10 of the Disclosure Schedule - Litigation

Burns lawsuit

 

 

INVESTMENT AGREEMENT

Section 6.12 of the Disclosure Schedule - Material Contracts

Leased Real Property - see Section 6.13(b) of the Disclosure Schedule

Collaborative Research Arrangements:

•               University of Texas, Health
Science Center at Houston - grant support for $240,000.

•               Emory University - $414,495 for
pre-clinical work for OTI-020.

Rahn & Bodmer Notes — see Section 6.08 of the Disclosure Schedule

Technology Transfer and License Agreement with Case Western Reserve
University (contains minimum royalty arrangements).

Facility lease and various equipment leases, as disclosed in the Notes
to the December 31, 2001 audited financial statements, have been capitalized
and represent an amortizing principal balance to the Company.

National Institute of Standards and Technology/Advanced Technology
Program - Neural Regeneration with MSCs; July 2002 to July
2005; $2.0 million over the three-year period.

Defense Advanced Research Projects Agency - Metabolic Stasis of MSCs; July 2002 to June 2003; $370,000 in funding.

Defense Advanced Research Projects Agency - Adult MSCs for Advanced Wound Healing; July 2002 to June 2003; $996,000 in funding.

Consulting Agreement, dated November 1995 by and between Friedli
Corporate Finance AG and the Company.

Marketing, Collaboration and License Agreement and related agreements,
by and between the Company and BioWhittaker, Inc. (Cambrex).

Stock Purchase Agreement with Novartis Pharma AG, dated June 16, 1997.

 

 

INVESTMENT AGREEMENT

Section 6.18 of the Disclosure Schedule - Environmental

See Section 6.13(b) of the Disclosure Schedule

 

 

INVESTMENT AGREEMENT

Section 6.13(b) of the Disclosure Schedule - Real Property

Street Address:

2001 Aliceanna Street

Baltimore, Maryland 21231-3043

 

Prime Landlord Notification Address:

ARE-2001 Aliceanna Street, LLC

C/O Alexandria real Estate
Equities, Inc.

135 N.  Robles Avenue, Suite 250

Pasadena, CA 91101

Attn: General Counsel

 

Tenant / Sub-landlord Notification Address:

MEDCO

26 South Charles Street

Suite 2410

Baltimore, MD 21201

Attn: Hans Mayer, Executive Director

 

Sublease (Belfort)
Arrangement for Real Property:

Belfort Instrument currently occupies space on the second floor
pursuant to a verbal understanding/letter agreement between Belfort and Osiris.  The current landlord has requested that this
situation be documented pursuant to an approved sublease.  Approval is necessary, but has not been
obtained from both our landlord (MEDCO) and MEDCO’s landlord (Alexandria).

Additionally, during a walk through by Osiris’ Safety Officer, it was
noted that several small containers of grease and two 55 gallon drums of oil
were not being stored properly.  This has
been brought to the attention of Belfort’s CEO as well as the owner of the
building - Alexandria.  This situation should
be resolved with the removal of the materials by a licensed carrier in the next
week and suitable documentation will be furnished to Osiris.

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