Document:

Exhibit 10.62

 

LOAN AND SECURITY AGREEMENT

 

This
LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of
August 11, 2004, between SILICON VALLEY
BANK, a California chartered bank, with its principal place of
business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at 400 Madison Avenue, Suite 15A, New York, New York
10017 (“Bank”) and AXS-ONE INC., a
Delaware corporation (“Borrower”), provides the terms on which Bank shall lend
funds to Borrower and Borrower shall repay Bank. The parties agree as follows:

 

1                                         ACCOUNTING
AND OTHER TERMS

 

Accounting terms not
defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made
following GAAP.  The term “financial
statements” includes the notes and schedules. 
The terms “including” and “includes” always mean “including (or
includes) without limitation,” in this or any Loan Document.  Capitalized terms in this Agreement shall
have the meanings set forth in Article 13.  All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code, to the extent such
terms are defined therein.

 

2                                         LOAN
AND TERMS OF PAYMENT

 

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

 

2.1.1                     Revolving
Advances.

 

(a)                                  Availability.  Bank shall make Advances not exceeding (i)
the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii) the
outstanding balance of all undrawn or unreimbursed Letters of Credit, minus
(iii) the FX Reserve, and minus (iv) the aggregate outstanding Advances
hereunder (including any Cash Management Services).  Amounts borrowed under this Section may be repaid and
reborrowed during the term of this Agreement.

 

(b)                                 Borrowing
Procedure.  To obtain an Advance,
Borrower must notify Bank (which notice shall be irrevocable) by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made.  If such notification is by
telephone, Borrower must promptly confirm the notification by delivering to
Bank a completed Payment/Advance Form in the form attached as Exhibit B.  Bank shall credit Advances to Borrower’s deposit account.  Bank may make Advances under this Agreement
based on instructions from a Responsible Officer or his or her designee or
without instructions if the Advances are necessary to meet Obligations which
have become due.  Bank may rely on any
telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss
Bank suffers due to such reliance, except to the extent such reliance was
effected through gross negligence or willful misconduct by Bank.

 

(c)                                  Interest
Rate.   The principal amounts
outstanding under the Revolving Line shall accrue interest at a per annum rate
equal to the aggregate of the Bank’s Prime Rate and one half of one percent
(0.5%), which interest shall be payable monthly, in arrears.

 

(d)                                 Termination;
Repayment.  The Revolving Line
terminates on the Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable. Provided that all Obligations
hereunder have been repaid, the Borrower may terminate this Agreement without
penalty or premium at any time upon not less than five (5) Business Days prior
written notice to Bank.

 

2.1.2                     Letters of
Credit Sublimit.

 

(a)                                  Bank
shall issue or have issued Letters of Credit for Borrower’s account not
exceeding (i) the lesser of (A) the Revolving Line or (B) the Borrowing Base
minus (ii) the outstanding principal balance of any Advances (including any
Cash Management Services), minus (iii) the FX Reserve, minus (iv) the
outstanding 

 

 

balance of all Letters of
Credit undrawn or unreimbursed, plus an amount equal to any Letter of Credit
Reserves.  The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed $1,000,000.00.  Borrower’s Letter of Credit reimbursement
obligation shall be secured by cash on terms acceptable to Bank on and after
(i) the Maturity Date, or (ii) the occurrence of an Event of Default
hereunder.  All Letters of Credit shall
be in form and substance acceptable to Bank in its sole discretion, and shall
be subject to the terms and conditions of Bank’s standard Application and
Letter of Credit Agreement (“Letter of Credit Application”).  Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.

 

(b)                                 The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement and such
Letters of Credit, and such Letter of Credit Application.  Borrower shall indemnify, defend,
protect,  and hold Bank harmless from
any loss, cost, expense or liability, including, without limitation, reasonable
attorneys’ fees, arising out of or in connection with any Letters of Credit,
except to the extent any such loss, cost, expense or liability was due to
Bank’s gross negligence or willful misconduct.

 

(c)                                  Borrower
may request that Bank issue a Letter of Credit payable in a currency other than
United States Dollars.  If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand
as an Advance to Borrower of the equivalent of the amount thereof (plus fees
and charges in connection therewith such as wire, cable, SWIFT or similar
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for transfer to the
country of which it is the currency.

 

(d)                                 Upon
the issuance of any letter of credit payable in a currency other than United
States Dollars, Bank shall create a reserve (the “Letter of Credit Reserve”)
under the Revolving Line for letters of credit against fluctuations in currency
exchange rates, in an amount equal to ten percent (10%) of the face amount of
such letter of credit.  The amount of
such reserve may be amended by Bank from time to time on notice to Borrower to
account for fluctuations in the exchange rate. 
The availability of funds under the Revolving Line shall be reduced by
the amount of such reserve for as long as such letter of credit remains
outstanding.

 

2.1.3                     Foreign
Exchange Sublimit. The Borrower may enter into foreign exchange forward
contracts with the Bank under which Borrower commits to purchase from or sell
to Bank a set amount of foreign currency more than one (1) business day after
the contract date (the “FX Forward Contract”). 
Bank shall subtract 10% of each outstanding FX Forward Contract (the
“F/X Reserve”) from the foreign exchange sublimit, which sublimit is a maximum
of $1,000,000.00.  The total FX Forward
Contracts at any one time may not exceed 10 times the amount of the FX
Reserve.  Bank may terminate the FX
Forward Contracts if an Event of Default occurs.  The Obligations of Borrower relating to this section may
not exceed: (i) the lesser of (A) the Revolving Line, or (B) the Borrowing
Base, minus (ii) the outstanding balance of all undrawn or unreimbursed Letters
of Credit, minus (iii) the FX Reserve, and minus (iv) the aggregate outstanding
Advances hereunder (including any Cash Management Services).

 

2.1.4                     Cash
Management Services Sublimit. 
In Borrower’s sole discretion, Borrower may use up to $1,000,000.00 for
the Bank’s Cash Management Services (the “Cash Management Services Sublimit”),
which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services identified in the various cash management
services agreements related to such Cash Management Services (the “Cash
Management Services”).  Such aggregate
amounts utilized under the Cash Management Services Sublimit shall at all times,
until repaid, reduce the amount otherwise available for Credit Extensions under
the Revolving Line.  Any amounts Bank
pays on behalf of Borrower or any amounts that are not paid by Borrower for any
Cash Management Services will be treated as Advances under the Revolving Line
and will accrue interest at the interest rate applicable to Advances.

 

2.1.5                     Undisbursed
Credit Extensions.  The Bank’s
obligation to lend the undisbursed portion of the Revolving Line shall
terminate if, in Bank’s sole discretion, there has been a Material Adverse
Change.

 

2.2                               Overadvances.  If Borrower’s Obligations under
Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (i) the
Revolving Line or (ii) the Borrowing Base, Borrower must immediately pay in
cash to Bank such excess, provided, however, that if such overage was due to
the Bank’s changing any reserve or eligibility standard for an Eligible
Account, Borrower shall have three (3) Business Days to pay such excess.

 

2

 

2.3                               Interest
Rate.

 

(a)                                  Default
Rate. After an Event of Default, Obligations shall bear interest at three
percent (3.0%) above the rate effective immediately before the Event of
Default.

 

(b)                                 Adjustment
to Interest Rate.  The applicable
interest rate hereunder shall increase or decrease when the Prime Rate changes.

 

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

 

(d)                                 Debit
of Accounts.  Bank may debit any of
Borrower’s deposit or operating accounts at Bank for principal and interest
payments when due, or any other amounts Borrower owes Bank hereunder or
pursuant hereto, when due. Bank shall promptly notify Borrower after it debits
Borrower’s accounts.  These debits shall
not constitute a set-off.

 

(e)                                  Payments.  Interest is payable monthly on the first
calendar day of each month.  Payments
received after 12:00 noon Eastern time are considered received at the opening
of business on the next Business Day. 
When a payment is due on a day that is not a Business Day, the payment
is due the next Business Day and additional fees or interest, as applicable,
shall continue to accrue to the date of payment.

 

2.4                               Fees.  Borrower shall pay to Bank:

 

(a)                                  Commitment
Fee.  A non-refundable commitment
fee as follows: (i) $30,000.00 due and payable on the Closing Date which shall
be deemed earned on the Closing Date, and (ii) if this Agreement has not been
terminated, $30,000.00 due and payable on August 10, 2005 which shall be
deemed earned on August 10, 2005; and

 

(b)                                 Letter
of Credit Fee.  The Borrower shall
pay the Bank’s customary fees and expenses for the issuance or renewal of
Letters of Credit, including, without limitation, a Letter of Credit Fee of one
percent (1.0%) per annum of the face amount of each Letter of Credit issued,
upon the issuance or renewal of such Letter of Credit by the Bank; and

 

(c)                                  Unused
Revolving Line Facility Fee.  In
addition to the foregoing, as compensation for the Bank’s maintenance of
sufficient funds available for such purpose, the Bank shall have earned a fee
for so long as this Agreement is in effect and has not been terminated (the
“Unused Revolving Line Facility Fee”), which fee shall be due and paid
quarterly, in arrears, on a calendar year basis, in an amount equal to one
quarter of one percent (0.25%) per annum of the average unused portion of the
Revolving Line, as determined by the Bank. The Borrower shall not be entitled
to any credit, rebate or repayment of any Unused Revolving Line Facility Fee
previously paid to the Bank pursuant to this Section. Notwithstanding the
foregoing, an Unused Revolving Line Facility Fee shall not be due provided that
Borrower maintains an average for the subject quarterly period, of at least
$800,000.00 in a non-interest bearing checking account with Bank. In the event
that the Borrower does not maintain at least $800,000.00 in average balances
with Bank, Borrower shall be entitled to a pro-rata fee reduction to the extent
of the balances maintained in such accounts at bank, on average, during the
subject quarterly period; and

 

(d)                                 Bank
Expenses.  All Bank Expenses
(including reasonable attorneys’ fees and expenses) incurred through and after
the Closing Date, when due.

 

3                                         CONDITIONS
OF LOANS

 

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

 

 

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(a)                                  this
Agreement;

 

(b)                                 a
certificate of the Secretary of Borrower with respect to articles, bylaws,
incumbency and resolutions authorizing the execution and delivery of this
Agreement;

 

(c)                                  Perfection
Certificate by Borrower;

 

(d)                                 a
legal opinion of Borrower’s counsel (authority and enforceability), in form and
substance acceptable to Bank;

 

(e)                                  insurance
certificate;

 

(f)                                    payment
of the fees and Bank Expenses then due specified in Section 2.4 hereof;

 

(g)                                 Certificate
of Foreign Qualification (New Jersey);

 

(h)                                 Certificate
of Good Standing/Legal Existence (Delaware); and

 

(i)                                     such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.

 

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

 

(a)                                  timely
receipt of any Payment/Advance Form; and

 

(b)                                 the
representations and warranties in Section 5 shall be true in all material
respects on the date of the Payment/Advance Form and on the effective date of
each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations
and warranties in Section 5 remain true in all material respects.

 

4                                         CREATION
OF SECURITY INTEREST

 

4.1                               Grant
of Security Interest.  Borrower
hereby grants Bank, to secure the payment and performance in full of all of the
Obligations and the performance of each of Borrower’s duties under the Loan
Documents, a continuing security interest in, and pledges and assigns to the
Bank, the Collateral (except Excluded Collateral), wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof.  Borrower warrants and
represents that the security interest granted herein shall be a first priority
security interest in the Collateral (except Excluded Collateral), subject to
Permitted Liens. The Collateral shall also be subject to permitted Subordinated
Debt.

 

Except as noted on the
Perfection Certificate, Borrower is not a party to, nor is bound by, any
material license (other than over the counter software that is commercially
available to the public) or other material agreement with respect to which the
Borrower is the licensee which is reasonably likely to have a material impact
on Borrower’s business or financial condition. Borrower shall provide written
notice to Bank within ten (10) days of entering or becoming bound by, any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition.

 

If the Agreement is
terminated, Bank’s lien and security interest in the Collateral shall continue
until Borrower fully satisfies its Obligations. If Borrower shall at any time,
acquire a commercial tort claim in the aggregate amount of at least $100,000,
Borrower shall promptly notify Bank in a writing signed by Borrower of the
brief details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Bank.

 

4

 

The Bank
covenants that so long as: (i) no Event of Default pursuant to Section 8.1
occurs and is continuing, (ii) no Event of Default pursuant to Section 8.5
occurs and is continuing, or (iii) the Bank has not accelerated any portion of
the Obligations, Bank shall not, without the consent of Borrower, notify
customers of Borrower as to assignment of accounts as collateral security or
direct payment of accounts to any specific lockbox.

 

4.2                               Authorization
to File Financing Statements. 
Borrower hereby authorizes Bank to file financing statements, without
notice to Borrower, with all appropriate jurisdictions in order to perfect or
protect Bank’s interest or rights hereunder.

 

5                                         REPRESENTATIONS
AND WARRANTIES

 

Borrower represents and
warrants as follows:

 

5.1                               Due
Organization and Authorization. 
Borrower and each domestic Subsidiary is duly existing and in good
standing in its state of formation and qualified and licensed to do business
in, and in good standing in, any state in which the conduct of its business or
its ownership of property requires that it be qualified except where the
failure to do so could not reasonably be expected to cause a Material Adverse
Change.  In connection with this
Agreement, the Borrower delivered to the Bank a certificate signed by the
Borrower and entitled “Perfection Certificate”.  The Borrower represents and warrants to the Bank that: (a) the
Borrower’s exact legal name is that indicated on the Perfection Certificate and
on the signature page hereof; and (b) the Borrower is an organization of the
type, and is organized in the jurisdiction, set forth in the Perfection
Certificate; and (c) the Perfection Certificate accurately sets forth the
Borrower’s organizational identification number or accurately states that the
Borrower has none; and (d) the Perfection Certificate accurately sets forth the
Borrower’s place of business, or, if more than one, its chief executive office
as well as the Borrower’s mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to the Borrower
is accurate and complete.  If the
Borrower does not now have an organizational identification number, but later
obtains one, Borrower shall forthwith notify the Bank of such organizational
identification number.

 

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

 

5.2                               Collateral.  Borrower has good title to the Collateral,
free of Liens except Permitted Liens. 
Borrower has no deposit account, other than the deposit accounts with
Bank and deposit accounts described in the Perfection Certificate delivered to
the Bank in connection herewith.  The
Accounts are bona fide, existing obligations, and the service or property has
been performed or delivered to the account debtor or its agent for immediate
shipment to the account debtor. The Collateral is not in the possession of any
third party bailee (such as a warehouse). 
Except as hereafter disclosed to the Bank in writing by Borrower, none
of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate. 
In the event that Borrower, after the date hereof, intends to store or
otherwise deliver any portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Bank, not to be unreasonably withheld, and
such bailee must acknowledge in writing that the bailee is also holding such
Collateral for the benefit of Bank (in addition to the Borrower). Borrower has
no knowledge of any actual or imminent Insolvency Proceeding of any account
debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. Borrower is the sole owner of or has all necessary rights and
interests to the Intellectual Property, except for non-exclusive licenses (or
exclusive licenses for a particular field of use or geographic area) granted to
its customers in the ordinary course of business.

 

5.3                               Litigation.  Except as shown in the Perfection
Certificate, there are no actions or proceedings pending or, to the knowledge
of Borrower’s Responsible Officers, threatened by or against Borrower or any
Subsidiary in which an adverse decision could reasonably be expected to cause a
Material Adverse Change.

 

5.4                               No
Material Deviation in Financial Statements.  All consolidated financial statements for Borrower and any
Subsidiary delivered to Bank fairly present, in accordance with GAAP, in all
material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. 
There has not been 

 

5

 

any material
deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank.

 

5.5                               Solvency.  The fair salable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions in this Agreement; and  Borrower
is able to pay its debts (including trade debts) as they mature.

 

5.6                               Regulatory
Compliance.  Borrower is not an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act.  Borrower is
not engaged as one of its important activities in extending credit for margin
stock (under Regulations T and U of the Federal Reserve Board of
Governors).  Borrower has complied in
all material respects with the Federal Fair Labor Standards Act.  Borrower has not knowingly violated any
laws, ordinances or rules, the violation of which could reasonably be expected
to cause a Material Adverse Change. 
None of Borrower’s or any Subsidiary’s properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. 
Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP.  Borrower and each domestic Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted except where the
failure to make such declarations, notices or filings would not reasonably be
expected to cause a Material Adverse Change.

 

5.7                               Subsidiaries.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

 

5.8                               Full
Disclosure.  No written
representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank by Borrower, or its agents, taken together with
all such written certificates and written statements given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).

 

6                                         AFFIRMATIVE
COVENANTS

 

Borrower shall do all of
the following:

 

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

 

6.2                               Financial
Statements, Reports, Certificates.

 

(a)                                  Borrower
shall deliver to Bank:  (i) as soon as
available, but no later than: (A) thirty (30) days after the last day of each
month when a Credit Extension is requested or Obligations are outstanding, and
(B) forty-five (45) days after the last day of each quarter, a company prepared
consolidated balance sheet and income statement covering Borrower’s
consolidated operations during the period certified by a Responsible Officer and
in a form acceptable to Bank; (ii) as soon as available, but no later than one
hundred twenty (120) days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm, which is currently KPMG; (iii)
within five (5) days of filing, copies of all statements, reports and notices
made available to Borrower’s security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission which reports shall be deemed to have been delivered on the
date on which Borrower posts any such report or provides a link thereto on
Borrower’s website on the Internet; (iv) a prompt report of any legal actions
pending or threatened against Borrower or any Subsidiary that 

 

6

 

could reasonably be
expected to result in damages or costs to Borrower or any Subsidiary of Two
Hundred Fifty Thousand Dollars ($250,000.00) or more; and (v)  other financial information reasonably
requested by Bank.

 

(b)                                 Within
(i) thirty (30) days after the last day of each month when a Credit Extension
is requested or Obligations are outstanding, and (ii) without duplication,
forty-five (45) days after the last day of each quarter,  Borrower shall deliver to Bank a Borrowing
Base Certificate signed by a Responsible Officer in the form of Exhibit C, with aged listings of
accounts receivable (by invoice date).

 

(c)                                  Within
(i) thirty (30) days after the last day of each month when a Credit Extension
is requested or Obligations are outstanding, and (ii) without duplication,
forty-five (45) days after the last day of each quarter, Borrower shall deliver
to Bank with the financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit
D.

 

(d)                                 Allow
Bank to audit Borrower’s Collateral at Borrower’s expense.  Such audits shall be conducted (prior to an
Event of Default, at normal business hours) no more often than once every
twelve (12) months (which shall not be the first calendar quarter, if no Event
of Default has occurred or is continuing) unless an Event of Default has occurred
and is continuing.  Notwithstanding the
foregoing, Borrower shall allow Bank to audit Borrower’s Collateral at
Borrower’s expense, prior to the earlier of: (i) the initial Credit Extension,
or (ii) sixty (60) days after the Closing Date. If the results of such audit
are not satisfactory to the Bank in its reasonable business discretion, the
Bank may, on notice to Borrower, at its reasonable business discretion, reduce
the amount of the Revolving Line, or not make any Credit Extensions hereunder,
except pursuant to terms satisfactory to Bank.

 

6.3                               Taxes.  Borrower shall make, and cause each
Subsidiary to make, timely payment of all material federal, state, and local
taxes or assessments (other than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves maintained in accordance with
GAAP) and will deliver to Bank, on demand, appropriate certificates attesting
to such payments.

 

6.4                               Insurance.  Borrower shall keep its business and the
Collateral insured for risks and in amounts as are customary for Borrower’s
industry.  Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’s
loss payable endorsement showing Bank as an additional loss payee and all
policies shall provide that the insurer must give Bank at least twenty (20)
days notice before canceling its policy. 
At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds received by the Bank under any
policy shall, at Bank’s option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy toward the replacement or repair of destroyed
or damaged property (and Bank shall execute such documentation as may be
reasonably necessary to instruct the Borrower’s insurance company to release
such proceeds from the Bank’s lien); provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Bank has been
granted a first priority security interest and (ii) after the occurrence and
during the continuation of an Event of Default all proceeds payable under such
casualty policy shall, at the option of the Bank, be payable to Bank on account
of the Obligations. If Borrower fails to obtain insurance as required under
Section 6.5 or to pay any amount or furnish any required proof of payment
to third persons and the Bank, Bank may make all or part of such payment or
obtain such insurance policies required in Section 6.5, and take any
action under the policies Bank deems prudent.

 

6.5                               Accounts.

 

(a)                                  In
order to permit the Bank to monitor the Borrower’s financial performance and
condition, Borrower shall maintain with Bank, or an affiliate: (i) Borrower’s
primary operating accounts, and (ii) all of Borrower’s depository and
securities accounts. Borrower’s cash or securities in excess of that amount
used for Borrower’s operations shall be maintained or administered through the
Bank, or an affiliate.

 

(b)                                 Borrower
shall identify to Bank, in writing, any bank or securities account opened by Borrower
with any institution other than Bank. 
In addition, for each such account that the Borrower at any time opens
or maintains, Borrower shall, at the Bank’s request and option, pursuant to an
agreement in form and substance acceptable to the Bank and the depository bank,
cause the depository bank or securities intermediary to agree that such account
is the collateral of the Bank pursuant to the terms hereunder.  The provisions of the previous 

 

7

 

sentence shall not apply
to deposit accounts exclusively used for payroll, payroll taxes and other
salary, compensation, wage and benefit payments to or for the benefit of the
Borrower’s employees and directors.  The
Borrower shall have thirty (30) calendar days from the Closing Date to transfer
the above-referenced accounts to Bank.

 

6.6                               Financial
Covenants.

 

(a)                                  Adjusted
Quick Ratio.  Borrower shall
maintain at all times, to be tested as of the last day of each: (i) quarter,
and (ii) month when a Credit Extension is requested or Obligations are
outstanding, a ratio of Quick Assets to Current Liabilities minus Deferred
Revenue of at least 1.75 to 1.0.

 

 (b)                              EBITDA.  Borrower shall maintain, to be tested as of
the last day of each quarter:  (i)
beginning with the quarter ending September 30, 2004, EBITDA of at least:
(A) ($500,000.00), for the three (3) month period ending September 30,
2004, (B) ($100,000.00), for the six (6) month period ending December 31,
2004, (C) $500,000.00, for the three (3) month period ending March 31,
2005, (D) $1,000,000.00, for the six (6) month period ending June 30,
2005, (E) $1,500,000.00, for the nine (9) month period ending
September 30, 2005, (F) $2,000.000.00 for the twelve (12) month period
ending December 31, 2005, (G) $500,000.00, for the three (3) month period
ending March 31, 2006, and (H) $1,000,000.00 for the six (6) month period
ending June 30, 2006, and (ii) beginning with the quarter ending
June 30, 2005 and for each calendar quarter thereafter, EBITDA of at least
$1.00, provided, however, that at any time or times during any one (1) quarter
ending June 30, 2005 and thereafter through December 31, 2005,
Borrower may have a maximum net EBITDA loss of no greater than $500,000,00 so
long as the required EBITDA in clause (i) for the period ending in the quarter
in which the loss was sustained continues to be satisfied.

 

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

 

7                                         NEGATIVE COVENANTS

 

Borrower shall not do any
of the following without the Bank’s prior written consent which shall not be
unreasonably withheld or delayed.

 

7.1                               Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively a “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property including, without
limitation, the Intellectual Property, except for Transfers (i) of Inventory in
the ordinary course of business; (ii) of non-exclusive licenses (or exclusive
licenses for a particular field of use or geographical area) and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) of worn-out or obsolete Equipment; or (iv)
prior to an Event of Default, the sale of stock of Borrower’s Subsidiaries.

 

7.2                               Changes
in Business, Ownership, or Business Locations.

 

(a)           (i) Engage in or permit any of its
Subsidiaries to engage in any material line of business other than those lines
of business conducted by Borrower and its Subsidiaries on the date hereof and
any business reasonably related, complementary, or incidental thereto or
reasonable extensions thereof, or (ii) have a Change in Control, or (iii) the
resignation or termination of the chief executive officer and the failure of
Borrower to obtain a replacement within one hundred twenty (120) days
thereafter.

 

(b)           Borrower shall not, without prior
written notice to Bank: (i) relocate its chief executive office, or add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Fifty Thousand Dollars ($50,000.00) in
Borrower’s assets or property), or (ii) change its jurisdiction of
organization, or (iii) change its organizational structure or type, or (iv)
change its legal name, or (v) change any organizational number (if any)
assigned by its jurisdiction of organization.

 

8

 

7.3                               Mergers
or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with
any other Person, or acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the capital stock or property of another Person except
where (i) no Event of Default has occurred and is continuing or would exist
after giving effect to the transactions; and (ii) the Borrower (or the
Subsidiary if the Borrower is not a party to such transaction) is the surviving
legal entity; provided, however, that the total consideration paid, including
assumption of indebtedness, in connection with such merger or acquisition shall
not exceed $2,000,000.00. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

 

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

 

7.5                               Encumbrance.  Create, incur, or allow any Lien on any of
its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the first
priority security interest granted herein. 
The Collateral may also be subject to Permitted Liens.

 

7.6                               Distributions;
Investments.  Other than
Permitted Investments, directly or indirectly acquire or own any Person, or
make any Investment in any Person, or permit any of its Subsidiaries to do so.

 

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

 

7.8                               Subordinated
Debt.  Make or permit any
payment on any Subordinated Debt, except under the terms of the Subordinated
Debt, or amend any material provision in any document relating to the
Subordinated Debt, without Bank’s prior written consent not to be unreasonably
withheld.

 

7.9                               Compliance.  Become an “investment company” or a company
controlled by an “investment company”, under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.

 

8                                         EVENTS
OF DEFAULT

 

Any one of the following
is an Event of Default:

 

8.1                               Payment
Default.  Borrower fails to pay
any of the Obligations within three (3) days after their due date. During such
three (3) day period the failure to cure the default shall not constitute an
Event of Default (but no Credit Extension shall be made during such period);

 

8.2                               Covenant
Default.  (i)  Borrower fails or neglects to perform any
obligation in Sections 6.2, 6.6, or 6.7, or violates any covenant in
Section 7;  or (ii)  Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant or agreement
contained in this Agreement, any Loan Documents, and as to any default under
such other material term, provision, condition, covenant or agreement that can
be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely
to be cured within a reasonable time, then Borrower shall have an additional
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the
default shall not be deemed an Event of Default (but no Credit Extensions shall
be made during such cure period).  Grace
periods provided under this section shall not apply, among other things,
to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain;

 

9

 

8.3                               Material
Adverse Change.  A Material
Adverse Change occurs;

 

8.4                               Attachment.  (i) Any material portion of Borrower’s
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10)
Business Days; (ii) Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business; (iii) a judgment or
other claim becomes a Lien on a material portion of Borrower’s assets; or (iv)
a notice of lien, levy, or assessment is filed against any of Borrower’s assets
by any government agency and not paid within ten (10) Business Days after
Borrower receives notice.  These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions shall be made during the cure period);

 

8.5                               Insolvency.  (i) Borrower is unable to pay its debts
(including trade debts) as they become due or otherwise becomes insolvent; (ii)
Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is
begun against Borrower and not dismissed or stayed within thirty (30) days (but
no Credit Extensions shall be made before any Insolvency Proceeding is
dismissed);

 

8.6                               Other
Agreements.  If there is a
default in any agreement to which Borrower is a party with a third party or
parties resulting in the acceleration of the maturity of any Indebtedness in an
amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that could
reasonably be expected to result in a Material Adverse Change;

 

8.7                               Judgments.  If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least Two
Hundred Fifty Thousand Dollars ($250,000) shall be rendered against Borrower
and shall remain unsatisfied and unstayed for a period of twenty (20) days
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment);

 

8.8                               Misrepresentations.  If any warranty or representation in this
Agreement or in any writing delivered by or on behalf of Borrower to Bank shall
have been incorrect in any material respect when made; and

 

8.9                               Subordinated
Debt. A default or breach occurs under any agreement between Borrower
and any creditor of Borrower that signed a subordination agreement with Bank,
or any creditor that has signed a subordination agreement with Bank breaches
any terms of the subordination agreement and the Bank in its reasonable
judgment, determines that such breach can reasonably be expect to adversely
affect the Bank’s rights hereunder.

 

9                                         BANK’S
RIGHTS AND REMEDIES

 

9.1                               Rights
and Remedies.  When an Event of
Default occurs and continues Bank may, without notice or demand, do any or all
of the following:

 

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

 

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

 

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

 

(d)                                 Settle
or adjust disputes and claims directly with account debtors for amounts, on
terms and in any order that Bank considers advisable and notify any Person
owing Borrower money of Bank’s security interest in such funds and verify the
amount of such account;

 

(e)                                  Make
any payments and do any acts it considers necessary or reasonable to protect
its security interest in the Collateral. 
Borrower shall assemble the Collateral if Bank requests and make it
available as 

 

10

 

Bank designates to the
extent not prohibited by applicable law. Borrower will not interfere with Bank
entering any premises where the Collateral is located to take and maintain
possession of any part of the Collateral. Bank may pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. To the extent it is not prohibited from
doing so, Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to lawfully exercise any of Bank’s rights or
remedies;

 

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

 

(g)                                 Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral in any commercially reasonably means;

 

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

 

(i)                                     Exercise
all rights and remedies and dispose of the Collateral according to the Code.

 

9.2                               Power
of Attorney.  Borrower hereby
irrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon
the occurrence and during the continuance of an Event of Default, to: (i)
endorse Borrower’s name on any checks or other forms of payment or security;
(ii) sign Borrower’s name on any invoice or bill of lading for any Account or
drafts against account debtors; (iii) settle and adjust disputes and claims
about the Accounts directly with account debtors, for amounts and on terms Bank
determines to be commercially reasonable; (iv) make, settle, and adjust all
claims under Borrower’s insurance policies; and (v) transfer the Collateral
into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact
to sign Borrower’s name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred until all Obligations have been satisfied in full and Bank is
under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.

 

9.3                               Accounts
Notification/Collection.  In the
event that either: (i) an Event of Default pursuant to Section 8.1 occurs
and is continuing, (ii) an Event of Default pursuant to Section 8.5 occurs
and is continuing, or (iii) the Bank accelerates any portion of the
Obligations, Bank may notify any Person owing Borrower money of Bank’s security
interest in the funds and verify and/or collect the amount of the Account.  After the occurrence of an Event of Default,
any amounts received by Borrower shall be held in trust by Borrower for Bank,
and, if requested by Bank, Borrower shall immediately deliver such receipts to
Bank in the form received from the account debtor, with proper endorsements for
deposit.

 

9.4                               Bank
Expenses.  Any reasonable
amounts paid by Bank as provided herein shall constitute Bank Expenses and are
immediately due and payable upon presentation of an invoice to Borrower with
detail if obtainable, and shall bear interest at the then applicable rate and
be secured by the Collateral.  No
payments by Bank shall be deemed an agreement to make similar payments in the
future or Bank’s waiver of any Event of Default.

 

9.5                               Remedies
Cumulative.  Bank’s rights and
remedies under this Agreement, the Loan Documents, and all other agreements are
cumulative.  Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one
right or remedy is not an election, and Bank’s waiver of any Event of Default
is not a continuing waiver. Bank’s delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.

 

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

 

11

 

10                                  NOTICES

 

All notices or demands by
any party to this Agreement or any other related agreement must be in writing
and be personally delivered or sent by an overnight delivery service, by
certified mail, postage prepaid, return receipt requested, or by telefacsimile
at the addresses listed below.  Either
Bank or Borrower may change its notice address by giving the other party prior
written notice.

 

	
  If to Borrower:

  	
   

  	
  AXS-ONE INC.

  
	
   

  	
   

  	
  301 Route 17 North

  
	
   

  	
   

  	
  Rutherford, New Jersey
  07070

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  FAX: (201) 939-6955

  
	
   

  	
   

  	
   

  
	
  with a conforming copy

  	
   

  	
   

  
	
  (which shall not
  constitute

  	
   

  	
   

  
	
  or be required as
  notice)

  	
   

  	
   

  
	
  to:

  	
   

  	
  Proskauer Rose LLP

  
	
   

  	
   

  	
  1585 Broadway

  
	
   

  	
   

  	
  New York, New York
  10036-8299

  
	
   

  	
   

  	
  Attn: Charles E.
  Dropkin, Esquire

  
	
   

  	
   

  	
  FAX: (212) 969-2900

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
  400 Madison Avenue,
  Suite 15A

  
	
   

  	
   

  	
  New York, New York
  10017

  
	
   

  	
   

  	
  Attn: Mr. Michael
  Moretti

  
	
   

  	
   

  	
  Fax:  (212) 688-5994

  
	
   

  	
   

  	
   

  
	
  with a conforming copy

  	
   

  	
   

  
	
  (which shall not
  constitute

  	
   

  	
   

  
	
  or be required as
  notice)

  	
   

  	
   

  
	
  to:

  	
   

  	
  Riemer & Braunstein
  LLP

  
	
   

  	
   

  	
  Three Center Plaza

  
	
   

  	
   

  	
  Boston, Massachusetts
  02108

  
	
   

  	
   

  	
  Attn: David A. Ephraim,
  Esquire

  
	
   

  	
   

  	
  FAX: (617) 880-3456

  

 

11                                  CHOICE
OF LAW, VENUE AND JURY TRIAL WAIVER

 

New York law governs the
Loan Documents without regard to principles of conflicts of law.  Borrower and Bank each submit to the
exclusive jurisdiction of the State and Federal courts in New York City.  NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION REQUIRED TO REALIZE ON THE
COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST THE BORROWER OR
ITS PROPERTY.

 

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

 

12                                  GENERAL
PROVISIONS

 

12.1                        Successors
and Assigns.  This Agreement
binds and is for the benefit of the successors and permitted assigns of each
party.  Borrower may not assign this
Agreement or any rights or Obligations under it 

 

12

 

without Bank’s prior
written consent which may be granted or withheld in Bank’s discretion.  Bank has the right, without the consent of
or notice to Borrower, to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank’s obligations, rights and benefits
under this Agreement, the Loan Documents or any related agreement.  Bank will provide notice of any assignment
of Bank’s obligations, rights and benefits under this Agreement, the Loan
Documents or any related agreement. 
Prior to an Event of Default, the Bank may only assign this Agreement to
a commercial bank or financial institution (which is not a direct competitor of
Borrower), except for assignments by Bank due to forced divestiture at the
request of any regulatory agency or a sale of the Bank or its assets.

 

12.2                        Indemnification.  Borrower hereby indemnifies, defends and
holds the Bank and its directors, officers, employees and agents harmless
against:  (a) all obligations, demands,
claims, and liabilities asserted by any other Person in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys’ fees
and expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.

 

12.3                        Right
of Set-Off.   Borrower hereby
grants to Bank, a lien, security interest and right of setoff as security for
all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of the Bank (including a Bank subsidiary) (to the extent not prohibited
by applicable law) or in transit to any of them.  At any time after the occurrence and during the continuance of an
Event of Default, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower when
due regardless of the adequacy of any other collateral securing the
Obligations.  ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

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

 

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

 

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

 

12.7                        Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, are an original, and all taken together,
constitute one Agreement. Delivery of an executed signature page of this
Agreement by telecopy and delivery of executed copies of documents required by
Section 3.1 by telecopy shall be as effective as delivery of a manually executed
counterpart of each such document.

 

12.8                        Survival.  All covenants, representations and
warranties made in this Agreement continue in full force while any Obligations
remain outstanding.  The obligation of
Borrower in Section 12.2 to indemnify Bank shall survive until the statute
of limitations with respect to such claim or cause of action shall have run.

 

12.9                        Confidentiality.              In handling any confidential information, Bank will
exercise the same degree of care that it exercises for its own proprietary information,
but disclosure of information may be made (i) to Bank’s Subsidiaries or
Affiliates, to further the purposes of this Agreement or transactions
contemplated hereby, whom Bank will cause to comply with this provision, (ii)
to prospective transferees or purchasers of any interest in the loans
(provided, however, Bank shall obtain such prospective transferee or
purchaser’s agreement to the terms of this provision), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection with
Bank’s examination or audit and (v) as appropriate in exercising remedies under
this Agreement.  Confidential 

 

13

 

information does not
include information that either: (a) is in the public domain or rightfully in
Bank’s possession when disclosed to Bank, or becomes part of the public domain,
through no fault of the Bank, after disclosure to Bank; or (b) is disclosed to
Bank by a third party, if Bank does not reasonably know that the third party is
prohibited from disclosing the information.

 

13                                  DEFINITIONS

 

13.1                        Definitions.  In this Agreement:

 

“Accounts” are all existing and later
arising accounts, contract rights, and other obligations owed Borrower in
connection with its sale or lease of goods (including licensing of software and
other technology) or provision of services, all credit insurance, guaranties,
other security and Borrower’s Books relating to any of the foregoing, as such
definition may be amended from time to time according to the Code.

 

“Advance” or “Advances” is a loan advance (or advances) under the Revolving
Line.

 

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

 

“Bank Expenses” are all reasonable audit
fees and expenses and reasonable costs or expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).

 

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

 

“Borrowing Base” is 80% of Eligible
Accounts, as determined by Bank from Borrower’s most recent Borrowing Base
Certificate; provided, however, that Bank, in its reasonable business
discretion, may lower the percentage of the Borrowing Base after performing an
audit of Borrower’s Collateral upon five (5) Business Days notice to Borrower.

 

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

 

“Cash Management Services” is defined in
Section 2.1.4.

 

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

 

“Change in Control” is a transaction in
which any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended) which did not
theretofore beneficially own at least 25% of the shares of all classes of stock
then outstanding of Borrower ordinarily entitled to vote in the election of
directors becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of
greater than 25% of the shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors.

 

“Closing Date” is the date of this
Agreement.

 

“Code” is the Uniform Commercial Code as
adopted in New York, as amended and as may be amended and in effect from time
to time.

 

 “Collateral”
is any and all properties, rights and assets of the Borrower in which the
Borrower obtains an interest, or the power to transfer rights, in the property
described on Exhibit A, and
excluding Excluded Collateral.

 

 “Contingent
Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation 

 

14

 

directly or
indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii)
any obligations for undrawn letters of credit for the account of that Person;
and (iii) all obligations from any interest rate, currency or commodity swap
agreement (valued at the net exposure), interest rate cap or collar agreement,
or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity
prices;  but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the
stated or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not
exceed the maximum of the obligations under any guarantee or other support
arrangement.

 

“Credit Extension” is each Advance, Letter
of Credit, F/X Forward Contract, or any other extension of credit by Bank for
Borrower’s benefit.

 

“Current Liabilities” are all obligations
and liabilities of Borrower to Bank, plus, without duplication, the aggregate
amount of Borrower’s Total Liabilities which mature within one (1) year.

 

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

 

“EBITDA” means earnings before interest,
taxes, depreciation and amortization, in accordance with GAAP.

 

“Eligible Accounts” are billed Accounts in
the ordinary course of Borrower’s business that meet all Borrower’s
representations and warranties in Section 5.2; but Bank, in its
reasonable business judgment, may change eligibility standards by giving
Borrower five (5) days prior notice. 
Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:

 

(a)                                  Accounts
that the account debtor has not paid within ninety (90) days of invoice date;

 

(b)                                 Accounts for an account debtor, fifty percent (50%) or
more of whose Accounts have not been paid within ninety (90) days of invoice
date;

 

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

 

(d)                                 That
portion of Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed thirty percent (30%) of all Accounts, except for
Pfizer, for which the percentage shall be forty percent (40%) for the amounts
that exceed that percentage, unless Bank otherwise approves in writing;

 

(e)                                  Accounts
for which the account debtor does not have a principal place of business in the
United States;

 

(f)                                    Accounts
for which the account debtor is a federal, state or local government entity or
any department, agency, or instrumentality thereof, except for Accounts of the
United States if the payee has assigned its payment rights to Bank and the
assignment has been acknowledged under the Assignment of Claims Act of 1940 (31
U.S.C. 3727);

 

(g)                                 Accounts
for which Borrower owes the account debtor, but only up to the amount owed
(sometimes called “contra” accounts, accounts payable, customer deposits or
credit accounts);

 

(h)                                 Accounts
for demonstration or promotional equipment, or in which goods are consigned,
sales guaranteed, sale or return, sale on approval, bill and hold, or other
terms if account debtor’s payment may be conditional;

 

15

 

(i)                                     Accounts
for which the account debtor is Borrower’s Affiliate, officer, employee, or
agent;

 

(j)                                     Accounts
in which the account debtor disputes liability or makes any claim and Bank
believes there may be a basis for dispute (but only up to the disputed or
claimed amount), or if the account debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business;

 

(k)                                  Accounts
for which Bank reasonably determines collection to be doubtful after inquiry
and consultation with Borrower.

 

“Equipment” is all present and future
machinery, equipment, tenant improvements, furniture, fixtures, vehicles,
tools, parts and attachments in which Borrower has any interest.

 

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

 

“Excluded Collateral” is defined in Exhibit A.

 

“FX Forward Contract” is defined in Section 2.1.3.

 

“FX Reserve” is defined in
Section 2.1.3.

 

“GAAP” is generally accepted accounting
principles.

 

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

 

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

 

“Intellectual Property” is any copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work, whether published or unpublished,
now owned or later acquired; any patents, trademarks, service marks and
applications therefor; any trade secret rights, including any rights to
unpatented inventions, now owned or hereafter acquired.

 

“Inventory” is present and future inventory
in which Borrower has any interest, including merchandise, raw materials,
parts, supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or later owned by or in the custody
or possession, actual or constructive, of Borrower, including inventory
temporarily out of its custody or possession or in transit and including
returns on any accounts or other proceeds (including insurance proceeds) from
the sale or disposition of any of the foregoing and any documents of title.

 

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

 

“Letter of Credit” means a letter of credit
or similar undertaking issued by Bank pursuant to Section 2.1.2.

 

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

 

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

 

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

 

16

 

“Material Adverse Change”  is: 
(i) a material adverse change in the results of operation or financial
condition of Borrower; (ii) a material impairment of the value or priority of
Bank’s security interest in the Collateral (except to the extent due to
negligence, by omission or commission, of Bank or its agents); or (iii) Bank
determines, based upon information available to it and in the exercise of
commercial reasonableness, that there is a substantial likelihood that Borrower
shall fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.

 

“Maturity Date” is August 9, 2006.

 

“Obligations” are debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
including letters of credit, cash management services, and foreign exchange
contracts, if any, and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.

 

“Permitted Indebtedness” is:

 

(a)                                  Borrower’s
indebtedness to Bank under this Agreement or any other Loan Document;

 

(b)                                 Indebtedness
existing on the Closing Date and shown on Schedule 7.6 hereto;

 

(c)                                  Subordinated
Debt;

 

(d)                                 Indebtedness
to trade creditors or to landlords incurred in the
ordinary course of business or with respect to surety bonds and similar obligations in the ordinary course of business;

 

(e)                                  Indebtedness
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect a Person
against fluctuations in interest rates, currency exchange rates, or commodity
prices;

 

(f)                                    Indebtedness
among Borrower and/or any of Borrower’s Subsidiaries;

 

(g)                                 Indebtedness
with respect to documentary letters of credit;

 

(h)                                 Capitalized
leases and purchase money Indebtedness secured by Permitted Liens;

 

(i)                                     Refinanced
Permitted Indebtedness, provided that the amount of such Indebtedness is not
increased;

 

(j)            Other Indebtedness
in an amount not to exceed $250,000.00.

 

“Permitted Investments” are:

 

(a)                                  Investments
shown on Schedule 7.4 hereto and existing on the Closing Date;

 

(b) (i)  Marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agencies or any state maturing within 1 year from its acquisition, (ii)
commercial paper maturing no more than 2 years after its creation and having
the highest rating from either Standard & Poor’s Corporation or Moody’s
Investors Service, Inc., and (iii) certificates of deposit issued maturing no
more than 1 year after issue;

 

(c)                                  Investments
(including mergers, acquisitions, or joint ventures permitted by
Section 7.3) approved by the Borrower’s Board of Directors or otherwise
pursuant to a Board-approved investment policy;

 

17

 

(d)                                 Investments
in any of its Subsidiaries;

 

(e)           Investments
consisting of deposit and investment accounts;

 

(f)            Investments
consisting of extensions of credit in the nature of accounts receivable,
prepaid royalties or notes receivable arising from the sale or lease of goods,
licensing of software or the performance of services;

 

(g)           Investments received
in satisfaction or partial satisfaction of obligations owed by financially
troubled obligors;

 

(h)           Investments acquired
in exchange for any other Investments in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization;

 

(i)                                     Investments
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect a Person
against fluctuations in interest rates, currency exchange rates, or commodity
prices;

 

(j)                                     Payroll,
travel and similar advances made in the ordinary course; and

 

(k)                                  Receivables
owing to the Borrower or Subsidiary, if created in the ordinary course and
dischargable in accordance with customary trade terms.

 

“Permitted Liens” are:

 

(a)                                  Liens
existing on the Closing Date and shown on Schedule 7.5 hereto or arising
under this Agreement or other Loan Documents;

 

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

 

(c)                                  Liens
(including with respect to capital leases) (i) on property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) acquired or held by Borrower or
its Subsidiaries incurred for financing such property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof), or (ii) existing on property (and accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof) when acquired, if the Lien is confined to such
property (including accessions, additions, parts, replacements, fixtures,
improvements and attachments thereto, and the proceeds thereof);

 

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

 

(e)           Licenses or
sublicenses granted in the ordinary course of Borrower’s business and any
interest or title of a licensor or under any license or sublicense;

 

(f)            Leases or subleases
granted in the ordinary course of Borrower’s business, including in connection
with Borrower’s leased premises or leased property;

 

(g)                                 Liens
in favor of custom and revenue authorities arising as a matter of law to secure
the payment of custom duties in connection with the importation of goods;

 

18

 

(h)                                 Liens
on insurance proceeds securing the payment of financed insurance premiums;

 

(i)                                     Customary
Liens granted in favor of a trustee to secure fees and other amounts owing to
such trustee under an indenture or other similar agreement;

 

(j)                                     Liens
consisting of pledges of cash, cash equivalents or government securities to
secure swap or foreign exchange contracts or letters of credit;

 

(k)                                  Liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default;

 

(l)                                     Carriers’,
warehousemen’s, mechanics’, material men’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 30 days or which are being contested in good faith and by
appropriate proceeding if adequate reserves with respect thereto are maintained
on the books of the applicable Person;

 

(m)                               Pledges
or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation;

 

(n)                                 Deposits
to secure the performance of bids, trade contracts (other than for borrowed
money), contracts for the purchase of property, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money; and

 

(o)                                 Easements,
rights-of-way, restrictions and other similar encumbrances affecting real
property which do not materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the applicable Person.

 

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

 

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

 

“Quick Assets” is, on any date, the
Borrower’s unrestricted cash and net billed accounts receivable.

 

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

 

“Revolving Line” is an Advance or Advances
of up to $4,000,000.00.

 

“Subordinated Debt” is debt incurred by
Borrower subordinated to Borrower’s debt to Bank (pursuant to a subordination
agreement entered into between the Bank, the Borrower and the subordinated
creditor), on terms acceptable to Bank in the exercise of commercial
reasonableness.

 

“Subsidiary” is any Person, corporation,
partnership, limited liability company, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.

 

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

 

19

 

“Total Liabilities” is on any day,
obligations that should, under GAAP, be classified as liabilities on Borrower’s
consolidated balance sheet, including all Indebtedness, and current portion of
Subordinated Debt permitted by Bank to be paid by Borrower, but excluding all
other Subordinated Debt.

 

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

 

[The
remainder of this page is intentionally left blank]

 

 

20

 

The parties hereto have
caused this Agreement to be executed under the laws of the State of New York as
of the date first above written.

 

	
  BORROWER:

  
	
   

  
	
  AXS-ONE INC.

  
	
   

  
	
  By

  	
    /s/ William G. Levering

  	
   

  
	
  Name:

  	
  William G. Levering

  	
   

  
	
  Title:

  	
    CFO

  	
   

  
	
   

  
	
  BANK:

  
	
   

  
	
  SILICON VALLEY BANK

  
	
   

  
	
  By

  	
    /s/ Michael
  Moretti

  	
   

  
	
  Name:

  	
  Michael Moretti

  	
   

  
	
  Title:

  	
    SVP

  	
   

  
					

 

S-1

 

EXHIBIT A

 

The Collateral consists
of all right, title and interest of Borrower in and to the following (excluding
Excluded Collateral):

 

All goods, equipment,
inventory, contract rights or rights to payment of money, license agreements,
franchise agreements, general intangibles (including payment intangibles),
accounts (including health-care receivables), documents, instruments (including
any promissory notes), chattel paper (whether tangible or electronic), deposit
accounts, fixtures, letters of credit rights (whether or not the letter of
credit is evidenced by a writing), commercial tort claims, securities, and all
other investment property supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books
relating to the foregoing and any and all claims, rights and interests in any
of the above and all substitutions for, additions, attachments, accessories,
accessions and improvements to and replacements, products, proceeds and
insurance proceeds of any or all of the foregoing.

 

Excluded Collateral means
(a) and (b) below:

 

(a) Any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, now
owned or later acquired and whenever and wherever arising, including all
present and future common law and other rights in and to copyrights or
copyrightable material in any medium throughout the world; any patents,
trademarks, service marks, trade styles, trade names, all other source or
business identification and design and applications therefor; any trade secret
rights, including any rights to unpatented inventions, now owned or hereafter
acquired; all inventions, designs, registrations, proprietary rights, Computron
and AXS-One programs, source codes, object codes, data bases, and all other
like intangible personal property at any time used in connection with the
businesses of the Borrower (collectively, “Intellectual Property”); and

 

(b) Shares of stock in
any Subsidiary of Borrower.

 

Notwithstanding the
foregoing, the Collateral shall include all accounts, license and royalty fees
and other revenues, proceeds, or income arising out of or relating to any of
the foregoing Intellectual Property.

 

 

EXHIBIT B

Loan Payment/Advance Request Form

DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.

 

	
  Fax To:  (617) 969-5965

  	
   

  	
   

  	
  Date: 

  	
   

  
	
   

  	
   

  	
   

  
	
  LOAN
  PAYMENT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AXS-ONE
  INC. (Borrower)

  
	
   

  	
   

  	
   

  
	
  From Account #

  	
   

  	
   

  	
   

  	
  To Account #

  	
   

  
	
  (Deposit
  Account #)

  	
   

  	
  (Loan
  Account #)

  
	
   

  	
   

  	
   

  
	
  Principal $

  	
   

  	
   

  	
   

  	
  and/or Interest $

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signature:

  	
   

  	
   

  	
   

  	
  Phone Number:

  	
   

  
												

 

LOAN
ADVANCE:

 

Complete Outgoing
Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

	
  From Account #

  	
   

  	
   

  	
   

  	
  To Account #

  	
   

  
	
  (Loan
  Account #)

  	
   

  	
  (Deposit
  Account #)

  
	
   

  	
   

  	
   

  
	
  Amount of Advance $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  All Borrower’s
  representation and warranties in the Loan and Security Agreement are true,
  correct and complete in all material respects on the date of the telephone
  transfer request for an advance, but those representations and warranties
  expressly referring to another date shall be true, correct and complete in
  all material respects as of such date:

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signature:

  	
   

  	
   

  	
   

  	
  Phone Number:

  	
   

  
									

 

OUTGOING
WIRE REQUEST

Complete
only if all or a portion of funds from the loan
advance above are to be wired.

Deadline for same day processing is 3:00 pm,
E.S.T.

 

	
  Beneficiary Name: 

  	
   

  	
   

  	
   

  	
  Amount of Wire: $

  	
   

  
	
   

  	
   

  	
   

  
	
  Beneficiary Bank: 

  	
   

  	
   

  	
   

  	
  Account Number:

  	
   

  
	
   

  	
   

  	
   

  
	
  City and State: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Beneficiary Bank Transit
  (ABA) #:

  	
   

  	
   

  	
   

  	
  Beneficiary Bank Code
  (Swift, Sort, Chip, etc.):

  	
   

  
	
   

  	
   

  	
  (For International Wire Only)

  
	
   

  	
   

  	
   

  
	
  Intermediary Bank: 

  	
   

  	
   

  	
   

  	
  Transit (ABA) #:

  	
   

  
	
   

  	
   

  	
   

  
	
  For Further Credit to:

  	
   

  
	
   

  	
   

  	
   

  
	
  Special Instruction:

  	
   

  
	
   

  	
   

  	
   

  
	
  By
  signing below, I (we) acknowledge and agree that my (our) funds transfer
  request shall be processed in accordance with and subject to the terms and
  conditions set forth in the agreements(s) covering funds transfer service(s),
  which agreements(s) were previously received and executed by me (us).

  
	
   

  	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
   

  	
  2nd Signature
  (If Required):

  	
   

  
	
  Print Name/Title:

  	
   

  	
   

  	
   

  	
  Print Name/Title:

  	
   

  
	
  Telephone #

  	
   

  	
   

  	
   

  	
  Telephone #

  	
   

  
																						

 

 

EXHIBIT C

BORROWING BASE CERTIFICATE

 

	
  Borrower:

  	
   

  	
  AXS-ONE INC.

  
	
  Lender:

  	
   

  	
  Silicon Valley Bank

  
	
  Commitment Amount:

  	
   

  	
  $4,000,000.00

  

 

	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Accounts
  Receivable Book Value as
  of                                    

  	
   

  	
  $

  	
   

  
	
  2.

  	
   

  	
  Additions
  (please explain on reverse)

  	
   

  	
  $

  	
   

  
	
  3.

  	
   

  	
  TOTAL
  ACCOUNTS RECEIVABLE

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE
  DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Amounts
  over 90 days due

  	
   

  	
  $

  	
   

  
	
  5.

  	
   

  	
  Balance
  of 50% over 90 day accounts

  	
   

  	
  $

  	
   

  
	
  6.

  	
   

  	
  Credit
  balances over 90 days

  	
   

  	
  $

  	
   

  
	
  7.

  	
   

  	
  Concentration
  Limits

  	
   

  	
  $

  	
   

  
	
  8.

  	
   

  	
  Foreign
  Accounts

  	
   

  	
  $

  	
   

  
	
  9.

  	
   

  	
  Governmental
  Accounts

  	
   

  	
  $

  	
   

  
	
  10.

  	
   

  	
  Contra
  Accounts

  	
   

  	
  $

  	
   

  
	
  11.

  	
   

  	
  Promotion or
  Demo Accounts

  	
   

  	
  $

  	
   

  
	
  12.

  	
   

  	
  Intercompany/Employee
  Accounts

  	
   

  	
  $

  	
   

  
	
  13.

  	
   

  	
  Other
  (please explain on reverse)

  	
   

  	
  $

  	
   

  
	
  14.

  	
   

  	
  TOTAL
  ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
  $

  	
   

  
	
  15.

  	
   

  	
  Eligible
  Accounts (#3 minus #14)

  	
   

  	
  $

  	
   

  
	
  16.

  	
   

  	
  LOAN VALUE
  OF ACCOUNTS (80% of #15)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  Maximum Loan
  Amount

  	
   

  	
  $

  	
  4,000,000.00

  	
   

  
	
  18.

  	
   

  	
  Total Funds
  Available (Lesser of #17 or #16)

  	
   

  	
  $

  	
   

  
	
  19.

  	
   

  	
  Present
  balance owing on Line of Credit

  	
   

  	
  $

  	
   

  
	
  20.

  	
   

  	
  Outstanding
  under Sublimits (Letters of Credit, F/X, and Cash Management)

  	
   

  	
  $

  	
   

  
	
  21.

  	
   

  	
  RESERVE
  POSITION (#18 minus #19 and #20)

  	
   

  	
  $

  	
   

  
							

 

The
undersigned represents and warrants that, this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

 

	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  
	
   

  	
  Received by: 

  	
   

  
	
  COMMENTS:

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
  Date:

  	
   

  
	
   

  	
  Verified:

  	
   

  
	
  By:

  	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
  Authorized
  Signer

  	
   

  	
  Date:

  	
   

  
	
   

  	
  Compliance Status:

  	
  Yes

  	
  No

  
										

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:                            SILICON VALLEY BANK

FROM:         AXS-ONE
INC.

 

The undersigned
authorized officer of AXS-ONE INC. certifies that under the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(i) Borrower is in compliance for the period ending
                      
with all required covenants except as noted below and (ii) there are no Events
of Default, and all representations and warranties in the Agreement are true
and correct in all material respects on this date.  Attached are the required documents supporting the
certification.  The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowings may be requested at
any time or date of determination that Borrower is not in compliance with any
of the terms of the Agreement, and that compliance is determined not just at
the date this certificate is delivered.

 

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

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
  Interim financial
  statements with CC

  	
   

  	
  Quarterly within 45 days*

  	
   

  	
  Yes  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes  No

  
	
  10-Q, 10-K and 8-K

  	
   

  	
  Within 5 days after filing
  with SEC

  	
   

  	
  Yes  No

  
	
  BBC A/R Agings

  	
   

  	
  Quarterly within 30 days*

  	
   

  	
  Yes  No

  

 

*Monthly w/in 30 days when
borrowing.

 

	
  Financial
  Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
  Minimum Adjusted Quick Ratio (quarterly*)

  	
   

  	
  1.75:1.0

  	
   

  	
   

  	
  :1.0

  	
   

  	
  Yes  No

  	
   

  
	
  Minimum EBITDA

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (quarterly - beginning quarter ending
  6/30/05)

  	
   

  	
  $1.00**

  	
   

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
  (cumulative - beginning quarter ending
  9/30/04)

  	
   

  	
  ($500,000)

  	
  7/1/04 thru
  9/30/04

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  ($100,000)

  	
  7/1/04 thru
  12/31/04

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $500,000

  	
  1/1/05 thru
  3/31/05

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $1,000,000

  	
  1/1/05 thru
  6/30/05

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $1,500,000

  	
  1/1/05 thru
  9/30/05

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $2,000,000

  	
  1/1/05 thru
  12/31/05

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $500,000

  	
  1/1/06 thru
  3/31/06

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  
	
   

  	
   

  	
  $1,000,000

  	
  1/1/06 thru
  6/30/06

  	
   

  	
  $

  	
   

  	
  Yes  No

  	
   

  

 

*Monthly when borrowing. 

**except for any 1 of the last 3 quarters in
2005 during which Borrower may sustain a maximum net EBITDA  loss of no greater than $500,000.

 

 

	
   

  	
  BANK USE ONLY

  
	
  Comments Regarding Exceptions:  See Attached.

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED SIGNER 

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  TITLE

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  DATE

  	
   

  	
   

  
	
   

  	
  Compliance
  Status:

  	
  Yes   No

  
							

 

 

SCHEDULE 7.4

(Existing Investments)

 

None.

 

 

SCHEDULE 7.5

(Existing Liens)

 

The following entities are
listed as Additional Insureds on the Company’s Master Special Multi-Peril
insurance policy (Hartford Policy No. 13UUN UJ5809):

 

1.               CIN Meadows, LLC

2.               Linque Management Co., Inc.

3.               Sun Microsystems

 

The following entity is listed
as a Loss Payee on the Company’s Master Special Multi-Peril insurance policy
(Hartford Policy No. 13UUN UJ5809):

 

1.               Minolta Business System

 

 

SCHEDULE 7.6

(Existing Indebtedness)

 

None.EXHIBIT 10.40

Confidential
Treatment(1)

 

 

LICENSE

AGREEMENT

between

ANIKA THERAPEUTICS, INC.

and

ORTHO-MCNEIL
PHARMACEUTICAL, INC.

acting through its

ORTHONEUTROGENA DIVISION

 

(1) Redacted portions have been marked with brackets containing
asterisks ([***]).  The redacted
portions are subject to a request for confidential treatment and have been
filed separately with the Securities and Exchange Commission.

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE
  I -  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  II -  PRODUCT DEVELOPMENT

  	
   

  
	
   

  	
   

  
	
  ARTICLE III -  COMMERCIALIZATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  IV -  INTELLECTUAL PROPERTY LICENSE
  GRANTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  V -  PAYMENTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  VI -  MANUFACTURE

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII -  PUBLICATIONS; TRANSFER OF DATA; CONFIDENTIALITY; COOPERATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  VIII -  OWNERSHIP OF INTELLECTUAL
  PROPERTY AND PATENT RIGHTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  IX -  REPRESENTATIONS AND WARRANTIES.

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  X -  ANIKA’S GENERAL OBLIGATIONS AND
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  XI -  ORTHO’s GENERAL OBLIGATIONS AND
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE XII -  TERM AND TERMINATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIII -  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIV -  DIVERTED AND GREY MARKET PRODUCTS

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  XV -  STEERING COMMITTEE

  	
   

  
	
   

  	
   

  
	
  ARTICLE XVI -  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  
	
  ARTICLE XVII -  MISCELLANEOUS

  	
   

  

 

i

 

This License Agreement (this “Agreement”) is made
effective as of July 23, 2004 by
and between ANIKA THERAPEUTICS, INC., a Massachusetts corporation, having a
place of business at 160 New Boston Street, Woburn, Massachusetts 01801
(“ANIKA”), and Ortho-McNeil Pharmaceutical, Inc., a Delaware corporation
(hereinafter referred to as “ORTHO”), acting through its OrthoNeutrogena
Division and having a place of business at 5760 W. 96th Street, Los Angeles,
CA  90045.  ANIKA and ORTHO are each referred to by name or as a “Party” or,
collectively, as the “Parties.”  For the
avoidance of doubt, obligations of ORTHO hereunder are to be performed by the
OrthoNeutrogena Division of ORTHO.

 

RECITALS

 

1.                                                          ANIKA develops,
manufactures and commercializes therapeutic products and devices.  Furthermore, ANIKA has been developing a
proprietary product intended for use in cosmetic dermatological procedures,
including cosmetic tissue augmentation.

 

2.                                                          On January 29,
2004, ANIKA submitted an IDE to the FDA for a preparation containing HA and
[******] intended for use in the correction of soft tissue contour
deficiencies, such as wrinkles, folds, and acne scars.

 

3.                                                          ORTHO possesses
development and commercialization capabilities, as well as proprietary
technology in dermatological and cosmetic fields.

 

4.                                                          ANIKA desires
to license specified hyaluronic acid preparations to ORTHO so that ORTHO may develop,
commercialize, distribute and sell such preparation for indications and
applications within the Field and in the Territory as provided herein.

 

5.                                                          ANIKA also
desires to supply such specified hyaluronic acid preparations for use by ORTHO
in the commercialization of such preparations pursuant to the terms of this
Agreement.

 

6.                                                          ANIKA, ORTHO,
and PSGA Division of ORTHO, have concurrently entered into the Quality
Agreement, attached hereto as Exhibit E, as of the date hereof.

 

7.                                                          Unless defined
elsewhere in this Agreement, capitalized terms used in this Agreement shall
have the meanings set forth in Article I.

 

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

 

 

ARTICLE I - DEFINITIONS

 

When used in this Agreement, each of the following
terms, when capitalized in their initials, shall have the meaning set forth
below.  The term shall have the same
meaning whether the singular or plural form is used.

 

“Activities” shall have the meaning set forth in
Section 3.1(b) of this Agreement.

 

“Additional Amount” shall have the meaning set forth
in Section 3.1(b) of this Agreement.

 

“Adverse Knowledge” shall have the meaning set forth
in Section 6.10(c) of this Agreement.

 

“Affiliate” of a Party means any company or entity
which controls, is controlled by or is under common control with such Party,
where control, for purposes of this definition, means (i) the possession,
directly or indirectly, of the power to direct the management or policies of a
Person or to veto any material decision relating to the management or policies
of a Person or a majority of the composition of the board of directors (or
similar governing body), in each case, whether through the ownership of voting
securities, by contract or otherwise, or (ii) the Beneficial Ownership,
directly or indirectly, of at least 50% of the voting securities of a Person.  “Beneficial Ownership” shall be determined
in compliance with Rule 13d-3 of the Securities Exchange Act of 1934.

 

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

 

“Alternative Supplier” shall have the meaning set
forth in Section 6.10(a) of this Agreement.

 

“Alternative Supplier Agreement” shall have the
meaning set forth in Section 6.10(a) of this Agreement.

 

“ANIKA Diverted Products” shall have the meaning set
forth in Section 14.2(b) of this Agreement.

 

“ANIKA Grey Market Products” shall have the meaning
set forth in Section 14.1(b) of this Agreement.

 

“ANIKA Know-How” means Information in ANIKA’s Control,
which is developed or acquired by ANIKA, either as of the Effective Date or at
any time during the Term of this Agreement, which relates to the use of a
Licensed Product in the Field. 
Notwithstanding anything herein to the contrary, ANIKA Know-How excludes
ANIKA Patents.

 

“ANIKA Patents” means any patent granted by any
governmental authority in any jurisdiction within the Territory relating to a
Licensed Product, which Patent is Controlled by ANIKA during the term of this
Agreement.  ANIKA Patents shall also
include Joint Patents.  A list of
current ANIKA Patents (including patent applications) is recited in Exhibit
G.

 

2

 

“Applicable Law” means, with respect to Licensed
Product in any country in the Territory, all domestic, foreign, national,
federal, state, local, governmental, judicial, arbitral and other laws,
statutes, codes, treaties, conventions, rules, regulations, judgments, awards,
orders, directives and other pronouncements having the effect of law or similar
binding effect, governing the sale or use of a medical device or drug,
including, importation and manufacture (where manufacture is required) in the
Field in such country.

 

“Audit” shall have the meaning set forth in Section
5.6(e) of this Agreement.

 

“Average Sales Price” shall have the meaning set forth
in Section 6.2(c)(iii) of this Agreement.

 

“Bankruptcy Code” shall have the meaning set forth in
Section 17.16 of this Agreement.

 

“Business Day” means a day on which banking
institutions in New York, New York are open for business.

 

“Calendar Quarter” means a quarter in a Calendar Year
and as defined by the J&J Universal Calendar.

 

“Calendar Year” means those twelve months as defined
by the J&J Universal Calendar.

 

“Claiming Party” shall have the meaning set forth in
Section 13.6 of this Agreement.

 

“Commercial Period” means, with respect to any
Licensed Product in any country in the Territory, the period commencing upon
the receipt of the first Regulatory Approval for such Licensed Product in such
country and ending upon the termination of this Agreement.

 

“Competing Product” shall have the meaning set forth
in Article XI (i) of this Agreement.

 

“Confidential Information” shall have the meaning set
forth in Section 7.1 of this Agreement.

 

“Control” or “Controlling” means owned by or possesses
the right to grant a license or sublicense without violating the terms of any
agreement with any Third Party.

 

“Current Development Plan” shall have the meaning set
forth in Section 2.1(a) of this Agreement.

 

“Current Licensed Product” shall mean the HA Product
containing lidocaine being developed pursuant to the Current IDE.

 

“Current IDE” means IDE No. G040014 filed January 29,
2004, as may be further supplemented, amended or augmented from time to time.

 

“Customers” shall have the meaning set forth in the
definition of Net Sales in Article I.

 

“Date of First Sale” means the date on which an ORTHO
Seller first sells a Licensed Product to an unaffiliated Third Party in an arms
length commercial transaction in conjunction with a

 

3

 

commercial launch of such Licensed Product in the applicable
country pursuant to a launch plan reviewed by the Steering Committee.

 

“Develop” or “Development” means all activities
relating to obtaining Regulatory Approval of Licensed Products within the Field
and Territory, including, but not limited to, chemical and analytical
development, clinical and pre-clinical testing, toxicology, formulation,
manufacturing process development, quality assurance and quality control,
pharmacokinetics, clinical studies, development of kits and/or development of
indications, applications and/or formulations.

 

“Development Invention” shall have the meaning set
forth in Section 8.1 of this Agreement.

 

“Dispute” shall have the meaning set forth in Section
16.2 of this Agreement.

 

“Dollars” or “$” means lawful money of the United States
in immediately available funds.

 

“Effective Date” means the last date of execution of
this Agreement referred to above.

 

“Europe” means, from time to time, the member states
of the European Union, including any successor states thereto; provided,
however, that from and after June 30, 2006, Europe shall mean those
member states of the European Union as of June 30, 2006.

 

“Failure to Supply” shall have the meaning set forth
in Section 6.10(a) of this Agreement.

 

“FDA” means the United States Food and Drug
Administration or any successor agency.

 

“Field” means injectable products for use in cosmetic
dermatology procedures in humans, including but not limited to, the correction
of soft tissue contour deficiencies such as wrinkles, folds, and scars, and the
enlargement and/or smoothing of the appearance of lips.

 

“Filing Party” shall have the meaning set forth in
Section 8.4 of this Agreement.

 

“Forecast” shall have the meaning set forth in Section
6.3(a) of this Agreement.

 

“cGMP” means current Good Manufacturing Practices as
such term is generally understood in the medical device industry.

 

“HA” means a hyaluronic acid whether as an acid, a
pharmaceutically acceptable salt, or a mixture thereof, in any solid or
solution phase form thereof, including, but not limited to, cross-linked
hyaluronic acid derivatives such as cross-linked biscarbodiimide hyaluronic
acid derivatives.

 

“HA Product” shall mean a product containing a
cross-linked biscarbodiimide HA for use in the Field.

 

“IDE” shall mean  the investigational device exemption
filed with the FDA as defined in 21 CFR Part 812.

 

4

 

“Information” means technical information, techniques
and data, whether in writing or not, generally not known to the public, relating
to the use of Licensed Product in the Field and including techniques and data,
including, but not limited to, screens, models, inventions, practices, methods,
knowledge, know-how, skill, experience, test data including pharmacological,
toxicological and clinical test data, analytical and quality control data,
marketing, pricing, distribution, sales, manufacturing data, and patent and
legal data or descriptions.

 

“Initial Average Sales Price” shall have the meaning
set forth in Section 6.2(c)(i) of this Agreement.

 

“Initial Estimated Transfer Price” shall have the
meaning set forth in Section 6.2(d)(i) of this Agreement.

 

“Initial Payment Period” shall have the meaning set
forth in Section 6.2(d)(i) of this Agreement.

 

“Initial Payment Period Report” shall have the meaning
set forth in Section 6.2(d)(ii) of this Agreement.

 

“Initial Period” shall have the meaning set forth in
Section 6.2(c)(i) of this Agreement.

 

“J&J Universal Calendar” means the annual calendar
put forth by Johnson & Johnson describing scheduled monthly, quarterly and
yearly accounting periods for the purposes of calculating net sales, royalty
payments and sales based milestone payments.

 

“Joint Patents” shall have the meaning set forth in
Section 8.1 of this Agreement.

 

“Launch Year” means the twelve (12) month period
following the Date of First Sale of the Licensed Product in the United States.

 

“Licensed Product(s)” means the Current Licensed
Product and any HA Product developed pursuant to Article 2 of this Agreement.

 

“License Period” shall have the meaning set forth in
Section 6.10(b) of this Agreement.

 

“Marketing Territory” shall have the meaning set forth
in Section 3.1(b) of this Agreement.

 

“Net Sales” means, consistent with, in the United
States, generally accepted accounting principles and, in the rest of the
Territory, ORTHO worldwide practices and procedures, and in each such case as
consistently applied with respect to all Licensed Products, the amount  invoiced
by ORTHO Sellers to Customers for sales of Licensed Product in the Territory,
less accruals estimated, credits taken, and actual payments (to the extent not
previously accrued) made for:  (i)
discounts, including, but not limited to, cash discounts, discounts to managed
care or similar organizations or government organizations, rebates paid,
credited, accrued or actually taken, including government rebates such as
Medicaid charge backs or rebates, and retroactive price reductions or
allowances actually allowed or granted from the billed amount, and commercially
reasonable and customary fees paid to wholesalers, buying groups, hospitals or
physicians,

 

5

 

excluding any distributors or sublicensees
(“Customers”), (ii) credits or allowances actually granted upon claims, rejections
or returns of such sales of Licensed Products, including recalls (provided such
recalls are in accordance with Section 6.9 of this Agreement and except to the
extent ANIKA has otherwise paid for such recall), (iii) taxes, duties or other
governmental charges levied on or measured by the billing amount when included
in billing, as adjusted for rebates, charge-backs, and refunds (and similar
adjustments), (iv) actual write-offs for uncollectible accounts, provided,
however, that if collected at a later date, such amounts will be added
to Net Sales, and (v) freight, postage, shipping and insurance charges paid for
delivery of such Licensed Products, to the extent billed and reflected on the
invoices.  For purposes of calculating
“Net Sales,” (a) a Licensed Product shall be considered “sold” upon the
invoicing of such Licensed Product by an ORTHO Seller to a Third Party and (b)
under no circumstances shall any Samples be included.

 

“Original Forfeiture Date” shall have the meaning set
forth in Section 3.1(b) of this Agreement.

 

“ORTHO Diverted Products” shall have the meaning set
forth in Section 14.2(a) of this Agreement.

 

“ORTHO Grey Market Products” shall have the meaning
set forth in Section 14.1(a) of this Agreement.

 

“OrthoNeutrogena Division” shall mean the business
that focuses primarily on the marketing and sale of dermatological prescription
and other skincare products to healthcare providers and operates under the
tradename “OrthoNeutrogena” as a separate, unincorporated division of the ORTHO
legal entity, or any successor entity or entities thereto, whether incorporated
or otherwise, that engages in the same of similar business.

 

“ORTHO Sellers” means ORTHO and its permitted
sublicensees under Section 4.1.

 

“Patent” means (i) valid and enforceable patent,
including any extension, registration, confirmation, reissue, continuation,
divisional, continuation-in-part, re-examination or renewal thereof, and (ii)
pending applications for letters patents, in any jurisdiction within the
Territory.

 

“Patent Costs” means the reasonable fees and expenses
paid to outside legal counsel and other Third Parties, and filing and
maintenance expenses, incurred in connection with the establishment and
maintenance of rights under Patents.

 

“Payment Event” shall have the meaning set forth in
Section 5.2(a) of this Agreement.

 

“Per Unit Overpayment” shall have the meaning set
forth in Section 6.2(d)(iii) of this Agreement.

 

“Per Unit Underpayment” shall have the meaning set
forth in Section 6.2(d)(iii) of this Agreement.

 

“Person” shall mean any natural person, corporation,
firm, limited liability corporation, limited liability partnership, business
trust, joint venture, association, organization, company, partnership or other
business entity, or any government or any agency or political subdivision
thereof.

 

6

 

“PMA” means a premarket approval application filed
with the FDA as defined in 21 CFR Part 814, or if a PMA is not the appropriate
filing, then the suitable filing required to obtain Regulatory Approval.

 

“Quality Agreement” shall mean the Quality Agreement
attached hereto as Exhibit E, as may be amended from time to time by the
parties of the Quality Agreement.  The
Quality Agreement shall terminate upon the termination or expiration of this
Agreement unless otherwise agreed to in writing by the parties of the Quality
Agreement.

 

“Raw Materials” shall mean the materials, components,
and packaging required to manufacture and package the Licensed Product in
accordance with the Specifications.

 

“Reference Quarter” shall have the meaning set forth
in Section 6.2(c)(iii) of this Agreement.

 

“Regulatory Approval Application” means an application
for Regulatory Approval required before commercial sale or use of a Licensed
Product as a drug or a medical device in a regulatory jurisdiction.

 

“Regulatory Approval” shall mean, with respect to any
country in the Territory, all approvals, clearances, registrations and permits
required under Applicable Law for first use or sale of a medical device or
drug.

 

“Rest of the World Countries” shall mean all countries
in the Territory with the exception of the United States and countries in
Europe.

 

“Retained Sample” shall have the meaning set forth in
Section 6.8 of this Agreement.

 

“Royalty Products” shall have the meaning set forth in
Section 5.3(a) of this Agreement.

 

“Samples” shall have the meaning set forth in Section
3.4 of this Agreement.

 

“Second Period” shall have the meaning set forth in
Section 6.2(c)(ii) of this Agreement.

 

“Second Period Average Sales Price” shall have the
meaning set forth in Section 6.2(c)(ii) of this Agreement.

 

“Section 3.2(a) Date” shall have the meaning set forth
in Section 3.2(a) of this Agreement.

 

“Section 3.3(b) Date” shall have the meaning set forth
in Section 3.3(b) of this Agreement.

 

“Shipping Point” shall have the meaning set forth in
Section 6.6(b) of this Agreement.

 

“Specifications” shall mean the specifications for the
composition, manufacture, packaging, label, and/or quality control of all
Licensed Product as set forth by the Steering Committee pursuant to Section
15.4(iii) of this Agreement.  As of the
date hereof, the Specifications for the Current Licensed Product is attached
hereto as Exhibit A, made a part hereof and shall be deemed to have been
agreed upon by the Steering Committee, and which such Specifications

 

7

 

may from time to time be amended by the Parties or
amended in accordance with the provisions of this Agreement.

 

“Steering Committee” shall have the meaning set forth
in Article 15.1 of this Agreement.

 

“Subsequent Product” shall have the meaning set forth
in Section 5.2(a) of this Agreement.

 

“Term” shall have the meaning set forth in Section
12.1 of this Agreement.

 

“Territory” means the world with the exception of
those countries that revert to ANIKA pursuant to Sections 3.1, 3.2, and 3.3 of
this Agreement.

 

“Third Party” means any entity other than ANIKA, ORTHO
or any Affiliates of ANIKA or ORTHO.

 

“Top Two Rest of the World Countries” shall have the
meaning set forth in Section 3.3(a) of this Agreement.

 

“Total Initial Units” shall have the meaning set forth
in Section 6.2(c)(i) of this Agreement.

 

“Total Second Period Units” shall have the meaning set
forth in Section 6.2(c)(ii) of this Agreement.

 

“Unit” shall mean each syringe containing Licensed
Product.

 

“Unit Price” shall have the meaning set forth in
Section 6.2(c) of this Agreement.

 

“Validity Challenge Claim” shall have the meaning set
forth in Section 8.6(i) of this Agreement.

 

ARTICLE II - PRODUCT DEVELOPMENT

 

2.1.                              Development Responsibilities for the
Current Licensed Product.

 

(a)                                  ANIKA, at the direction of and oversight
by the Steering Committee, shall be responsible for and shall use commercially
reasonable efforts in conducting the Development of Current Licensed Product
and obtaining Regulatory Approval of the Current Licensed Product worldwide
(other than the conducting of clinical trials (i) in the United States for the
purpose of obtaining additional label claims for the Current Licensed Product
and (ii) outside of the United States which shall be the responsibility of
ORTHO as set forth below in Section 2.1(d)) pursuant to a development plan and
budget agreed to by the Steering Committee. 
The current development plan for the Current Licensed Product for the
United States, including the corresponding budget, is attached hereto as Exhibit
H (“Current Development Plan”) (which, for purposes of this Agreement,
shall be deemed to have been agreed upon by the Steering Committee).  The Current Development Plan may be modified
from time to time by the Steering Committee to the extent set forth in Section
15.4, such as expanding the Current Development Plan to include any Development
activities outside of the United States.

 

8

 

(b)                                 ORTHO, at the request of ANIKA, shall
provide reasonable assistance to ANIKA in conducting such Development for the
Current Licensed Product, including, but not limited to, reviewing clinical
trials, Regulatory Applications, proposed labeling for the Current Licensed
Product, and third party contracts for such services.  Notwithstanding anything to the contrary contained herein, upon
reasonable request by ORTHO, ANIKA agrees to set up a meeting or initiate
contact with the FDA in connection with the Current Licensed Product.  In such meeting or contact, ORTHO shall be
permitted to communicate and interact directly with the FDA and other
regulatory authorities (in jurisdictions where Regulatory Approval is being
sought) in connection with a Regulatory Approval; provided that
(a) ORTHO shall notify ANIKA in advance of such desired communications or
interaction (including the probable substance thereof); (b) ANIKA
facilitates and coordinates such communications or interaction; and (c) a
representative of ANIKA shall be present for and participate during such
communications or interaction.  In
addition, ANIKA shall also provide ORTHO with reasonable prior notice, if known
in advance by ANIKA, of any material meetings or conversations with any
Regulatory Authority related to the Current Licensed Product and ORTHO shall
have the right to participate in such meetings or conversations to the extent
ORTHO timely makes representatives available.

 

(c)                                  ORTHO shall reimburse ANIKA’s reasonable
internal and out-of-pocket expenses pursuant to the budget set forth in the
Current Development Plan relevant to Development of the Current Licensed
Product in the United States; provided, however, that although
the budget of the Current Development Plan is estimated, as of the date of this
Agreement, at [***********************************], any such reimbursement
pertaining to the clinical trial in the United States shall not exceed
[***************************** *******************] except to the extent that
such additional expenses are a result of modifications to the clinical trial in
the United States as presently contained in the Current Development Plan that
are requested in writing by ORTHO pursuant to a budget provided by ANIKA, in
which case all such additional expenses shall be reimbursed by ORTHO without
being included in the [******************************************]
reimbursement cap.  ANIKA shall invoice
ORTHO within thirty (30) days of the end the Calendar Quarter for such
reasonable internal and out-of-pocket costs incurred that are attributable to
the Development of the Current Licensed Product and set forth in the budget
during such Calendar Quarter (or which were previously incurred prior to the
Effective Date or which have otherwise been approved by the Steering
Committee).  ORTHO shall reimburse ANIKA
for such costs within thirty (30) days of receipt of such invoice.  Such reimbursable costs may include, but not
be limited to, the costs of hiring contract research organizations and clinical
trial costs, and the filing and maintenance costs of Regulatory Applications.
Such invoice shall itemize those Development activities completed during such
Calendar Quarter and the costs associated with each activity, and such invoice
shall also include reasonable documentation demonstrating the completion and/or
costs associated with such activities. 
If ORTHO disputes the validity of any invoice provided by ANIKA
hereunder, the Parties shall endeavor to resolve the dispute in good
faith.  If ORTHO does not indicate in
writing to ANIKA the basis for any dispute of an invoice within ninety (90)
days of receipt of such invoice, the validity of the underlying amounts shall
be deemed automatically accepted by ORTHO. 
If, after one hundred twenty (120) days from the original receipt of an
invoice by ORTHO, the Parties are unable to resolve a disagreement, the matter
shall be submitted to arbitration in accordance with Article XVI.  In addition, subject to

 

9

 

the same dispute
resolution procedures contained in the previous three sentences, ORTHO agrees
to reimburse ANIKA within thirty (30) days of the receipt of applicable
invoices with respect to those Development activities completed as of the
Effective Date, which such invoices ANIKA agrees to deliver as promptly as
practicable following the Effective Date, and ORTHO agrees that such costs
shall be deemed valid unless they are determined to have been unreasonable as
of the time incurred.  Notwithstanding
the foregoing, if at any time it is determined that an invoice delivered
pursuant to this Section 2.1(c) contained an obvious, clear or manifest error
resulting in an incorrect payment by ORTHO, either Party may dispute the
validity of the invoice, and, if the Parties are unable to resolve such
disagreement within thirty (30) days of notice to the other Party of the
dispute, the matter shall be submitted to arbitration in accordance with
Article XVI.

 

(d)                                 ORTHO, at the direction of and oversight
by the Steering Committee, shall be responsible for conducting clinical trials,
if any, of Current Licensed Product (i) in the United States for the purpose of
obtaining additional label claims for the Current Licensed Product and (ii)
outside the United States.  All expenses
associated with such Development activities shall be the sole cost and
responsibility of ORTHO.  Upon ORTHO’s
written request or as set forth in Steering Committee minutes kept pursuant to
Section 15.2(c), ANIKA shall provide reasonable assistance to ORTHO in
conducting such Development for Current Licensed Product; provided that
any expenses of ANIKA associated therewith shall be the responsibility of
ORTHO.

 

(e)                                  In addition to
the provisions of Section 2.1(c) and (d), ORTHO shall reimburse ANIKA’s
reasonable internal and out-of-pocket costs that are attributable to the
Development of the Current Licensed Product outside of the United States to the
extent such costs are set forth in the budget included in the Current Development
Plan (as may be expanded as contemplated pursuant to Section 2.1(a)) or which
have otherwise been approved by the Steering Committee.

 

2.2.                              Development Responsibilities for Other HA
Products.

 

(a)                                  Should the Steering Committee decide to
Develop HA Products other than the Current Licensed Product, ANIKA at the
direction and oversight of the Steering Committee, shall be responsible for the
Development of such products pursuant to applicable development plan(s) and
budget(s) agreed to by the Steering Committee (other than the conducting of
clinical trials which shall be the responsibility of ORTHO as set forth below
in Section 2.2(c), but which shall also be subject to applicable development
plan(s) and budget(s) agreed to by the Steering Committee); provided, however,
that ORTHO shall provide reasonable assistance to ANIKA for such Development
efforts at ORTHO’s sole cost as set forth in the approved budgets and
development plans.  Contingent upon the
creation by the Steering Committee of applicable development plan(s) and
budget(s), it is presently contemplated by the Parties that ANIKA will endeavor
to Develop [**] HA Products contemplated to be categorized as line extensions
to the Current Licensed Products.  ANIKA will not be required to Develop more than
[**] HA Products in addition to the Current Licensed Product pursuant to this
Section 2.2.

 

(b)                                 The Development of additional HA Products
contemplated by Section 2.2(a) shall be guided by the Steering Committee
pursuant to development plan(s) and budget(s) approved in accordance with
Article XV of this Agreement.  Any such
development plan(s) shall address

 

10

 

design inputs,
budgets, clinical trial protocols and timing, product Development timetables,
product Development stages and milestones (and may include pre-determined
conditions for proceeding to each such product Development stage (such as
conditions that proceeding to subsequent stages will require the mutual
agreement of the Parties)), and such other issues as the Steering Committee
determines are necessary.  ORTHO shall
reimburse ANIKA’s reasonable internal and out-of-pocket expenses pursuant to
the budget set forth in the applicable development plan in accordance with
reimbursement procedures approved of by the Steering Committee prior to the
commencement of any Development expenditures by the Parties.  ORTHO shall reimburse ANIKA for such costs
pursuant to the payment schedule set forth in the development plans and
budgets, which are presently anticipated to include reimbursement provisions
that will become due upon the completion of applicable Development steps or
milestones, as well as other costs approved by the Steering Committee.  Notwithstanding anything to the contrary
contained herein, upon reasonable request by ORTHO, ANIKA agrees to set up a
meeting or initiate contact with the FDA in connection with such Licensed
Products.  In such meeting or contact,
ORTHO shall be permitted to communicate and interact directly with the FDA and
other regulatory authorities (in jurisdictions where Regulatory Approval is
being sought) in connection with a Regulatory Approval; provided that
(a) ORTHO shall notify ANIKA in advance of such desired communications or
interaction (including the probable substance thereof); (b) ANIKA
facilitates and coordinates such communications or interaction; and (c) a
representative of ANIKA shall be present for and participate during such
communications or interaction.  In addition,
ANIKA shall also provide ORTHO with reasonable prior notice, if known in
advance by ANIKA, of any material meetings or conversations with any Regulatory
Authority related to such HA Products and ORTHO shall have the right to
participate in such meetings or conversations to the extent ORTHO timely makes
representatives available.

 

(c)                                  ORTHO, at the direction of and oversight
by the Steering Committee, shall be responsible for conducting all clinical
trials of the HA Products contemplated by this Section 2.2.  All expenses associated with such Development
activities shall be the sole cost and responsibility of ORTHO.  ANIKA shall provide reasonable assistance to
ORTHO in conducting such Development activities.

 

2.3.                              Ownership and Obtaining of Regulatory
Approval Applications and Regulatory Approvals.

 

ANIKA, at the direction and
oversight of the Steering Committee, shall be responsible for the filing,
obtaining, and maintaining Regulatory Approval Applications for Licensed
Products in the Territory; provided, however, that all reasonable
expenses associated with filing, obtaining and maintaining such Regulatory
Applications shall be the sole cost and responsibility of ORTHO.  ORTHO shall reimburse ANIKA for such
expenses (to the extent initially paid by ANIKA) in a manner consistent with
the reimbursement provisions of Section 2.1(c) (with respect to the Current
Licensed Product) or the provisions of Section 2.2(b) (with respect to other
Licensed Products).  ANIKA shall have
sole ownership rights in all Regulatory Approvals for Licensed Products
received and all relevant documents associated with such Regulatory Approval
and corresponding Regulatory Approval Application materials.  ANIKA shall provide

 

11

 

ORTHO with an electronic copy of all such Regulatory Approval
Applications as well as copies of all material correspondences with such
Regulatory Authorities, including but not limited to, meeting minutes, letters,
e-mails, and teleconference summaries that are material and relate to such
applications, to the extent prepared by or available to ANIKA (it being
acknowledged by ORTHO that ANIKA is permitted to redact disclosure to the
extent unrelated to Licensed Products).

 

ARTICLE III - COMMERCIALIZATION

 

3.1.                              ORTHO’s Commercialization Obligations For
Licensed Products.

 

(a)                                  ORTHO, at the oversight of the Steering
Committee, shall be responsible for the commercialization, sale, offering for
sale, advertising, marketing, and/or promotion of Licensed Products under this
Agreement and the commercialization of any particular Licensed Product in a
particular country in the Territory provided that as contemplated by
Section 15.3, final decisions related to such activities, including the sale,
price and promotion of Licensed Products under this Agreement and the decisions
whether to market or not market any particular Licensed Product shall be within
the sole discretion of ORTHO.  To the extent contemplated by Section
15.4, the Steering Committee shall review and comment on the relevant
marketing, sales and other commercialization activities including, at a
minimum, an annual review of the marketing plan.  Notwithstanding the foregoing sentences, ORTHO is required to
comply with the obligations contained in this Section 3.1.  Any marketing or commercialization of a Licensed
Product in one country within the Territory shall not obligate ORTHO to market
or commercialize said Licensed Product in any other country.  Furthermore, subject to
Article IX and XI of this Agreement, ORTHO makes no representation, warranty or
covenant that the marketing of a Licensed Product shall be the exclusive means
by which ORTHO will participate in the Field.

 

(b)                                 ORTHO agrees and commits to expend in the
commercialization, sale, offering for sale, advertising, marketing, and/or
promotion, including but not limited to Licensed Product-specific detailing and
promoting to physicians, pharmacists, and other licensed health professionals
of the Licensed Product(s) for use in the Field, but excluding any payments to
ANIKA for Samples pursuant to Section 3.4 hereunder (collectively “Activities”)
during any Calendar Year in each of (a) the United States, (b) Europe, and (c)
the Rest of the World (each, a “Marketing Territory”) an amount equal to at
least [***************] of Net Sales of Licensed Products during the prior
Calendar Year in such Marketing Territory for the first seven (7) Calendar
Years commencing in the Calendar Year including the Date of First Sale of a
Licensed Product in such Marketing Territory, provided, however,
at a minimum ORTHO agrees and commits to expend with respect to such Activities
(1) in the United States at least [********* *****************] in conjunction
or in connection with the Launch Year Activities (all such expense to be
incurred prior to the end of the Launch Year) and at least [******************
***********] for the twelve-month period immediately following the end of the
Launch Year and (2) in each of the other Marketing Territories, at least
[**************************** ************] in each of the first two twelve-month
periods immediately following the Date of First Sale of the first Licensed
Product in a country in such Marketing Territory.  For purposes of determining compliance with this Section 3.1(b),
ORTHO shall be entitled to include relevant

 

12

 

expenditures with
respect to such Activities of any and all ORTHO Sellers.  Within forty-five (45) days of each Calendar
Year, Launch Year or relevant 12-month period, as applicable, ORTHO shall
provide ANIKA with a report detailing ORTHO’s compliance with the requirements
of this Section 3.1(b), which such reports and underlying calculations shall be
subject to ANIKA’s audit rights pursuant to Section 5.6(e).  If ORTHO (including ORTHO Sellers) fails to
expend any of the amounts set forth in the immediately preceding sentence with
respect to any Marketing Territory, then ORTHO’s rights and licenses under this
Agreement are automatically forfeited with respect to any Licensed Product in
such Marketing Territory, all such rights and licenses (including distribution
rights) granted to ORTHO with respect to such Licensed Product in such
Marketing Territory shall revert to ANIKA, and all references to “Territory”
herein will automatically exclude such Marketing Territory.  Any forfeiture in accordance with the
previous sentence shall occur automatically on the date (the “Original
Forfeiture Date”) that is thirty (30) days after the earlier of (1) ORTHO’s
delivery of the yearly report required under this Section 3.1(b) or (2) the
date of ORTHO’s actual knowledge that such report would indicate non-compliance
with the requirements of this Sentence 3.1(b). 
This reversion of Territory to ANIKA shall be ANIKA’s sole and exclusive
remedy for ORTHO’s failure to comply with the provisions of this Section
3.1(b).  Notwithstanding the foregoing,
no forfeiture and reversion of Territory shall take effect if, prior to the
Original Forfeiture Date, ORTHO indicates in writing its commitment to expend
with respect to the Activities in the applicable Marketing Territory, during
the first six (6) months following the end of the period in which such
non-compliance occurred, an amount, in addition to the amounts required to be
expended during the then-current period, equal to 150% of the difference in
such prior period between the amount necessary to have been in compliance in
such Marketing Territory and the amount actually expended (the “Additional
Amount”); provided, however, that if the Additional Amount is not
expended during such six-month time period, then (a) the applicable forfeiture
and reversion shall be deemed to have occurred as of the end of such six-month
time period and (b) within thirty (30) days of the date of forfeiture and
reversion, ORTHO shall pay to ANIKA an amount in cash equal to the difference
between (1) the Additional Amount and (2) the amount, if any, actually expended
by ORTHO in connection with its commitment to expend the Additional Amounts;
and provided, further, that ORTHO is permitted to avail itself of
the remedy provided in this sentence no more than one time during the
Term.  For purposes of clarity, the
Parties understand that Additional Amounts shall not be included in determining
compliance under this Section 3.1(b) with respect to the actual Calendar Year,
Launch Year or twelve-month period, as the case may be, in which the payment of
the Additional Amounts occurs.

 

3.2.                              Commencement of Commercialization of the
Current Licensed Product in Europe.

 

(a)                                  An ORTHO Seller shall cause to occur a
Date of First Sale of the Current Licensed Product in [********************] by
the later of (a) [***********] or (b) [*****] ************************
***************** ******************] (such later date, the “Section 3.2(a)
Date”).  ORTHO may in its discretion,
but shall have no obligation to, commercialize Licensed Products in any of the
other countries in Europe.

 

(b)                                 If no ORTHO Seller meets the obligations
set forth in Section 3.2(a) above, ORTHO shall pay to ANIKA a one-time fee of
[***************************] within thirty

 

13

 

(30) days of the
Section 3.2(a) Date.  In addition to
such payment of [**************** ***********], at such time ORTHO may at its
discretion extend the Section 3.2(a) Date for an additional one (1) year period
by paying ANIKA, within thirty (30) days of the Section 3.2(a) Date, a one-time
payment of [*******************************]. 
If ORTHO fails to make either such payment or no ORTHO Seller has caused
to occur a Date of First Sale of the Current Licensed Product in France and
Germany prior to the end of such extended period (for any reason other than due
to ANIKA’s inability to supply Current Licensed Product pursuant to Article VI
hereof), then ANIKA’s sole and exclusive remedy for such failure shall be that
ORTHO’s rights and licenses under this Agreement are immediately forfeited with
respect to any Licensed Product in Europe, and all such rights and licenses
(including distribution rights) granted to ORTHO with respect to such Licensed
Product in Europe shall revert to ANIKA, and all references to “Territory”
herein will automatically exclude all countries in Europe.

 

(c)                                  At any time after [***********], ORTHO
may elect upon nine (9) months prior written notice to terminate its rights in
Europe; provided, however, that ORTHO shall be entitled to
terminate only to the extent any and all fees due and payable under this
Agreement as of such time have been paid in full.  Upon such termination, all such rights and licenses (including
distribution rights) granted to ORTHO with respect to such Licensed Product in
Europe shall revert to ANIKA, and all references to “Territory” herein will
automatically exclude all countries in Europe.

 

3.3.                              Commencement of Commercialization of the
Current Licensed Product in the Rest of the World Countries.

 

(a)                                  On or before [**********], ORTHO shall
deliver to ANIKA written notice as to whether it is committed to pursuing the
commercialization of the Current Licensed Product in the Rest of the
World.  ORTHO shall also designate in
such notice the two countries selected from the list on Exhibit I hereto
in which it is committed to commercializing the Current Licensed Product (the
“Top Two Rest of the World Countries”) by the Section 3.3(b) Date.

 

(b)                                 An ORTHO Seller shall cause to occur a
Date of First Sale of the Current Licensed Product in each of such Top Two Rest
of the World Countries by the later of (a) [*** *******] or (b)
[************************************************************* ****] such
countries (such later date, the “Section 3.3(b) Date”).  ORTHO may in its discretion, but shall have
no obligation to, commercialize Licensed Products in any of the other Rest of
the World Countries.

 

(c)                                  If no ORTHO Seller meets the obligations
set forth in Section 3.3(b) above, at such time ORTHO shall pay to ANIKA a
one-time fee of [***************************** ***********] within thirty (30)
days of the Section 3.3(b) Date; provided, however, if ORTHO
informs ANIKA prior to July 1, 2005 in writing that it is abandoning its
intentions to commercialize in the Rest of the World Countries, then no such
payment will be required.  Assuming
timely payment of such amount to ANIKA, the Section 3.3(b) Date shall be
extended for an additional one (1) year period.  If no ORTHO Seller has caused to occur a Date of First Sale in
each of the Top Two Rest of the World Countries prior to the end of such
extended period (for any reason other than due to ANIKA’s inability to supply
Current Licensed Product

 

14

 

pursuant to
Article VI hereof), or if ORTHO informs ANIKA of its intention to abandon such
commercialization efforts prior to July 1, 2005, then ANIKA’s sole and
exclusive remedy for such failure shall be that ORTHO’s rights and licenses
under this Agreement with respect to any Licensed Product in the Rest of the
World Countries are immediately forfeited, and all such rights and licenses
(including distribution rights) granted to ORTHO with respect to such Licensed
Product in the Rest of the World Countries shall revert to ANIKA, and all
references to “Territory” herein will automatically exclude all of the Rest of
the World Countries.

 

(d)                                 At anytime after [***********], ORTHO may
elect upon nine (9) months prior written notice to terminate its rights in the
Rest of the World Countries.  Upon such
termination, all such rights and licenses (including distribution rights)
granted to ORTHO with respect to such Licensed Product in the Rest of the World
Countries shall revert to ANIKA, and all references to “Territory” herein will
automatically exclude all of the Rest of the World Countries; provided, however,
that ORTHO shall be entitled to terminate only to the extent any and all fees
due and payable under this Agreement have been paid in full.

 

3.4.                              ANIKA Marketing Support; Samples. 
ANIKA agrees to assist ORTHO’s commercialization effort by providing
Licensed Products at a price of [******************] per Unit and in such
quantities as ORTHO shall reasonably request and order pursuant to the ordering
procedures set forth in Section 6.3 of this Agreement and pay for pursuant to
the payment terms provided for in Section 6.2(e) of this Agreement (the
Licensed Products provided pursuant to this Section 3.4 hereinafter referred to
as “Samples”); provided, however, that such quantity of Samples
in any Calendar Year shall not in the aggregate exceed the lesser of (a) [**
***************] Units and (b) [*******************] of the Units sold in the
aggregate by ORTHO Sellers in such Calendar Year, and, furthermore, ANIKA is
not required to provide Samples with respect to any Marketing Territory until
at least one Regulatory Approval has been received in one country in such
Marketing Territory.  ORTHO
agrees that the Samples shall be used solely for marketing purposes in
accordance with applicable law and ORTHO shall not sell, or offer for sale, or
otherwise permit its Affiliates or distributors to sell or offer for sale, the
Samples.

 

3.5.                              Trademarks.  ORTHO shall
have the right to promote and sell Licensed Products under trademarks selected
by ORTHO, which trademarks shall be and remain the property of ORTHO.  All costs and expenses incurred in
connection with such trademarks shall be solely born by ORTHO, which such costs
and expenses shall not be included in determining compliance by ORTHO with
Section 3.1(b) of this Agreement. 
Nothing herein shall be deemed to give either party, either during the
Term of this Agreement or thereafter, any right to the other Party’s trademarks
or their use.  ORTHO agrees that it is
prohibited from suing or making any claim against ANIKA with respect to any
infringement of ORTHO’s trademarks as a result of ANIKA’s (or its permitted
assignees’) use of such trademarks on the Licensed Products supplied to ORTHO Sellers
pursuant to the terms of this Agreement.

 

ARTICLE IV - INTELLECTUAL PROPERTY
LICENSE GRANTS

 

4.1.                              ANIKA hereby grants to ORTHO an exclusive
(except as expressly set forth in Sections 4.2 and 4.3 below), non-transferable
and, upon ANIKA’s receipt of the payment contemplated

 

15

 

by Section 5.1
below, paid-up license under the ANIKA Know-How and ANIKA Patents solely to
use, sell and offer to sell Licensed Products in the Field in the Territory and
for no other purpose, with a right to grant sublicenses, provided, however,
(a) in the United States, ORTHO may only grant sublicenses to Affiliates or, if
approved in advance in writing by ANIKA, to Third Parties and (b) ORTHO may
grant sublicenses in countries other than the United States to its Affiliates
or to its, or its Affiliate’s, Third Party distributors (to the extent such
Third Party distributors are ORTHO’s or such Affiliate’s (as the case may be)
customary historical normal course distributors consistent with past practice)
without prior notice or approval by ANIKA, and to other Third Party
distributors only upon prior written notice and approval by ANIKA, not to be
unreasonably withheld.  With respect to
any such sublicensee, ORTHO shall be responsible for making any payments due
under this Agreement to ANIKA resulting from sales made by such sublicensee and
the compliance by sublicensee with all applicable terms of this Agreement.

 

4.2.                              Notwithstanding anything herein to the
contrary, ANIKA shall retain all rights necessary including all such rights
under the ANIKA Know-How and ANIKA Patents, in order to fulfill its obligations
under this Agreement (including but not limited to its obligation to sell
Licensed Product to ORTHO).

 

4.3.                              Subject only to the rights expressly
granted to ORTHO under this Agreement, ANIKA reserves all right, title and
interest in, to and under the ANIKA Know-How, ANIKA Patents and Current
Licensed Product.

 

ARTICLE V - PAYMENTS

 

In
consideration of the rights and licenses granted under this Agreement, ORTHO
agrees to pay ANIKA the following non-refundable amounts:

 

5.1.                              License Fee.

 

In
consideration of the license grant set forth in Section 4.1 above, ORTHO agrees
to pay to ANIKA a non-refundable upfront payment of one million dollars
($1,000,000) within five (5) Business Days of the Effective Date.

 

5.2.                              Payment Events.

 

(a)                                  ORTHO agrees to make the following
non-refundable, one-time payments to ANIKA under this Section 5.2 upon the
first occurrence of each of the events specified in Section 5.2(b) and (c)
below (each a “Payment Event”) for any Licensed Product; provided  however,
following payment by ORTHO relating to the achievement of a Payment Event, if
another Licensed Product (a “Subsequent Product”) satisfies the same Payment
Event criteria, ORTHO shall not be obligated to make any payments for the
Subsequent Product to the extent it has already made payment in connection with
a previous Licensed Product.  It is
understood that in no event shall ORTHO be obligated to make the payment due on
any event below more than once.

 

16

 

(b)                                 [*****************************************************************************************
************************************************************************************************************
************* *******************************************************]

 

(c)                                  Within twenty (20) Business Days
following receipt from ANIKA of a notice and invoice regarding the achievement
of each of the following events in connection with a Licensed Product as
follows:

 

(i)                                     [***********************************************************************************
****************************************************************************************************
****************************************************************************************************
****************************************************************************************************
********* **********************************************************************]

 

(ii)                                  [***********************************************************************************
*************************************************************************************************]

 

(iii)                               [**********************************************************************************
*********************************************************************************************************]

 

(iv)                              [***********************************************************************************
*************************************************************************************************************]

 

5.3.                              Earned Royalties For Licensed Products
Manufactured by ANIKA.

 

(a)                                  In addition to any payments pursuant to
Article III, Sections 5.1 and 5.2 and Article VI of this Agreement for the
purchase of Licensed Products from ANIKA by ORTHO, ANIKA shall be entitled to
the following royalty payments for the sale by ORTHO Sellers of Licensed
Products purchased from ANIKA (“Royalty Products”):  (i) [**************] of Net Sales of Royalty Products that are
within the first [**********************************] of cumulative Net Sales
of Royalty Products in any Calendar Year; (ii) [***************] of Net Sales
of Royalty Products that are within the next incremental [*********************
**********] of cumulative Net Sales of such Royalty Products in such Calendar
Year; (iii) [** ************] of Net Sales of Royalty Products that are within
the next incremental [***** **************************] of cumulative Net Sales
of Royalty Products in such Calendar Year; and (iv) [******************] of Net
Sales of Royalty Products that are within any additional total cumulative Net
Sales (i.e., above [*********] of total Net Sales) of Royalty Products in such
Calendar Year.

 

17

 

(b)                                 The royalties owed to ANIKA shall be
calculated on a quarterly basis based upon the percentage of Net Sales of
Royalty Products.  For example, if in
each Calendar Quarter during a Calendar Year, the Net Sales for Royalty
Products sold by ORTHO Sellers were [**** ***********************], then no
royalty would be owed to ANIKA by ORTHO in the first two Calendar
Quarters.  The royalty owed to ANIKA by
ORTHO in the third Calendar Quarter would be
[***************************************************************].  The royalty owed to ANIKA by ORTHO in the
fourth Calendar Quarter would be [**************
***************************************************].

 

(c)                                  Royalties shall be paid in respect of all
sales of Royalty Products in the Territory for the entire Term of this
Agreement, including extensions or renewals thereof.

 

(d)                                 All royalty payments to be made by ORTHO
to ANIKA under this Section 5.3 shall be made in Dollars by same day wire
transfer  no later than forty-five
(45) Business Days from the end of the applicable Calendar Quarter.

 

5.4.                              Third Party Patents.

 

If
a Patent or Patents of a Third Party should be in force in any country in the
Territory during the term of this Agreement covering the use or sale of any
Licensed Product, and if after receiving such notice from such Third Party it
should prove in ORTHO’s reasonable judgment after consultation with ANIKA,  impractical
or impossible for ORTHO or any ORTHO sublicensee to continue performing the
activity or activities licensed hereunder without obtaining a license from such
Third Party under such Patent or Patents in said country, then ORTHO shall
promptly notify ANIKA in writing.  If
ANIKA agrees that a license is required it shall use commercially reasonable
efforts to procure such license from the Third Party and fifty percent (50%) of
the portion of any compensation paid to such Third Party attributable to the
manufacture, use, or sale of Licensed Products sold by ORTHO Sellers shall be
paid to ANIKA by ORTHO within thirty (30) days of invoice of ANIKA documenting
such compensation payment by ANIKA to the Third Party; provided, however,
that ORTHO shall not be required to pay ANIKA such amounts unless ORTHO has
agreed in writing to consent to the amount ANIKA has agreed to pay in procuring
the license, which such consent shall not be unreasonably withheld.  If ANIKA disagrees that such a license is
required, the Parties shall submit the issue to an independent patent attorney
selected mutually by the Parties to determine whether a license is needed.  The decision of such patent attorney shall
be final and to the extent that such patent attorney decides that a license is
required, ANIKA will use commercially reasonable efforts to procure such
license, with ANIKA and ORTHO sharing the cost thereof as described above in
this Section 5.4.  The cost of such
patent attorney shall be borne by the non-prevailing party in the disagreement.

 

5.5.                              Payments in US Dollars.

 

All
royalties, one-time and other payments under this Agreement shall be paid in
Dollars.

 

18

 

5.6.                              Reports and Records.

 

(a)                                  During the Term of this Agreement and
commencing with the Date of First Sale of a Licensed Product, ORTHO shall
furnish, or cause to be furnished to ANIKA, written reports, including the
calculation of royalty payment due, within thirty (30) Business Days following
the end of each Calendar Quarter, showing:

 

(i)                                     the Net Sales of each Licensed Product
(and, to the extent different, Royalty Products) sold by each of ORTHO Seller
in each country of the Territory, during the Calendar Quarter and the total for
all quarters of the current Calendar Year;

 

(ii)                                  the Units of each Licensed Product (and,
to the extent different, Royalty Products) sold by each of ORTHO Seller in each
country of the Territory, during the Calendar Quarter and the total for all
quarters of the current Calendar Year;

 

(iii)                               the royalties payable in Dollars, which
shall have accrued hereunder in respect to such Net Sales for the current
Calendar Year; and

 

(iv)                              a detailed calculation of Net Sales for
the Calendar Quarter and the total amount of Net Sales for the current Calendar
Year through the most recently completed Calendar Quarter.

 

(b)                                 During the Term of this Agreement and
commencing with the Date of First Sale of a Licensed Product, ORTHO shall
furnish, or cause to be furnished to ANIKA, written reports, within fifteen
(15) Business Days following the end of each Calendar Month, showing the Net
Sales of each Licensed Product (and, to the extent different, Royalty
Products)sold by each of ORTHO Seller in each country of the Territory, during
the Calendar Month.

 

(c)                                  In the case of sales outside the United
States, for the purpose of this Article V, such sales shall be converted to
Dollars in accordance with ORTHO’s current customary and usual procedures for
calculating same which are the following: the rate of currency conversion shall
be as quoted by the Wall Street Journal, New York edition, for the last day of
the quarter  for each Calendar
Quarter or Calendar Month, as the case may be. 
These methods of conversion are consistent with ORTHO’s current
accounting methods.  ORTHO shall give
ANIKA prompt written notice of any proposed changes to ORTHO’s customary and
usual procedures for currency conversion, which shall only apply after such
notice has been delivered to and approved by ANIKA, provided that such
changes continue to maintain a set methodology for currency conversion.

 

(d)                                 Each report shall be made within thirty
(30) Business Days from the end of each Calendar Quarter or fifteen (15)
Business Days from the end of each month, as the case may be.  ORTHO shall keep accurate records in
sufficient detail to enable royalties and other payments payable hereunder to
be determined.  ORTHO shall be
responsible for all royalties and late payments that are due to ANIKA that have
not been paid by ORTHO Sellers.  All
costs of enforcing or collecting payment hereunder, including attorney’s fees
and court costs, shall be paid by the non-prevailing Party.

 

19

 

(e)                                  ORTHO shall maintain complete and
accurate records, in accordance with U.S. generally accepted accounting
practices, which are relevant to costs, expenses and payments under this
Agreement and such records shall be open during reasonable business hours for a
period of five (5) years from creation of individual records for examination at
ANIKA’s expense and not more often than once each year by a certified public
accountant or other representative selected by ANIKA and acceptable to ORTHO
for the sole purpose of verifying the correctness of calculations or such
costs, expenses or payments made under this Agreement (the “Audit”).  If ORTHO disagrees with the calculation of
the Audit, and ORTHO and ANIKA cannot resolve their disagreement, the matter
shall be submitted to arbitration in accordance with Article XVI.  In the absence of material discrepancies (in
excess of 5% of the disputed amount) in any request for reimbursement resulting
from such audit, the accounting expense shall be paid by ANIKA.  If material discrepancies do result, ORTHO
shall bear the reasonable audit expense. 
Any records or accounting information received from ORTHO shall be Confidential
Information for purposes of Article VII.

 

(f)                                    In addition to the above quarterly and
monthly reports, during the Term of this Agreement and commencing with the Date
of First Sale of a Licensed Product, ORTHO shall endeavor to furnish, or cause
to be furnished, to ANIKA a written weekly report showing the approximate Net
Sales of each Licensed Product sold by each ORTHO Seller in each country of the
Territory during the previous week. 
ANIKA agrees and acknowledges that such report is an estimate, may not
be accurate, and shall not be used as a basis for calculating any payments
hereunder; provided, however, that such report will be prepared
by ORTHO in good faith.  ANIKA
acknowledges and agrees that failure of ORTHO to furnish such a report shall
not be deemed a breach of this Agreement.

 

(g)                                 ORTHO shall provide ANIKA with a
preliminary and unaudited report containing the Net Sales for each Calendar
Quarter within five (5) Business Days following the end of each Calendar
Quarter for the United States and within ten (10) Business Days following the
end of the Calendar Quarter for the rest of the Territory.  These preliminary and unaudited reports will
be superceded by the reports under Section 5.6(a) at the time those reports are
required to be furnished.

 

5.7.                       Taxes.

 

(a)                                  ORTHO will make all payments to ANIKA
under this Agreement without deduction or withholding for taxes except to the
extent that any such deduction or withholding is required by law in effect at
the time of payment.

 

(b)                                 Any tax required to be withheld on
amounts payable under this Agreement will promptly be paid by ORTHO on behalf
of ANIKA to the appropriate governmental authority, and ORTHO will furnish
ANIKA with proof of payment of such tax. 
Any such tax required to be withheld will be an expense of and borne by
ANIKA.

 

(c)                                  ORTHO and ANIKA will cooperate with
respect to all documentation required by any taxing authority or reasonably
requested by ORTHO or ANIKA to secure a reduction in the rate of applicable
withholding taxes.

 

20

 

(d)                                 If ORTHO had a duty to withhold taxes in
connection with any payment it made to ANIKA under this Agreement but ORTHO
failed to withhold, and such taxes were assessed against and paid by ORTHO,
then ANIKA will reimburse ORTHO for such taxes.  If ORTHO makes a claim under this Section 5.7(d), it will comply
with the obligations imposed by Section 5.7(b) as if ORTHO had withheld taxes
from a payment to ANIKA.

 

(e)                                  ORTHO will provide ANIKA with reasonable
prior written notice to be given no later than the later of (a) sixty (60) days
prior to the commencement of such withholding or (b) ten (10) Business Days
after ORTHO has knowledge of changes in law or regulations requiring such
withholding or deductions under this Agreement, in the event ORTHO determines
that any deductions or withholding will be required pursuant to this Section
5.7.  As of the date hereof, ORTHO is
not aware of any requirements to deduct and withhold as contemplated by this
Section 5.7.  ANIKA acknowledges and
agrees that failure of ORTHO to timely provide notice pursuant to this Section
5.7(e) shall not be deemed a material breach of this Agreement.

 

ARTICLE VI - MANUFACTURE

 

6.1.                              Supply of Products.

 

Subject to the provisions of this Agreement, during
the Term of the Agreement, ANIKA agrees to manufacture and supply ORTHO in the
Territory on an exclusive basis with those quantities of Licensed Product as
ordered by ORTHO pursuant to this Agreement, and ORTHO shall purchase
exclusively from ANIKA (which includes permitted sublicensees of ANIKA pursuant
to Section 17.5) 100% of ORTHO’s requirements for Licensed Products to be sold
subject to the ordering procedures set forth in this Article VI.

 

6.2.                              Prices for Product.

 

(a)                                  Transfer Prices for Sale in the United
States.  The transfer price for each Unit of Licensed
Product for sale in the United States sold by ANIKA to ORTHO shall be set at
[***** *****************************] of the Unit Price (as defined below); provided
that (i) with respect to all Licensed Products, if the calculation of Unit
Price would result in a transfer price less than [*****************], then the
transfer price shall instead be [*******************] and (ii) with respect
solely to the Current Licensed Product, if the calculation of Unit Price would
result in a transfer price greater than [******************], then the transfer
price shall instead be [******************].

 

(b)                                 Transfer Prices for Sales in Countries
Other than the United States.  The transfer
price for each Unit of Licensed Product for sale in each country in the
Territory other than the United States sold by ANIKA to ORTHO shall be set at
[**************************** ******] of the Unit Price; provided however, that
(i) with respect to all Licensed Products, if the calculation of Unit Price in
any such country would result in a transfer price less than [*******
***********] in that country, then the transfer price shall instead be
[*******************] in such country and (ii) with respect solely to the
Current Licensed Product, if the calculation of Unit Price in any such country
would result in a transfer price greater than [**************** *****]

 

21

 

in that country,
then the transfer price shall instead be [********************] in such
country.

 

(c)                                  Unit Price Calculation.  The “Unit Price” in each country in the
Territory shall be calculated as follows:

 

(i)                                     First Calendar Quarter. 
The Unit Price for the period from the Date of First Sale until the last
day of the Calendar Quarter during which the Date of First Sale occurs (the
“Initial Period”), shall be the Initial Average Sales Price for such Initial
Period where “Initial Average Sales Price” shall mean the fraction the numerator
of which is the total Net Sales in such country during such Initial Period and
the denominator of which is the total Units sold in such country by the
ORTHO Sellers during such Initial Period (the “Total Initial Units”).

 

(ii)                                  Second Calendar Quarter. 
The Unit Price for the Calendar Quarter immediately succeeding the
Initial Period (the “Second Period”) shall be the Second Period Average Sales
Price for such Second Period where “Second Period Average Sales Price” shall
mean the fraction the numerator of which is the total Net Sales in such
country during such Second Period and the denominator of which is the
total Units sold in such country by the ORTHO Sellers during such Second Period
(the “Total Second Period Units”).

 

(iii)                               Subsequent Calendar Quarters. 
The Unit Price for each Calendar Quarter ended after the Second Period
shall be the Average Sales Price determined from the Calendar Quarter ended two
Calendar Quarters immediately preceding such Calendar Quarter (the “Reference
Quarter”) (for instance, in the case of Q4, the Reference Quarter would be Q2),
where “Average Sales Price” shall mean the fraction the numerator of
which is the total Net Sales in such country during such Reference Quarter and
the denominator of which is the total Units sold in such country by the
ORTHO Sellers during such Reference Quarter. 
Notwithstanding the foregoing, in the event there are no applicable
Units sold in a country in a Reference Quarter (which would result in no
Average Sales Price for that Reference Quarter), the Unit Price for such
Reference Quarter shall be the Unit Price for the last previous Reference
Quarter in which Units were sold in such country.

 

(d)                            Invoice Price and Transfer Price True-Up.

 

(i)                                     Because the Unit Price for the Initial
Period and the Second Period (each, an “Initial Payment Period”) cannot be
determined until after the end of such Payment Period, ANIKA shall initially
invoice ORTHO at a transfer price (“Initial Estimated Transfer Price”) equal to
[****************************] of ORTHO’s published list price for Units sold
during such Initial Payment Period (subject to any applicable minimum and
maximum transfer prices in accordance with Section 6.2(a) and (b)).

 

(ii)                                  Within ten (10) days following the end of
each Initial Payment Period, ORTHO will provide ANIKA with a report containing
the Net Sales in each country

 

22

 

during
such Initial Payment Period and the total Units sold in each such country
during such Initial Payment Period (the “Initial Payment Period Report”).

 

(iii)                               Within ten (10) days following the receipt of an
Initial Payment Period Report, (A) if [********************************] of the
Initial Average Sales Price or Second Period Average Sales Price, as
applicable, is greater than the applicable Initial Estimated Transfer Price
(such difference, the “Per Unit Underpayment”), ORTHO shall (subject to the
transfer price maximums in Section 6.2(a) and 6.2(b)) pay to ANIKA the product
of (1) the Per Unit Underpayment and (2) the Total Initial Units or Total
Second Period Units, as the case may be, or, (B) if the Initial Estimated
Transfer Price is greater than [**********************************] of the
Initial Average Sales Price or Second Period Average Sales Price, as applicable
(such difference, the “Per Unit Overpayment”), ANIKA shall (subject to the
transfer price minimums in Section 6.2(a) and 6.2(b)) pay to ORTHO the product
of (a) the Per Unit Overpayment and (b) the Total Initial Units or Total Second
Period Units, as the case may be.

 

(e)                                  Payment Terms. 
Payment terms on all orders of Licensed Product shall be forty-five (45)
days net of invoice date.  ORTHO shall
keep accurate records in sufficient detail to enable transfer fees and other
payments payable hereunder to be determined. 
ORTHO shall be responsible for all transfer prices and late payments
that are due to ANIKA.  Any past due
amounts for any overdue payment to ANIKA pursuant to any provision of this
Agreement will be subject to a late fee of 1% per month, or the highest rate
allowed by law, whichever is less, with such interest accrual commencing on the
thirtieth day after the end of the month such payment was due.  All costs of enforcing or collecting payment
hereunder, including attorney’s fees and court costs, shall be paid by the
non-prevailing Party.  Breach for
non-payment commences on the forty-sixth day following shipment of the Product
by ANIKA, assuming all invoice data from ANIKA is accurate.

 

6.3.                              Forecasts, Orders.

 

(a)                                  Forecasts.  No later
than three (3) months prior to the anticipated commencement of the first
Commercial Period for the Current Licensed Product, ORTHO shall provide ANIKA
with its initial written forecast of ORTHO’s anticipated requirements for
Licensed Products during the first twelve months of such Commercial Period (the
“Forecast”).  Beginning with the first
full Calendar Quarter after the initial Forecast has been provided to ANIKA,
sixty (60) days prior to each Calendar Quarter during the Term, ORTHO shall
provide ANIKA with a revised Forecast covering the 12-month period that
commences with such Calendar Quarter. 
It is understood and agreed that with respect to all Forecasts issued to
ANIKA by ORTHO pursuant to the terms hereof, the first three (3) months thereof
shall become binding on ORTHO on a rolling basis and constitute a firm order
for Licensed Products, regardless of receipt of ORTHO’s actual purchase orders
placed pursuant to Section 6.3(b).

 

(b)                                 Subject to the binding commitment
incurred in the first three months of each Forecast pursuant to Section 6.3(a),
ORTHO shall place specific binding orders for Licensed Product by the issuance
of separate purchase orders to ANIKA (which may be in written or electronic
form or by any other means agreed to by the Parties).  ORTHO’s purchase orders shall

 

23

 

designate the
desired types, configuration (including packaging variations) and quantities of
Licensed Products (of those made available by ANIKA), delivery dates and
destinations.  ORTHO shall issue written
purchase orders for Licensed Products to ANIKA at least ninety (90) days prior
to the requested delivery dates. 
Subject to the immediately following sentence, the Parties acknowledge
that ORTHO is not obligated to buy any specific amount of any Licensed Product
under this Agreement, except for the quantities which ORTHO shall actually
order through such binding purchase orders and otherwise in accordance with
this Section 6.3.  In the event that
ORTHO shall fail to place sufficient purchase orders to satisfy the binding
order commitment incurred pursuant to any Forecast, ANIKA may assume that such
purchase orders have been submitted and shall reasonably deliver such Licensed
Product to ORTHO.  ANIKA shall not be
required to supply quantities of any specific Licensed Product in excess of
125% of the binding portion of such Licensed Product in the applicable
Forecast.  In such instances, the
Parties agree in good faith to negotiate delivery dates and quantities.

 

(c)                                  Conflicts.  To the
extent of any conflict or inconsistency between this Agreement and any purchase
order, purchase order release, confirmation, acceptance or any similar
document, the terms of this Agreement shall govern.

 

6.4.                              Most Favored Customer.

 

In consideration of the arrangements provided in this
Agreement for ORTHO to purchase Licensed Product exclusively from ANIKA, ANIKA
agrees that during the term of this Agreement ORTHO shall be treated with “most
favored nation” status in connection with allocation of HA for manufacturing
Licensed Product, and, accordingly, if ANIKA is unable to supply all of the
quantities of Licensed Product ordered by ORTHO pursuant to binding orders in
accordance with this Agreement, ANIKA shall not provide any other customer
(which customer is similarly situated or purchases equivalent or less volume of
products from ANIKA than ORTHO in the aggregate) with preferential or more
favorable treatment with respect to allocation of cross-linked biscarbodiimide
hyaluronic acid derivative for manufacturing Licensed Product (taking into
account reasonable forecasts, past sales and sales performance against
forecast).

 

6.5.                              Improvements.

 

(a)                                  Change in Specifications. 
Either Party shall have the right to request a change to the
Specifications or packaging of Licensed Product during the Term of this
Agreement.  In such event, the Party
wishing to request a change shall notify the other Party of its request in
writing.  If the receiving Party agrees
to such request, the Parties shall cooperate with each other to have such
change to such Specifications or packaging of Licensed Product approved by the
FDA or other regulatory agency, if such approval is necessary.  ANIKA shall not be obligated to make any
changes to such Specifications of Licensed Product requested by ORTHO, unless
such changes is approved by the Steering Committee in accordance with Section
15.3.  If the FDA or other regulatory
agency requires a change to the Specifications or packaging of Licensed Product
(other than changes requested by ORTHO), ANIKA shall use commercially
reasonable efforts to make such change with respect to the Licensed Product
sold in the Territory, and the costs for making such change as required by such
regulatory agency shall be born by ORTHO. 
ORTHO shall reimburse ANIKA for the actual, documented expenses incurred
by ANIKA in

 

24

 

connection with
changes to the Specifications or the packaging of product requested by ORTHO or
the Steering Committee, including, without limitations, any necessary
Regulatory Approval costs. 
Notwithstanding any other terms of this paragraph, if the change to the
Specifications or packaging of the Licensed Product creates obsolescence in
existing inventory held by ANIKA or ORTHO or any other person or entity, the
actual costs of such obsolescence, together with any actual hard disposal
costs, shall be the responsibility of ORTHO. 
ORTHO shall have the right to appoint an independent certified
accountant mutually acceptable to both Parties to audit and review ANIKA’s
financial records pertaining directly to such costs for obsolescence.  Any disputes arising from a request for
cost-sharing or reimbursement of expenses incurred in connection with a change
in Specifications or packaging of the Licensed Product under this Section
6.5(a) and not resolved informally within 30 days shall be referred to the
Steering Committee for resolution.  If
the Steering Committee does not resolve the matter within 60 days, either Party
may submit the matter to arbitration as provided in Article XVI.

 

(b)                                 Records.  ANIKA shall
keep complete and accurate records pertaining to the manufacture, including
quality control, of the Licensed Product. 
ORTHO shall keep complete and accurate records pertaining to the use,
sale and other disposition of the Licensed Product, including for each lot
number of Licensed Product, the quantity shipped and where the lot was
shipped.  Each party shall keep its
respective records for at least five (5) years or for such longer period if and
as required by law.  Each party shall
make available such records to the other party for such lawful purpose as such
other party may reasonably request in writing.

 

6.6.                              Delivery.

 

(a)                                  All charges for packing, hauling,
storage, bar coding and transportation to the Shipping Point are included in
the transfer price as set forth in Section 6.2 hereunder unless otherwise
agreed to by the Parties in writing. 
ORTHO will pay all freight, shipping, insurance, duties, forwarding and
handling charges, taxes, storage and all other charges applicable to Licensed
Product after it is delivered by ANIKA to the Shipping Point.  All shipments will be accompanied by a
packing slip which describes the articles, states the purchase order number and
shows the shipment’s destination.  ANIKA
agrees to promptly forward the original bill of lading or other shipping
receipt for each shipment in accordance with ORTHO’s instructions.

 

(b)                                 Shipment.  The risk of
loss with respect to Licensed Product shall remain with ANIKA through
production until Licensed Product is delivered to ORTHO FOB ANIKA’s
manufacturing facility (currently located in Woburn, Massachusetts), or other
manufacturing facility in which Licensed Product may be produced in accordance
with the applicable Licensed Product Regulatory Approvals (the “Shipping
Point”).  ANIKA will pack all Licensed
Product ordered hereunder in a manner suitable for shipment and sufficient to
enable the Licensed Product to withstand the normal effects of shipping,
including handling during loading and unloading.  ORTHO is responsible for designating the carrier(s) and
negotiating terms for shipment of Licensed Product, and is responsible for
payment of all shipping insurance, handling, storage and custom duties and
fees.

 

25

 

(c)                                  Inventory.  ANIKA and
ORTHO agree to reasonably cooperate to improve the process for ordering
Licensed Product with the mutual objectives of expediting the supply process to
a just-in-time process and reducing inventory costs.

 

6.7.                              Inspections.

 

(a)                                  During the Term, ORTHO shall have rights
to inspect ANIKA’s facilities as provided in Sections 5.4 and 5.5 of the
Quality Agreement.

 

(b)                                 ANIKA shall have the right to visit
ORTHO’s or ORTHO’s Seller’s facilities where the Licensed Product is stored or
delivered from time to time during the term of this Agreement to perform a
quality audit of ORTHO’s records concerning storage and distribution (including
shipping and handling) of the Licensed Product.  Such visits shall be conducted during normal business hours upon
at least ten (10) business days prior written notice and each party shall be
limited to not more than one visit per year, except in the event of a recall of
the Licensed Product or governmental action involving the Licensed Product.

 

6.8.                              Non-Conforming Product.

 

ORTHO shall evidence any claims of nonconformity of
Licensed Product with an analysis of the allegedly nonconforming Licensed
Product that shall have been prepared by ORTHO or its agent.  Such report shall be accompanied with a copy
of the records pertaining to such testing and a sample of the Licensed Product
from the batch analyzed.  If, after its
own analysis of a sample stored by ANIKA from such lot of Licensed Product (which
such sample ANIKA is required to retain) (the “Retained Sample”), ANIKA
confirms such nonconformity, ANIKA shall, at ANIKA’s election, either replace
the nonconforming Licensed Product with conforming Licensed Product as soon as
reasonably practicable at ANIKA’s expense or refund to ORTHO the entire
transfer price therefore.  The
foregoing, and the rights under this Section 6.8, shall be ORTHO’s sole and
exclusive remedy with respect to such nonconformity.  The nonconforming Licensed Product shall either be returned to
ANIKA, at ANIKA’s request and its expense, or destroyed, at ANIKA’s expense.

 

If, after ANIKA’s own
analysis, ANIKA does not confirm such non-conformance to the Specifications or
whether the Retained Sample of the Licensed Product has such a defect, either
Party may deliver the Licensed Product to an independent Third-Party
laboratory, mutually and reasonably acceptable to both Parties, for analytical
testing to confirm the Retained Sample of the Licensed Product’s conformance to
the Specifications or the presence or absence of defects.  All costs associated with such Third-Party
testing shall be at ORTHO’s expense unless the tested Retained Sample of the
Licensed Product is deemed by such Third-Party to be materially defective or
not in compliance with the Specifications, in which case all such costs,
including reimbursement of freight and disposition costs, shall be promptly
paid by ANIKA.  No inspection or testing
of or payment for Licensed Product by ORTHO or any Third-Party agent of ORTHO
shall constitute acceptance by ORTHO thereof, nor shall any such inspection or
testing be in lieu or substitution of any obligation of ANIKA for testing,
inspection and quality control as provided in the Specifications or under
applicable local, state, or federal laws, rules, regulations, standards, codes
or statutes.  In the event that any such
shipment or batch thereof is ultimately agreed or

 

26

 

found to meet the
specifications, ORTHO shall retain such shipment or batch, and all the terms
and conditions of this Agreement shall continue to apply to such Licensed
Product.

 

6.9.                              Corrective Action.

 

(a)                                  Reportable Events. 
ANIKA shall be responsible for notifying all applicable regulatory
authorities of reportable events (including without limitation complaints)
involving the Licensed Product for which ANIKA receives written notification,
as required by applicable laws.  ORTHO
shall notify ANIKA of potentially reportable events promptly but in no event
later than twenty-four (24) hours after it receives notice of the event.  In addition, all such notices shall be
consistent with the requirements of law in the applicable jurisdictions.

 

(b)                                 Licensed Product Complaints. 
ORTHO shall promptly communicate to ANIKA by facsimile, telephone or
email (and confirm any such telephone communication as instructed at the time)
any complaint received from users of the Licensed Product, in the configuration
supplied by ANIKA.  Each notification of
a complaint shall contain, but not be limited to, the lot number, dosage size,
expiration date, indication for actual use and description of circumstances
involved in the failure of the Unit(s) in question.  Each complaint notification will contain all the information
available to ORTHO at that time, including all information then available which
is required in the ANIKA Complaint Form attached hereto as Exhibit F,
and a summary of the proposed action to be taken by ORTHO to comply with its
legal obligations.  ORTHO will provide
additional information promptly as it becomes available.  ORTHO acknowledges that complaint
investigation is the responsibility of ANIKA, but ORTHO reserves the right to
directly contact its customers.

 

(c)                                  Safety or Efficacy Concerns. 
Each party agrees to notify the other party as soon as practicable of
any information of which it becomes aware which relates to the safety or
efficacy claims of the Licensed Product. 
Upon receipt of any such information, the Parties shall consult with
each other in an effort to arrive at a mutually agreeable course of action that
is consistent with the obligations of the Parties under this Agreement and
consistent with Applicable Laws.

 

(d)                                 Licensed Product Recalls. 
If (i) the Licensed Product is subjected to a recall by any governmental
agency or (ii) in the event either Party, after notification to, and good faith
consultation with, including, if requested by either Party, face-to-face
meetings with, the other Party, elects to make a Licensed Product recall,
withdrawal or corrective action, the expense of such recall, withdrawal or
corrective action shall be borne as provided below.  If (i) it is established that the Licensed Product was
nonconforming pursuant to Section 6.8 upon delivery by ANIKA to a common
carrier at ANIKA’s Shipping Point, or (ii) such recall, withdrawal or
corrective action arises from any breach by ANIKA of the provisions of this
Agreement, then ANIKA, subject to Article XIII, shall hold ORTHO harmless and
shall bear all expenses related to the recall, withdrawal or corrective action,
including the replacement of the recalled or withdrawn Licensed Product, which
shall be replaced as soon as reasonably practicable.  If such recall, withdrawal or corrective action arises as a
result of actions or omissions on the part of ORTHO Sellers, or from any breach
by ORTHO Sellers of the provisions of this Agreement, then ORTHO, subject to
Article XIII, shall hold ANIKA harmless and shall bear all costs and expenses
in connection with such recall, withdrawal or corrective action.  ORTHO shall keep,

 

27

 

and will use its
reasonable efforts to the extent required by law to cause other ORTHO Sellers
to keep, detailed distribution records for each lot number detailing the
quantity shipped and the location where the lot was shipped, so that in event
of a recall, ORTHO will be able to contact all physicians and/or end users.

 

6.10.                        Failure to Supply: License to Manufacture.

 

(a)                                  If ANIKA fails, for a period of three
consecutive months, to deliver eighty percent (80%) of the aggregate cumulative
quantity of all Licensed Products which ANIKA has agreed to deliver to ORTHO
pursuant to binding purchase orders pursuant to Section 6.3 of this Agreement
during that period, without being able to complete the delivery requirements
along with any other scheduled delivery requirement in the next subsequent two
months (whether or not caused by a force majeure) (hereinafter referred to as a
“Failure to Supply”), then during any such License Period, ORTHO shall be
permitted to obtain such Licensed Product from another supplier (an
“Alternative Supplier”) and to make and have made Licensed Product pursuant to
the license granted in this Section 6.10; provided, however,
ORTHO shall use commercially reasonable efforts to ensure that the term of any
agreement with an Alternative Supplier (the “Alternative Supplier Agreement”)
is as short as possible; provided further however, in no event shall the term
of any Alternative Supplier Agreement extend beyond 30 months inclusive of any
termination notice requirements under the terms of such Alternative Supplier
Agreement.  Upon the occurrence of any
such Failure to Supply and through and until the later of such time as ANIKA
fully resumes its supply obligations hereunder: ANIKA shall make available to
ORTHO or its designee access to all Information, ANIKA Patents and ANIKA
Know-How necessary for ORTHO to procure required raw materials or product or
arrange an alternative supplier of Licensed Product, (b) ANIKA shall provide
reasonable advice and consultation in connection therewith and (c) ORTHO shall
bear all costs necessary to relocate manufacturing to an Alternative Supplier’s
facility in accordance with this Section 6.10. 
Notwithstanding anything to the contrary contained in this Agreement, in
the event that ORTHO shall manufacture or have manufactured the Licensed
Product, pursuant to this Section 6.10(a), ORTHO shall be permitted to disclose
to any Third Party any Confidential Information as is reasonably necessary in
connection with such activities (subject to such Third Party agreeing in
writing to be bound by the terms of Article VII hereof and entering into with
ANIKA a confidentiality and non-disclosure agreement that includes provisions
substantially in the form attached as Exhibit J hereto, the execution of
which shall not be unreasonably delayed by ANIKA.

 

(b)                                 ANIKA hereby grants to ORTHO a fully paid
up, non-exclusive license under ANIKA Patents and ANIKA Know-how, with the
right to grant sublicenses to Affiliates, to manufacture and have manufactured
Licensed Products solely in the Territory which such license shall only become
effective upon the occurrence of a Failure to Supply and continue to be
effective through and until such time as ANIKA fully resumes its supply
obligations hereunder (such period is hereinafter referred to as a “License
Period”); provided, however, that such license shall be effective
only during a License Period and ORTHO shall not exercise its rights to make or
have made the Licensed Products pursuant to such license other than during such
a License Period.  For the avoidance of
doubt, such license shall no longer be effective upon the end of the License
Period.  Neither ORTHO nor any sublicensee
shall file a patent

 

28

 

application
without the prior written consent of ANIKA that recites or was conceived or
reduced to practice based on Confidential Information provided pursuant to
Section 6.10(a).

 

(c)                                  In the event that either ORTHO or ANIKA
has actual knowledge of any facts or circumstances that are likely to result in
a material disruption to the manufacture or sale of Licensed Products (“Adverse
Knowledge”), such Party that has such Adverse Knowledge shall give prompt
notice to the other Party, and such Parties or the Steering Committee shall
work together in good faith to address the subject matter of such Adverse
Knowledge.

 

6.11.                        Insurance.

 

Each Party agrees to procure and maintain in full
force and effect during the term of this Agreement valid and collectible insurance
policies in connection with its activities as contemplated hereby which ANIKA
policies shall be in compliance with Exhibit D attached hereto.  Upon the other Party’s request, each Party
shall provide the other with a certificate of coverage or other written
evidence reasonably satisfactory to the requesting Party of such insurance
coverage.

 

6.12.                        Packaging.

 

ORTHO, with the
review of the Steering Committee, shall have the right to determine the
appearance and text of any labeling and packaging consistent with the approved
label used in connection with the Licensed Product in the Territory or any
finished product containing or contained in the Licensed Product in the
Territory.  ORTHO shall pay all of the
costs associated with the design of the labeling and packaging for the Licensed
Product.  Once the initial labeling and
packaging has been decided upon and confirmed in writing, ANIKA shall not be
required to make subsequent changes to such labeling unless ORTHO agrees to pay
all additional costs associated with the implementing of changes and to pay
ANIKA’s out of pocket costs associated with all packaging inventory rendered
obsolete by the change in labeling. 
Notwithstanding the foregoing, if any changes are required to be made to
the packaging or labeling as a result of the changes required by ANIKA, ANIKA
shall bear the expenses thereof.

 

6.13.                        Clinical Trial Supplies

 

ANIKA agrees to supply required Units of Licensed
Product for clinical trials at no cost only if, and to the extent that, both the
Steering Committee and ANIKA have approved such clinical trial.  For other clinical trials, ANIKA will
provide Licensed Product at a price of [***** *****************] per Unit,
subject to Section 6.2(e).

 

ARTICLE VII - PUBLICATIONS; TRANSFER
OF DATA; CONFIDENTIALITY; COOPERATION

 

7.1.                              Confidentiality; Exceptions.

 

The Parties acknowledge that discussions between ANIKA
and ORTHO will necessarily require the exchange of information (including
detailed financial and product information) that is

 

29

 

considered confidential and proprietary by the disclosing Party.  The Parties agree that any information
relating to the business of the disclosing Party which such Party discloses to
the other Party pursuant to this Agreement shall be considered “Confidential
Information” and shall include, without limitation, (i) the ANIKA Know-How;
(ii) earnings, costs, and other financial information; (iii) drawings,
formulations, samples, technical data, photographs, specifications,
manufacturing methods, testing procedures; (iv) marketing, sales and customer
information relating to the disclosing Party’s business; (v) all clinical
studies and data developed by either party in connection with this Agreement;
and (vi) all other Information related to Licensed Products.  Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, for the
Term of this Agreement and for five (5) years thereafter, but in no event less
than ten (10) years from the date hereof, subject to and except as permitted by
Section 7.4 of this Agreement, each Party shall keep confidential (and shall
cause the directors, officers, employees and agents of such Party or its
Affiliates and sublicensees)  to keep completely confidential and shall
not publish or otherwise disclose or use for any purpose other than as
expressly provided for in this Agreement the Confidential Information, except
to the extent the receiving Party’s (and their Affiliates and sublicensees)
employees and/or agents (including consultants) need to know such Confidential
Information in order to discharge such Party’s obligations and exercise its
rights hereunder and provided, that in the event any Party uses such
Confidential Information for any purpose other than as provided for in this
Agreement such use shall constitute a breach of this Agreement.  Each Party will protect the other Party’s
Confidential Information from unauthorized use, access or disclosure in the
same manner that it protests it own similar Confidential Information.  Confidential Information shall not include
information which:

 

(i)                                     was in the lawful knowledge and
possession of the receiving Party prior to the time it was disclosed to, or
learned by, the receiving Party, or was otherwise developed independently by
the receiving Party, as evidenced by written records kept in the ordinary
course of business, or other documentary proof of actual use by the receiving
Party;

 

(ii)                                  was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the
receiving Party;

 

(iii)                               became generally available to the public
or otherwise part of the public domain after its disclosure and other than
through any act or omission of the receiving Party in breach of this Agreement;

 

(iv)                              was disclosed to the receiving Party,
other than under an obligation of confidentiality, by a Third Party who had no
obligation to the disclosing Party not to disclose such information to others;
or

 

(v)                                 was or is required to be disclosed as a
result of a judicial order or decree or applicable law or regulation; provided,
however, that the Party whose Confidential Information is the subject of
such judicial order or decree is given the opportunity (to the extent not
violative of applicable law) to contest the judicial order or decree prior to
any disclosure.

 

30

Each Party will be responsible and liable for all
breaches of the confidentiality provisions of this Agreement by its directors,
officers, employees, agents, sublicensees and Affiliates, and shall indemnify
the other for any breaches thereof.

 

7.2.                              Authorized Disclosure.

 

Except as expressly provided otherwise in this
Agreement, each Party may disclose Confidential Information as follows:  To Third Parties (including without
limitation investors and potential investors of ANIKA, Affiliates,
sublicensees, distributors and suppliers of ANIKA and Affiliates of ORTHO)
under appropriate terms and conditions that include confidentiality provisions
substantially equivalent to those in this Agreement as is reasonably necessary
to exercise the rights granted herein.

 

7.3.                              Publications.

 

Notwithstanding
any other provision of this Agreement, including, but not limited to the
provisions of Section 7.4, ANIKA may not publish the results of any Development
activities within the Territory relating to Licensed Products without the prior
written consent of ORTHO.  ANIKA may,
however, publish the results of ANIKA’s Development activities outside the
Territory provided that, ANIKA provides ORTHO thirty (30) days advance
period to review the publications and to suggest to ANIKA any comments.  Notwithstanding the foregoing, at ANIKA’s
request, ORTHO shall provide ANIKA with the results and all other information
related to initiation and execution of clinical studies and other information
and data Developed by or on behalf of the Parties in connection with the
Development of Licensed Products.  ANIKA
may use such information and data outside of the Territory for any purpose with
the prior consent of ORTHO, not to be unreasonably withheld.

 

7.4.                              Public Announcements.

 

Neither
Party shall originate any publicity, press release or public announcements,
written or oral, whether to the public or press, relating to this Agreement,
its existence, the subject matter to which it relates or to any amendment
hereto without the prior written consent of the other Party (not to be
unreasonably withheld), save only such announcements that are required by or
advisable under applicable law or any securities exchange or Nasdaq to be made
or that are otherwise agreed by the Parties. 
Notwithstanding the foregoing, the Parties agree that ANIKA is hereby
granted the right to issue a press release with respect to the occurrence of
the following events subject to ORTHO’s prior review and opportunity to comment
upon the content of such release, and any comments provided by ORTHO which are
given in good faith will not be unreasonably denied:

 

•                                         filing and/or approvals of any regulatory
applications;

•                                         significant clinical trial developments,
including initiation, and/or completion of a clinical trial;

•                                         commercialization launches in any country or
region;

 

31

 

•                                         statements in quarterly or annual press
releases reporting ANIKA’s quarterly or yearly financial or operating results
to the extent they relate to such financial or operating results.

 

In
the event of such publication, press release or public announcement described
in the first sentence of this Section 7.4, the Party making the announcement
will give the other Party at least reasonable advance notice, where possible,
of the text of the announcement so that the other Party will have an
opportunity to comment upon the announcement. 
Notwithstanding anything contained in this Agreement to the contrary,
(i) upon execution of this Agreement, ANIKA may issue a press release in the
form of Exhibit C, and (ii) ORTHO acknowledges that ANIKA is permitted
to file this Agreement with the Securities and Exchange Commission.

 

Notwithstanding
the foregoing, however, where urgent, unusual and rare circumstances require immediate
disclosure in the opinion of the Party’s counsel, the Party will, unless
impossible or inadvisable because of legal reasons, provide at least one (1)
Business Day’s advance written notice.

 

7.5.                              Cooperation.

 

Each Party agrees to provide
the other Party, upon reasonable advance request, access to documentation
related to the Development and commercialization activities being conducted
pursuant to this Agreement, including without limitation, protocols, data and
stat plans of non-clinical and clinical trials, the design of manufacturing
protocols, analytical test methods, chemical synthesis and purification,
Regulatory Applications, proposed labeling for Licensed Products, third party
contracts for related services, marketing plans and proposed advertising,
marketing and promotional materials; provided, however, that to
the extent any such documentation is Confidential Information (as defined
pursuant to Section 7.1 of this Agreement), the receiving Party shall comply
with the provisions of Section 7.1 with respect thereto and; provided, further,
that failure by either party to furnish any such requested documentation shall
not be deemed a material breach of this Agreement.  Each of the Parties agree to provide the other Party with updates
as to the Development and commercialization of the Licensed Products via
teleconference or an in person meeting to the extent the other Party reasonably
requests, it being the intent of the Parties that such meetings occur on a
regular and periodic basis as circumstances warrant.

 

ARTICLE VIII - OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS

 

8.1.                              Title.

 

Except as expressly set forth below in this Section 8.1, (a) title to
all Patents claiming inventions made solely by an employee of a Party in the course of performing
Development of Licensed Products (“Development Invention”) shall be owned by
such Party; (b) title to Patents claiming inventions made jointly by employees
of ORTHO and ANIKA shall be jointly owned by ORTHO and ANIKA (“Joint Patents”);
and (c) the laws of the United States with respect to joint ownership of
inventions shall apply in all jurisdictions; accordingly, except as expressly
provided in this Agreement, neither Party shall have any obligation to account
to the

 

32

 

other for profits, or to obtain any approval of the other party to
license a Joint Patent (except ANIKA would not be able to license rights in
Joint Patents to the extent licensed to ORTHO under this Agreement), by reason
of joint ownership thereof.

 

8.2.                              License to ORTHO Development Inventions.

 

ORTHO hereby
grants ANIKA and its Affiliates a perpetual, non-exclusive, worldwide license
to use ORTHO’s Development Inventions, at a commercially reasonable royalty
determined based upon the value added to the Licensed Product by the
Development Invention, with the right to sublicense, to use, manufacture, have
manufactured, sell, offer for sale, import, have imported, offer to import,
Licensed Products outside the Territory. 
ORTHO shall have no obligations to file and/or maintain any patent or
patent applications relating to such Development Inventions.

 

8.3.                              Disclosure of Patentable Inventions.

 

Each Party shall
provide to the other any invention disclosure submitted in the normal course of
disclosing an invention arising in the course of the Development or relating to
Licensed Product.  Such invention
disclosures shall be provided to the other Party promptly after creation.

 

8.4.                              Patent Filings.

 

(a)           Except for Joint Patents (which are the subject of the
following sentences), each Party may prepare, file, prosecute and maintain
Patents to cover discoveries and inventions which such party owns relating to
any Licensed Products being developed or sold hereunder.  Joint Patents may be filed, prosecuted and
maintained by the Party desiring to file such Joint Patent.  Notwithstanding the above, neither party
shall file a Joint Patent or a patent application that recites or was conceived
or reduced to practice based on Confidential Information of the other Party
without the prior written consent of the other Party which may be withheld in
such Party’s sole discretion; provided, however, in the event that either Party
files a Joint Patent or patent application in violation of this sentence, the
filing party shall assign, and hereby be deemed to assign, title to any such
Patent or patent application to the other Party.  Within ten (10) months after the filing of a Joint Patent, the
Filing Party (as defined below) shall provide the other Party notice of the
countries that it intends on filing counterpart applications.  The other Party shall have the right to
request that the Filing Party file, prosecute, and maintain counterpart
applications in additional countries; provided, however, that the other Party
shall reimburse the Filing Party for the costs of prosecuting and maintaining
such counterpart application unless and until the other Party requests that the
Filing Party abandon the prosecution or maintenance of such counterpart
application.  Each party shall have the
right to direct or control all material actions relating to the prosecution or
maintenance of Joint Patents which it filed. 
The Party who is responsible for filing a Patent, will be termed the
“Filing Party” and the Filing Party shall bear all Patent Cost associated
therewith (except as set forth above for counterpart applications).  The Filing Party shall keep the other Party
apprised of the status of each Joint Patent, and shall seek the advice of the
other Party with respect to patent strategy and drafting applications and shall
give reasonable consideration to any suggestions or recommendations of the
other Party concerning the preparation, filing, prosecution, maintenance

 

33

 

and defense thereof. 
The Parties shall cooperate reasonably in the prosecution of all Joint
Patents and shall share all material information relating thereto, including
all material communications from patent offices, promptly after receipt of such
information.  If, during the term of
this Agreement, the Filing Party intends to allow any Joint Patent or if ANIKA
intends to allow any other ANIKA Patent to lapse or leave abandoned, the Filing
Party shall, whenever practicable, notify the non-Filing Party of such intention
at least sixty (60) business days prior to the date upon which such Patent
shall lapse or become abandoned, and the non-Filing Party shall thereupon have
the right, but not the obligation, to assume responsibility for the
prosecution, maintenance and defense thereof and all expenses related thereto.

 

(b)           In addition to the provisions of Section 8.4(a), the
Parties agree to cooperate with each other and with the Steering Committee to
determine which countries it may be necessary or advisable under this Agreement
to file, prosecute and maintain counterpart applications of ANIKA Patents
(other than Joint Patents, which are subject to Section 8.4(a)). It is
initially contemplated that the determination of such countries will be decided
by the Steering Committee with sufficient advance notice so as to permit the
reasonable obtaining of the Patent prior to commercialization in the applicable
county or countries.  The associated
Patent Costs during the Term of this Agreement shall be the sole responsibility
of ORTHO and shall be included into the applicable development plan(s) and
budget(s) agreed to by the Steering Committee; provided, however,
that if at any time after an initial filing is commenced in a particular
country ORTHO specifies in writing it no longer desires for ANIKA to prosecute
and/or maintain any such patent application of ANIKA Patents (other than Joint
Patents), then ORTHO shall not be responsible for any associated Patent Costs
incurred from the date of such notice, but shall be responsible and pay for any
such Patent Costs incurred prior to the date of such notice.  Under no circumstances shall the failure to
prosecute and/or maintain an ANIKA Patent which ORTHO has indicated pursuant to
the previous sentence it no longer desires to be prosecuted or maintained, be
deemed to result in a breach by ANIKA of any provision of this Agreement.  ANIKA shall retain the right to file,
prosecute and maintain patent applications of ANIKA Patents in any jurisdiction
not identified by the Steering Committee as contemplated for commercialization
by this Section 8.4(b), at ANIKA’s sole cost and expense.

 

8.5.                              Infringement by Third Parties.

 

(i)            If any ANIKA Patent covering a Licensed Product is
infringed by a Third Party in any country in connection with the manufacture,
use, sale, offer for sale and importation of a Licensed Product in such
country, the Party to this Agreement first having knowledge of such
infringement shall promptly notify the other in writing.  The notice shall set forth the known facts
of that infringement in reasonable detail.

 

(ii)           ANIKA shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to such infringement of the ANIKA Patent, by counsel of its own choice,
and at its own expense.  If ANIKA fails
to bring an action or proceeding within a period of one hundred eighty (180)
days after a request by ORTHO to do so, ORTHO shall have the right but not the
obligation to bring and control any such action by counsel of its own choice,
and at its own expense.

 

34

 

(iii)          The Party bringing suit under this Paragraph 8.5
regarding an ANIKA Patent shall bear all costs and expenses of the suit, with
any damages or other monetary awards recovered being split with 50% to ORTHO
and 50% to ANIKA  after costs of the prosecuting Party are reimbursed.

 

(iv)          No settlement or consent judgment or other voluntary
final disposition of a suit brought by a Party related to an ANIKA Patent under
this Paragraph 8.5 shall diminish the rights or interests of the other Party
without the consent of the other Party. 
Examples of diminishing the rights or interests of the other Party
include, but are not limited to, admittance of the invalidity or unenforceability
of any ANIKA Patent.

 

(v)           Each Party shall have the sole and exclusive right,
but no obligation, to enforce any Patent that it solely owns against
infringement or alleged infringement thereof by a Third Party.

 

8.6.                              Validity Challenge Claims.

 

(i)            In the event that any person shall assert any claim
that any ANIKA Patent are invalid or unenforceable, or seeks to limit the scope
of enforcement thereof (each a “Validity Challenge Claim”), whether in defense
against an enforcement action brought by a party, by a separate action for
declaratory judgment, or otherwise, the party receiving notice of such claim
shall promptly notify the other party.

 

(ii)           ANIKA shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to any Validity Challenge Claim relating to an Joint Patent, by counsel
of its own choice, and at its own expense. 
If ANIKA fails to bring an action or proceeding within a period of one
hundred eighty (180) days after a request by ORTHO to do so, ORTHO shall have
the right but not the obligation to bring and control any such action by
counsel of its own choice, and at its own expense.

 

(iii)          The Party bringing suit under this Paragraph 8.6
regarding a Joint Patent shall bear all costs and expenses of the suit, with
any damages or other monetary awards recovered being split with 50% to ORTHO
and 50% to ANIKA after costs of the prosecuting Party are reimbursed.  The other Party will reasonably cooperate
with and use commercially reasonable efforts to assist the Party bringing suit
under this Paragraph 8.6, and the Party bringing such suit shall reimburse the
other Party for its out-of-pocket expenses incurred as a result of such
cooperation.

 

(iv)          A settlement or consent judgment or other voluntary
final disposition of a suit brought by a Party relating to a Joint Patent under
this Paragraph 8.6 may be entered into without the consent of the other Party; provided
that such settlement, consent judgment or other disposition does not admit the
invalidity or unenforceability of any Joint Patent.

 

(v)           Each Party shall have the sole and exclusive right,
but no obligation, to institute, prosecute and control any action or proceeding
with respect to any Validity Challenge Claim relating to any Patent that it
solely owns.

 

35

 

8.7.                              Patent Assignment.

 

Neither
Party may assign, license or otherwise transfer its rights under any Joint
Patent except with the prior written consent of the other Party; provided,
however, that either Party may assign such rights without consent to
permitted assignee under this Agreement in connection with a merger or similar
reorganization or the sale of all or substantially all of its assets to which
such Joint Patents relate.

 

8.8.                              Notices.

 

ANIKA
shall promptly notify ORTHO of the issuance of each patent included among the
ANIKA Patents, giving the date of issue and patent number for each such patent.

 

8.9.                              Defense and Settlement of Third Party
Claims

 

(a)           If a Third Party asserts that a patent right owned by
it is infringed by the use, sale, or manufacture of Licensed Product, the Party
receiving such notice shall promptly notify the other Party.

 

(b)           Subject to ANIKA’s rights under Section 13.6, if a
Third Party asserts that a patent right owned by it is infringed by the use or
sale (but not manufacture) of Licensed Product, ORTHO will be solely
responsible for defending against any such assertions at its cost and
expense.  ORTHO shall have the right to
defend and settle against such charge of infringement.  In no event, however, shall any such
settlement by ORTHO adversely affect ANIKA.

 

(c)           Subject to ORTHO’s rights under Section 13.6, if a
Third Party asserts that a patent right owned by it is infringed by the manufacture
(but not the use or sale) of Licensed Product, ANIKA will be solely responsible
for defending against any such assertions at its cost and expense and ANIKA
shall have the right to defend and settle against such charge of infringement.  In no event, however, shall
any such settlement by ANIKA modify the rights and licenses granted hereunder
to or otherwise adversely effect ORTHO.

 

(d)           If a Third Party action involves an alleged
infringement relating to both (a) the use or sale and (b) the manufacture of
Licensed Products, or if the other Party is a named defendant in any applicable
lawsuit, the Parties will be jointly responsible for and have joint rights to
defend such charges and, the Parties will act cooperatively with respect to any
such defense at their cost and expense; provided, however that
neither party shall have the right to settle the action without the advance
written consent of the other Party, which consent shall not be unreasonably
withheld.

 

(e)           Notwithstanding the foregoing, if an action has not
been brought but an assertion has been made that a patent right owned by a
Third Party is infringed by the use or sale of Licensed Product then the
provisions of Section 5.4 shall be applicable.

 

36

 

ARTICLE
IX - REPRESENTATIONS AND WARRANTIES.

 

9.1.          Representations and Warranties of ANIKA.

 

ANIKA hereby represents and warrants to ORTHO as
follows:

 

(a)           ANIKA is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite corporate power and lawful authority to
own, lease and operate its assets and to carry on its business as heretofore
conducted.  ANIKA has the full legal right,
corporate power and authority to execute and deliver this Agreement and the
other agreements contemplated hereby and to consummate the transactions
contemplated hereby and thereby.  This
Agreement has been duly executed and delivered by ANIKA and constitutes the
valid and binding obligation of ANIKA, enforceable against ANIKA in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally or by general equitable principles.

 

(b)           Except as described in the following sentence, ANIKA
owns all rights, title and interest in the ANIKA Know-How and ANIKA
Patents.  ANIKA expressly warrants and
represents as of the Effective Date that it owns (i) an undivided half-interest
in all of the rights, title and interest in and to the ANIKA/SUNY Patents
listed in Exhibit G and (ii) all rights, title, and interest in the
other ANIKA Patents listed in Exhibit G.  ANIKA has no outstanding encumbrances, liens, or agreements,
either written, oral, or implied, in connection with the ANIKA Patents.  To the best of ANIKA’s knowledge, the
Current Licensed Product does not infringe upon any proprietary right, other
than patents of any Person in the Territory; provided, however,
that ANIKA makes no such representation and warranty with respect to any
trademarks or trade dress which may be used by ORTHO in the marketing,
distribution and sale of the Current Licensed Product.  ANIKA does not have actual knowledge of any
infringement by the Current Licensed Product of any issued patent in the
Territory.  ANIKA makes no
representation or warranty with respect to any marketing, distribution, sale or
use of the Current Licensed Product not in accordance with any applicable
Regulatory Approval.  Nothing contained
in this Agreement is in conflict with any other agreement to which ANIKA is a
party or is otherwise bound.  ANIKA has
not granted the right to market, sell or distribute the Current Licensed
Product in the Field in the Territory to any other Person.

 

(c)           ANIKA represents and warrants to ORTHO that at the
time of delivery to a common carrier at ANIKA’s Shipping Point, all Licensed
Product supplied in connection with this Agreement shall be of merchantable
quality, fit for the purpose intended by this Agreement and free from defects
in material and workmanship and shall be manufactured and provided in
accordance and conformity with the applicable Specifications and in compliance
with this Agreement.  ANIKA represents
and warrants that it shall materially comply with all pertinent present and
future statutes, laws, ordinances and regulations relating to the manufacture
and supply of the Licensed Product in the Territory and in the Field being
provided hereunder, including, without limitation, those enforced by the United
States Food and Drug Administration (including compliance with cGMP) and
International Standards Organization Rules 9000 et seq.

 

37

 

(d)           ANIKA’S WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN
LIEU OF ANY OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND,
ANIKA HEREBY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTY
OF MERCHANTABILITY, NON-INFRINGEMENT, TITLE OR FITNESS FOR A PARTICULAR
PURPOSE.

 

9.2.                              Representations and Warrantees of ORTHO.

 

ORTHO hereby represents and warrants to ANIKA as
follows:

 

(a)           ORTHO is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and lawful authority to own, lease and operate its assets
and to carry on its business as heretofore conducted.  ORTHO is a wholly-owned indirect subsidiary of Johnson &
Johnson. 
ORTHO has the full legal right, power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
and to consummate the transactions contemplated hereby and thereby.  This Agreement has been duly executed and
delivered by ORTHO and constitutes the valid and binding obligation of ORTHO,
enforceable against ORTHO in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally or by general equitable
principles.

 

(b)           Nothing contained in this Agreement is in conflict
with any other agreement to which ORTHO or its sublicensees is or may become a
party or is otherwise bound.

 

(c)           ORTHO Sellers shall store, distribute, market and sell
Licensed Product in accordance with directions for storage and use as indicated
in this Agreement and any amendments hereto.

 

(d)           ORTHO Sellers shall
distribute, market and sell Product in accordance with all applicable
international, national and local laws of each country within the Territory,
including without limitation, applicable drug and medical device laws.

 

ARTICLE X - ANIKA’S GENERAL
OBLIGATIONS AND COVENANTS

 

During the Term of this Agreement, ANIKA shall, in
accordance with any marketing plan, strategy and direction approved by the
Steering Committee:

 

(a)           Provide to ORTHO reasonable technical, scientific,
sales and marketing support with respect to the Licensed Product, to the extent
ORTHO makes available opportunities to provide such support;

 

(b)           Maintain ownership of Regulatory Approvals for
Licensed Products and be responsible for making all such regulatory filings;

 

(c)           No earlier than thirty (30) days after the execution
and delivery of this Agreement, upon ORTHO’s request, ANIKA shall deliver to
ORTHO copies of all material Information in

 

38

 

ANIKA’s possession
related to ANIKA’s Know-How and ANIKA’s Patents available as of such date which
ANIKA and ORTHO reasonably determine is relevant to the safety, efficacy,
regulatory status, sale, marketing or distribution of a Licensed Product in the
Territory; provided, however, that all such transferred
Information shall be subject to the confidentiality provisions of Article VII
of this Agreement;

 

(d)           Refrain from soliciting orders from or selling
Licensed Products to any Person (other than ORTHO Sellers) located inside the
Territory or to any Person outside the Territory for sales which ANIKA knows or
believes are intended to be distributed to users inside the Territory; and

 

(e)           ANIKA covenants that during the Term it will not
directly or indirectly Develop and Manufacture products containing HA for use
in the Field (other than for sale outside the Territory), nor negotiate or
enter into any written agreements with any Third Party relating to such
Developments that take effect during the Term (other than for sale outside the
Territory).

 

ARTICLE
XI - ORTHO’s GENERAL OBLIGATIONS AND COVENANTS

 

During the Term of this
Agreement, ORTHO shall:

 

(a)           Store and distribute Licensed Product in accordance
with direction for storage and use as indicated in the applicable Regulatory
Approvals which are in effect at the time of such storage and use

 

(b)           Market and sell Licensed Product in accordance with
approved labeling for Licensed Product at the time of such distribution,
marketing or sales;

 

(c)           Subject to Article IV, notify ANIKA prior to engaging
any distributor sublicensees to market, sell or distribute Licensed Product in
the Territory and cause any such sublicensees to agree in writing to be bound
by the terms of this Agreement as if ORTHO hereunder.  Notwithstanding the foregoing, ORTHO shall
remain solely and primarily responsible under this Agreement;

 

(d)           Be responsible for the entire cost of selling,
marketing, advertising, promoting and distributing Licensed Product in the
Territory except as explicitly set forth herein;

 

(e)           Supply ANIKA with any information as required under
Applicable Law by the FDA or other governmental agencies for U.S. and
international regulatory filings related to the sale of the Licensed Product in
the Territory;

 

(f)            Timely advise ANIKA in writing of any suit, claim or
complaint known to ORTHO resulting from the distribution or use of any Licensed
Product;

 

(g)           Invoice Third Parties (and ensure any sublicensees
invoice) Third Parties appropriately, consistently and on a timely basis with
respect to sales of any and all Licensed Products;

 

39

 

(h)           ORTHO will, and cause other ORTHO Sellers to, to the
extent required by applicable law, keep detailed distribution records for each
lot number detailing the quantity shipped and the first location where the lot
was shipped by ORTHO, and provide ANIKA with reasonable access to records for
purposes of conducting quality control audits as provided in Section 5.6(d);

 

(i)            Except in those countries in the
Territory where the Parties are unable to commercialize any Licensed Product
and obtain necessary Regulatory Approvals (due solely to a deficiency in the
Licensed Product that prevents the obtaining of the necessary Regulatory
Approvals after the Parties have taken all reasonable steps to obtain such
Regulatory Approval), ensure that the OrthoNeutrogena Division shall neither
acquire, develop, market or commercialize any products containing HA for use in
the Field (a “Competing Product”), nor otherwise distribute such Competing
Product, nor negotiate or enter into any written agreements with any Third
Party with respect to any such Competing Product (it being understood that the
restrictions of this Section XI(i) are intended to, and do, apply only to the
OrthoNeutrogena Division and does not restrict any other existing or future
businesses of ORTHO; it being further understood, however, for the sake of
clarity, that the application or use of any intellectual property rights or
other rights obtained by ORTHO under this Agreement to businesses other than
that within and conducted by the OrthoNeutrogena Division will constitute a
violation of this Section XI(i));

 

(j)            Refrain from soliciting orders from or selling
Licensed Products to any Person located outside the Territory or to any Person
inside the Territory for sales which ORTHO knows or believes are intended to be
distributed to users outside the Territory; and

 

(k)           Furnish to ANIKA all advertising, marketing and
promotional materials related to the Licensed Product, for review and approval
relative solely to their conformance with regulatory requirements, not to be
unreasonably withheld, at least five (5) days prior to utilizing such
materials, including, without limitation, any content to be displayed on any
website; provided, however, that if there is an unresolved
dispute as to whether ANIKA has unreasonably withheld approval of such
materials, such matter shall be submitted to arbitration as provided in Article
XVI; provided further, however, that should ANIKA fail to respond to any
request for approval within the applicable five (5) day period then such
approval will be deemed to have been granted.

 

ARTICLE
XII - TERM AND TERMINATION

 

12.1.        Term.

 

This Agreement
shall commence on the Effective Date and shall remain in effect for ten (10)
years subject to the termination provisions set forth herein (such initial
term, and any additional periods, the “Term”). 
The Term of this Agreement will be automatically extended for perpetual
additional periods of (5) five-year intervals subject to the termination
provisions set forth herein; provided, however, that ORTHO has
not provided ANIKA six-months’ prior written notice of its decision not to
extend the Term for an additional five (5) year period.

 

40

 

Absent a provision to the contrary, any extension of this Agreement
shall be subject to the terms set forth hereunder.

 

12.2.                        Termination Rights.

 

(a)           Notwithstanding any of the foregoing, this Agreement
may be terminated by either Party upon written notice to the other party of its
intent to terminate under this Section 12.2 (provided such written notice is
mailed by registered or certified mail (return receipt requested), postage
prepaid, or sent by express courier service), upon the occurrence of any of the
following: (i) a material breach of any term or condition of this Agreement by
the other Party which is amenable to cure, and the breaching party shall have
failed to cure such breach within ninety (90) days from the receipt by it of
written notice thereof from the other Party; (ii) either Party commits a
material breach which is not amenable to cure; (iii) the other Party shall
commence any case, proceeding or other action (A) under any applicable law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, wind-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part
of its assets; (iv) there shall be commenced against the other Party any such
case, proceeding or other action referred to in clause (iii) of this Section
12.2 which results in the entry of an order for relief; (v) the other Party
shall take any action authorizing, or in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth above in
clauses (iii) or (iv) of this Section 12.2; or (vi) the other Party (or, in the
case of ORTHO, its ultimate parent Affiliate) shall admit in writing its
inability to pay its debts as they become due; provided, however,
that ORTHO may not terminate under Section 12.2(iii)-(vi) if ANIKA has not
materially breached Section 6.1 of this Agreement.  For avoidance of doubt, in the event of any dispute over the
occurrence of an event set forth above in this Section 12.2, the ninety (90)
day period set forth in subsection (i) of this paragraph shall be tolled and
such termination shall not become effective until such dispute has been
resolved as set forth in Article XVI of this Agreement.

 

12.3.                        Results of Termination.

 

In the event of termination of this Agreement by
ANIKA, except as expressly provided in this Article XII, all the rights and
obligations, including without limitation, the licenses granted to ORTHO in
Article II, Article V and Article VI hereof, shall immediately terminate.  Upon termination by either Party, ORTHO
shall provide ANIKA at no cost to ANIKA copies of all relevant communications
and correspondence with and from regulatory agencies pertaining to Licensed
Products and copies of all relevant marketing and promotional materials
including customer lists, together with all Information relating to ORTHO’s
product development pursuant to Article II hereof.  Except as otherwise provided in this Section 12.3, upon the
termination of this Agreement, each Party shall promptly: (i) upon request
return to the requesting Party all of the requesting Party’s relevant records,
materials and Confidential Information relating to the Licensed Product in the
possession or control of the other Party, or its sublicensees, and (ii)
discontinue all distribution of the Licensed Product and the use of know-how in
connection therewith.  Notwithstanding
anything herein to the contrary, upon termination of this Agreement

 

41

 

for any reason, ORTHO shall have the right for one (1)
year to dispose of all Licensed Product then in ORTHO’s or its sublicensee’s
possession, and the payments pursuant to Sections 5.2 and 5.3 which have been
accrued or earned shall be paid to ANIKA with respect to such Licensed Product
as though this Agreement had not terminated. 
Termination of this Agreement shall not terminate ORTHO’s obligation to
pay ANIKA for Licensed Product which has been shipped to ORTHO under this
Agreement or under the supply provisions if it is sold to a Third Party,
including, without limitation, any applicable payments under Article V
hereof.  Notwithstanding the provisions
of this Section 12.3 with respect to ORTHO’s right to dispose of Licensed
Product post-termination of this Agreement, ANIKA shall have the right upon
termination of this Agreement by ANIKA pursuant to Section 12.2 or by ORTHO
pursuant to Section 12.4 to purchase all of ORTHO’ s unsold inventory in
merchantable condition or having a remaining shelf life acceptable to ANIKA, at
the price of [*********************] per Unit for Licensed Product transferred
for sale outside the United States and [********************] per Unit for
Licensed Product transferred for sale in the United States.

 

12.4.                        Termination by ORTHO.

 

ORTHO
shall have the right to terminate this Agreement as follows:

 

(i)            upon thirty (30) days prior written notice to ANIKA if
such notice to terminate is given within thirty (30) days following receipt by
ANIKA of the Regulatory Approval by the FDA with respect to the PMA for the
Current Licensed Product; provided, however, that to effect this
termination right such Regulatory Approval must either (a) require a skin test
prior to the administering of the Current Licensed Product, (b) have a safety
profile that is materially adverse to that of the current approved labels of
either Hylaform® or Restylane® as of the date of this Agreement, or (c) contain
an approved label that indicates that the primary efficacy analysis of the
Current Licensed Product at six (6) months post injection is inferior to the
control [***********] and/or to pre-treatment referred in the United States
clinical trial and described in the Current IDE;

 

(ii)           upon thirty (30) days written notice if
the PMA for the Current Licensed Product has not received Regulatory Approval
from the FDA by December 31, 2006;

 

(iii)          upon thirty (30) days written notice if ANIKA fails
for a period of six (6) consecutive months following the delivery of ORTHO’s
initial binding purchase order pursuant to Section 6.3(b), to deliver fifty
percent (50%) of the aggregate cumulative quantity of all Licensed Products
which ANIKA has agreed to deliver to ORTHO pursuant to binding purchase orders
pursuant to Section 6.3(b) of this Agreement during that period;

 

(iv)          upon thirty (30) days written notice to ANIKA at any
time after Regulatory Approval by the FDA with respect to the PMA of any
Licensed Product if material data regarding the safety of such Licensed
Product(s) arise after the Effective Date that indicate a materially and
adversely different safety profile as compared to the profile of the approved
PMA for such Licensed Product(s); provided, however, ORTHO’s
termination right shall extend only to the applicable Licensed Product(s)
(unless at such time no other unaffected Licensed Product(s) are

 

42

 

being commercialized in
which case ORTHO’s termination right shall extend to the entire Agreement);

 

(v)           upon two hundred and seventy (270) days written notice
to ANIKA if such notice to terminate is given after the earlier of (a) two (2)
years after the date of Regulatory Approval by the FDA with respect to the PMA
for the Current Licensed Product or (b) forty-eight (48) months from the
Effective Date;

 

(vi)          upon one hundred and eighty (180) days written notice
to ANIKA if such notice to terminate is given after the earlier of (a) three
(3) years after the date of Regulatory Approval by the FDA with respect to the
PMA for the Current Licensed Product or (b) sixty (60) months from the
Effective Date; and

 

(vii)         upon ninety (90) days prior written notice to ANIKA at
any time during the Term; provided, however, that termination
under this Section 12.4(vii) shall also require a payment to ANIKA of a
one-time payment of either(a) the difference between (I) [********************
**********] minus (II) any payments made by ORTHO to ANIKA pursuant to Sections
5.1 and 5.2 hereof if such notice under this Section 12.4(vii) is made prior to
the approval of the first PMA of a Licensed Product, (b)
[******************************] if such notice under this Section 12.4(vii) is
made within the period of two (2) years after the approval of the first PMA of
a Licensed Product or (c) [***********************] if such notice under this
Section 12.4(vii) is made anytime after two years following the approval of the
first PMA of a Licensed Product.

 

In the event of termination under this Section 12.4,
ANIKA shall retain all payments made by ORTHO under this Agreement and all
payments made by ORTHO to purchase Licensed Product prior to the termination
date, and ORTHO shall also make any such payments to which ANIKA is then
entitled or which have been accrued or earned under this Agreement but payment
of which have not previously been made by ORTHO.  In addition, ANIKA shall have no right to use ORTHO owned
trademarks even if such were used by ORTHO in connection with the Licensed
Product.

 

12.5.                        Accrued Rights, Surviving Obligations.

 

Termination of the
Agreement for any reason shall be without prejudice to any Party’s obligations
which shall have accrued prior to such termination, including, without
limitation, the payment obligations under Article V hereof or to the remedy, in
accordance with the terms herein, of either Party hereto in respect of any
previous breach on any covenant contained herein.  Such termination shall not relieve either Party from obligations
that are expressly indicated to survive termination or expiration of the
Agreement.  Notwithstanding any
provision to the contrary herein, the rights and obligations of the Parties
regarding dispute resolution (Article XVI), indemnification (Article XIII),
publications, transfer of data and confidentiality (Sections 7.1 through 7.3)
as well as such other provisions that are expressly indicated by their terms to
survive the termination or expiration of this Agreement (and any relevant
definitions in Article I), shall survive such termination or expiration.  In addition, each Party acknowledges and
agrees that, following termination or expiration of this Agreement, the terms
and conditions of this

 

43

 

Agreement shall be treated as Confidential Information of the other
Party and subject to the provisions of Section 7.1.

 

12.6.                        Termination Not Sole Remedy.

 

Termination
is not the sole remedy under this Agreement and, whether or not termination  is
effected, all other remedies will remain available except as agreed to
otherwise herein.

 

ARTICLE
XIII - INDEMNIFICATION

 

13.1.        ANIKA shall indemnify, defend and hold harmless ORTHO,
and any Affiliates of ORTHO, together with their respective officers and
directors, from and against any and all losses (except consequential losses,
such as, for example, loss of business profits) including compensatory losses
for personal injury, damages, liabilities, costs and expenses, including
without limitation reasonable attorney’s fees, arising out of or in connection
with:

 

(a)                                  the breach of any of ANIKA’s representations
and warranties made in Section 9.1;

 

(b)                                 the breach by ANIKA of any of its
obligations, covenants or undertakings hereunder;

 

(c)                                  any Licensed Product recall for which
ANIKA is required to bear all costs and expenses pursuant to Section 6.9(d);

 

(d)           any act or omission of ANIKA in connection with the
design, Development, manufacture, packaging, testing, warehousing or handling
of the Licensed Product; and

 

(e)           any infringement of a Third Party’s patent rights
resulting solely from the manufacturing process utilized in connection with a
Licensed Product.

 

13.2.        ORTHO shall indemnify, defend and hold harmless ANIKA
and any Affiliates of ANIKA, together with their respective officers and
directors, from and against any and all losses (except consequential losses,
such as, for example, loss of business or of profits) including compensatory
losses for personal injury, damages, liabilities, costs and expenses, including
without limitation reasonable attorney’s fees, arising out of or in connection
with:

 

(a)                                  the breach of any of ORTHO’s
representations and warranties made hereunder;

 

(b)                                 the breach by ORTHO of any of its
obligations, covenants or undertakings hereunder;

 

(c)           any claim made by ORTHO Sellers, as to the safety or
effectiveness of the Licensed Product or the use to be made of the Licensed
Product by any purchaser of Licensed Product, contained in any advertising or
other promotional material created and disseminated by ORTHO Sellers to the
extent that such claim is not supported by the Licensed Product label and
package insert as approved by the FDA (or, in other countries, the appropriate
governmental

 

44

 

body having authority to
approve the Licensed Product, label, and package insert for marketing in such
country);

 

(d)           any other act or omission of the ORTHO Sellers in
connection with Development, marketing, promotion, and sale of Licensed
Product, including the storage, handling and distribution by ORTHO Sellers of
Licensed Product;

 

(e)           any product recall for which ORTHO is required to bear
all costs and expenses pursuant to Section 6.9(d);

 

(f)            ORTHO Sellers’ use, sale or disposition of Licensed
Products where such Licensed Products incorporate changes made by ORTHO Sellers
to the applicable Specifications or packaging, or changes made by ORTHO Sellers
to any Regulatory Application with respect to Licensed Product which ANIKA has
not approved; and

 

(g)           Any claim of trademark infringement with regard to a
Licensed Product sold by or manufactured for an ORTHO Seller.

 

13.3.        The Parties agree that in the event of a loss for
which it is determined under this Article XIII that both Parties bear a measure
of responsibility, it is the intent of both Parties that the liability for the
loss (including without limitation all damages, hard costs and expenses,
together with reasonable attorney’s fees) be apportioned among the Parties
according to their respective measures of responsibility, as that
responsibility is determined according to this Section 13.3.  The Parties further agree that any portion
of the loss not attributable to either party under this Section 13.3 (and not
otherwise recoverable from a third party or its insurer) shall be borne equally
among the Parties.  For example, the
Party determined to be 10% responsible under Article XIII pays 10% of the loss,
the Party determined to be 60% responsible pays 60% of the loss, and each Party
pays one-half of the remaining 30%. 
Within ten (10) business days after either Party so requests, the
Steering Committee shall convene to develop an equitable apportionment of
liability for the loss according to this Article XIII.  If the Steering Committee fails to agree on
an apportionment within twenty (20) days after meeting, either Party may submit
the matter to arbitration under Article XVI.

 

13.4.        Notwithstanding anything contained in this Agreement
to the contrary, the Parties expressly agree that ANIKA shall have no liability
to ORTHO under this Article XIII for claims, losses, or liability of any kind
based upon or related to:

 

(a)           ORTHO Sellers’ use, sale or disposition (including
ORTHO Development activities) of Licensed Products where such Licensed Products
incorporates changes made by ORTHO Sellers to the Specifications or packaging
which ANIKA has not approved, or changes made by ORTHO Sellers to any
Regulatory Application with respect to Licensed Product which ANIKA has not
approved;

 

(b)           sale or disposition of Licensed Products by ORTHO
Sellers for any use other than the uses specified by the accompanying package
inserts;

 

45

 

(c)           use, sale or disposition of Licensed Products by ORTHO
Sellers in combination with devices or Licensed Products not purchased
hereunder, where such combined sale or disposition is the sole cause of an
infringement claim and whereas such Licensed Products would not themselves be
infringing;

 

(d)           sale or disposition of Licensed Products by ORTHO
Sellers in or for an application or environment for which such Licensed
Products were not approved by the FDA or other applicable governmental or
regulatory agency; or

 

(e)                                  modifications of Licensed Products by
ORTHO Sellers;

 

to the extent such uses,
sales, dispositions or modifications give rise to the claim, loss or liability
and have not been approved by ANIKA.

 

13.5.        Notwithstanding anything contained in this Agreement
to the contrary, the Parties expressly agree that ORTHO shall have no liability
to ANIKA under this Section for claims, losses or liability of any kind based
upon or related to:

 

(a)           the design, manufacturing, packaging, sterilization,
testing, warehousing and handling of the Product by ANIKA through delivery to
the common carrier for shipment to the Shipping Point;

 

(b)           ANIKA’s use, sale or disposition of Licensed Products
where such Licensed Products incorporate changes made by ANIKA to the
Specifications which ORTHO or the Steering Committee has not approved;

 

(c)           sale or disposition of Licensed Products by ANIKA for
any use other than the uses specified by the accompanying package inserts;

 

(d)           sale or disposition of Licensed Products by ANIKA in
or for an application or environment for which such Licensed Products were not
approved by the FDA or other applicable governmental or regulatory agency; or

 

(e)           modification of Licensed Products by ANIKA which ORTHO
has not approved and as to which ORTHO has the right to approve under this
Agreement;

 

to the extent such
activities, uses, sales, dispositions or modifications give rise to the claim,
loss or liability and have not been approved by ORTHO.

 

13.6.        If ORTHO or ANIKA intends to claim indemnification
under this Section as a result of a Third Party Claim or suit, such Party (the
“Claiming Party”) shall (i) promptly notify the other Party in writing of
any claim or loss for which it intends to claim such indemnification,
(ii) cooperate fully with the other Party and its legal representatives in
the investigation of any claim or loss covered by this Article XIII, and
(iii) allow the other Party to control the defense and/or disposition of
such suit or claim; provided that the Claiming Party shall have the
right to participate at its own expense through counsel of its own
choosing.  Neither Party shall have any
indemnification obligations hereunder to the extent that such Party’s ability
to defend such suit or

 

46

 

redress such loss is
prejudiced by the Claiming Party’s failure to perform the obligations set forth
in the preceding sentence.  No claim
shall be settled for which any Indemnifying Party shall be liable without the
advance written consent of both the indemnifying Party and the Claiming Party,
which consent shall not be unreasonably withheld.

 

ARTICLE
XIV - DIVERTED AND GREY MARKET PRODUCTS

 

14.1.                        Grey Market Products.

 

(a)           If ORTHO reasonably believes that product containing
HA marketed, manufactured, or distributed by ANIKA other than Licensed Products
are being marketed for use or being used in the Field in the Territory (other
than if such products are being marketed for use or are being used in the Field
by an Affiliate of ORTHO) (“ORTHO Grey Market Products”) and such has caused
financial loss to ORTHO of at least [******], ORTHO shall promptly notify
ANIKA of such belief, and provide ANIKA with a written description of the basis
for ORTHO’s belief.  Within five (5)
Business Days of ANIKA’s receipt of such notice, the matter shall be submitted
to the Steering Committee for resolution of the following issues:  (A) whether or not the goods believed by
ORTHO to be ORTHO Grey Market Product are actually goods manufactured by ANIKA;
(B) whether or not the goods believed by ORTHO to be ORTHO Grey Market Product
are actually being marketed or used in the Field in the Territory; (C) upon
determination that the goods are in fact ORTHO Grey Market Product, whether or
not the financial loss to ORTHO is at least [******], and if so, the
approximate amount; and (D) upon determination that ORTHO Grey Market Product
has caused financial loss to ORTHO of at least [******], what commercially
reasonable course of action ANIKA shall be required to take, including without
limitation taking such action, including legal and/or equitable action as
required to prevent the ORTHO Grey Market Product from entering the Territory
and to prevent it from being marketed or used therein.  In the event the Steering Committee does not
reach a resolution concerning the ORTHO Grey Market Product within thirty (30)
days after such issues are presented to it, either Party may submit the matter
to arbitration as provided in Article XVI herein, for resolution of the same
issues as outlined in clauses (A) through (C) in the immediately preceding
sentence.

 

(b)           If ANIKA reasonably believes that HA Products
marketed, manufactured or distributed by the OrthoNeutrogena Division, or any
ORTHO Seller, (including Licensed Products) are being marketed for use or being
used outside the Field inside or outside the Territory (“ANIKA Grey Market
Products”) and such products have caused financial loss to ANIKA (and any
distribution, marketing or licensing partner of ANIKA) of at least [******],
ANIKA shall promptly notify ORTHO of such belief, and provide ORTHO with a
written description of the basis for ANIKA’s belief.  Within five (5) Business Days of ORTHO’s receipt of such notice,
the matter shall be submitted to the Steering Committee for resolution of the
following issues:  (A) whether or not
the goods believed by ANIKA to be ANIKA Grey Market Product are actually goods
marketed, manufactured or distributed by the OrthoNeutrogena Division or a
sublicensee of ORTHO; (B) whether or not the goods believed by ANIKA to be
ANIKA Grey Market Product are actually being marketed, distributed or used in
the Field; (C) upon determination that the goods are in fact ANIKA Grey Market
Product, whether or not the

 

47

 

financial loss to ANIKA
(and any distribution, marketing or licensing partner of ANIKA) is at least
[******], and if so, the approximate amount; and (D) upon determination that
ANIKA Grey Market Product has caused financial loss to ANIKA (and any
distribution, marketing or licensing partner of ANIKA) of at least [******],
what commercially reasonable course of action ORTHO shall be required to take,
including without limitation taking such action, including legal and/or
equitable action as required to prevent the ANIKA Grey Market Product from
being marketed or used inside or outside the Territory.  In the event the Steering Committee does not
reach a resolution concerning the ANIKA Grey Market Product within thirty (30)
days after such issues are presented to it, either Party may submit the matter
to arbitration as provided in Article XVI herein, for resolution of the same
issues as outlined in clauses (A) through (C) in the immediately preceding
sentence.

 

14.2.                        Diverted Products.

 

(a)           If ORTHO reasonably believes that HA Products
marketed, manufactured, or distributed by ANIKA (other than Licensed Products
marketed by ORTHO Sellers) marketed outside the Territory is being marketed or
used in the Field in the Territory (“ORTHO Diverted Products”) and such
products have caused financial loss to ORTHO of at least [******], ORTHO shall
promptly notify ANIKA of such belief, and provide ANIKA with a written
description of the basis for ORTHO’s belief. 
Within five (5) Business Days of ANIKA’s receipt of such notice, the
matter shall be submitted to the Steering Committee for resolution of the
following issues:  (A) whether or not
the goods believed by ORTHO to be ORTHO Diverted Product are actually goods
manufactured by ANIKA (B) whether or not the goods believed by ORTHO to be
ORTHO Diverted Product are actually being marketed or used in the Field in the
Territory; (C) upon determination that the goods are in fact ORTHO Diverted
Product, whether or not the financial loss to ORTHO is at least [******], and
if so, the approximate amount; and (D) upon determination that ORTHO Diverted
Product has caused financial loss to ORTHO of at least [******], what
commercially reasonable course of action ANIKA shall be required to take,
including without limitation, taking such action, including legal and/or
equitable action as required to prevent the ORTHO Diverted Product from
entering the Territory and to prevent it from being marketed or used therein (including,
without limitation, terminating the supply agreement(s), if permitted
thereunder, with the parties to whom ANIKA had originally sold such ORTHO
Diverted Product).  In the event the
Steering Committee does not reach a resolution concerning the Diverted Product
within thirty (30) days after such issues are presented to it, either Party may
submit the matter to arbitration as provided in Article XVI herein, for
resolution of the same issues as outlined in clauses (A) through (C) in the
immediately preceding sentence.

 

(b)           If ANIKA reasonably believes that Licensed Products
marketed, manufactured or distributed by the OrthoNeutrogena Division, or any
ORTHO Seller, are being marketed for use or being used in the Field outside the
Territory (“ANIKA Diverted Products”) and such Licensed Products have caused
financial loss to ANIKA (and any distribution, marketing or licensing partner
of ANIKA) of at least [******], ANIKA shall promptly notify ORTHO of such
belief, and provide ORTHO with a written description of the basis for ANIKA’s
belief.  Within five (5) Business Days
of ORTHO’s receipt of such notice, the matter shall be submitted to the
Steering

 

48

 

Committee for resolution
of the following issues:  (A) whether or
not the goods believed by ANIKA to be ANIKA Diverted Product are actually goods
marketed, distributed or manufactured by the OrthoNeutrogena Division or a
sublicensee of ORTHO (B) whether or not the goods believed by ANIKA to be ANIKA
Diverted Product are actually being marketed or used in the Field outside the
Territory; (C) upon determination that the goods are in fact ANIKA Diverted
Product, whether or not the financial loss to ANIKA (and any distribution,
marketing or licensing partner of ANIKA) is at least [******], and if so, the
approximate amount; and (D) upon determination that ANIKA Diverted Product has
caused financial loss to ANIKA and any distribution, marketing, or licensing
partner of ANIKA of at least [******], what commercially reasonable course of
action ORTHO shall be required to take, including without limitation, taking
such action, including legal and/or equitable action as required to prevent the
ANIKA Diverted Product from entering the countries outside the Territory and to
prevent it from being marketed or used therein (including, without limitation,
terminating the agreement(s), if permitted thereunder, with the parties to whom
ORTHO had originally contracted with (other than ANIKA), with respect to such
ANIKA Diverted Product.  In the event
the Steering Committee does not reach a resolution concerning the ANIKA
Diverted Product within thirty (30) days after such issues are presented to it,
either Party may submit the matter to arbitration as provided in Article XVI
herein, for resolution of the same issues as outlined in clauses (A) through
(C) in the immediately preceding sentence.

 

ARTICLE
XV - STEERING COMMITTEE

 

15.1.        Steering Committee
Structure and Members.  ANIKA and ORTHO shall create,
within thirty (30) days after the Effective Date (or such later time as may be
mutually agreed to by the Parties), a committee (the “Steering Committee”) to
coordinate the development of Licensed Products.  The Steering Committee shall have two (2) members from each
Party.  Each Party may change its
representatives upon notice to the other Party.  Members of the Steering Committee shall serve on such terms and
conditions as shall be determined by the Party selecting such person for
membership on the Steering Committee. 
An alternate member designated by a Party may serve temporarily in the
absence of a permanent member designated by such Party.  The Steering Committee shall be chaired by
one representative of either ANIKA or ORTHO for each successive twelve (12)
month period during the Term of this Agreement, and the chair shall alternate
between the Parties.  During the first
twelve (12) month period, the Steering Committee shall be chaired by a
representative of ANIKA.

 

15.2.        Steering Committee Meetings: The Steering Committee: (a) shall hold
meetings at such times and places as shall be determined by a majority of the
entire membership of the Steering Committee, but in no event shall such
meetings be held less frequently than four times per Calendar Year (i.e.
quarterly) and meetings in person shall alternate between the offices of the
Parties or such other place as may be mutually agreed upon by the Parties; (b)
may conduct meetings in person or by telephone conference; (c) shall keep
minutes reflecting actions taken at meetings signed by one of the members of
the Steering Committee from each of the Parties; and (d) may act without a
meeting if, prior to such action, a written consent to such action is signed by
all members of the Steering Committee. 
Each Party may invite to the meetings those people whom it believes may
be necessary to discuss issues to be discussed at such meeting.

 

49

 

15.3.        Steering Committee Action by Unanimous Vote Only: Actions to be taken by the Steering
Committee pursuant to the terms of this Agreement shall be taken only following
the unanimous vote of the members of the Steering Committee, and the reduction
of such vote to writing in minutes as set forth in Section 15.2; provided,
however, that any expenditures by the Parties not otherwise required by
this Agreement shall be confirmed in writing by the most senior officer of
ORTHO and ANIKA (for ANIKA currently the chief executive officer and for ORTHO
currently the general manager).  If the
Steering Committee is unable to reach a unanimous decision with regards to any
action, such decision shall be referred to and be made jointly by such senior
officer of ORTHO and such senior officer of ANIKA.  If such officers are unable to agree on such decision, then (a)
decisions related to commercialization and marketing of Licensed Products shall
be made by the manager of the most senior officer of ORTHO (currently the
world-wide president of Neutrogena Corporation); (b) decisions related to the
manufacturing of Licensed Products shall be made by the chief executive officer
of ANIKA, and (c) all other decisions, including without limitation the
Specifications of Licensed Products, labeling claims, the packaging (other than
as required by the FDA or other regulatory agency), the content of Regulatory
Approval Applications of Licensed Products, the protocol of clinical studies of
Licensed Products, and modifications to any Development Plan shall only be made
by mutual written agreement by the Parties.

 

15.4.        Responsibilities of the Steering
Committee.  Subject to Section 15.3, the duties and
responsibilities of the Steering Committee shall include to: (i) review,
comment, and approve any Development of Licensed Products being conducted
pursuant to Article II of this Agreement, including but not limited to the
review of the raw clinical data and SAS data sets; provided, however,
that any modification to the Current Development Plan that is not requested by
a Regulatory Authority shall also need to be agreed in writing by both Parties;
(ii) review and approve all submissions to Regulatory Authorities, including
but not limited to Regulatory Approval Applications and correspondences
relating thereto; (iii) establish the Specifications and any changes thereto
for Licensed Products; provided, however, that any modification
to the Specification that is not requested by a Regulatory Authority shall also
need to be agreed in writing by both Parties; (iv) review and comment, but not
approve, prior annual marketing plans of Licensed Products prior to the
implementation thereof; (v) review and comment, but not approve, marketing and
sales activities, if any, being conducted by ORTHO in the Territory, (vi)
discuss issues concerning whether to file for Regulatory Approval and/or launch
the Licensed Product in any country in the Territory; (vii) review and discuss,
but not approve, any manufacturing issues that may arise; and (viii) review,
discuss and approve the filing of ANIKA Patents as contemplated by Section
8.4(b) of this Agreement in those jurisdictions where such filing is determined
to be necessary or advisable.  In
connection with any meeting of the Steering Committee, the Parties will
endeavor to provide to the other Party all materials in connection with this
Section 15.4 at least five (5) Business Days in advance of such meeting.  Notwithstanding anything to the contrary
contained herein, to the extent that the Development of the two additional
Licensed Products pursuant to Section 2.2 of this Agreement results in either
Party being disadvantaged by the requirements and obligations of Sections 3.4
and 6.2, then the Steering Committee, in connection with the Parties, shall
endeavor to provide alternative applicable provisions with respect to such
requirements and obligations or otherwise address such issues to the mutual
satisfaction of the Parties.

 

50

 

ARTICLE
XVI - DISPUTE RESOLUTION

 

16.1.                        Dispute Resolution and Arbitration.

 

In
the case of any Disputes (as defined below) between the Parties arising from
this Agreement, and in case this Agreement does not provide a solution for how
to resolve such disputes, the Parties shall endeavor to discuss and negotiate
in good faith towards a solution acceptable to both Parties and in the spirit of
this Agreement.  If the Parties fail to
reach agreement within sixty (60) days, then the senior officer of ANIKA and
the senior officer of ORTHO shall discuss in good faith an appropriate
resolution to the dispute.  If these
executives fail to reach an amicable agreement within sixty (60) days, then
either Party may upon written notice to the other submit the dispute to binding
arbitration pursuant to Section 16.2.

 

16.2.                        Arbitration.

 

Any claim, dispute or controversy arising out of or in
connection with or relating to this Agreement, (including, without limitation,
disputes with respect to the rights and obligations of the Parties following
termination) (a “Dispute”) not settled by the procedures set forth in Section
16.1 above shall be adjudicated by arbitration in accordance with the
Arbitration Proceedings as set forth in Exhibit B attached hereto.

 

ARTICLE
XVII - MISCELLANEOUS

 

17.1.                        Relationship of Parties.

 

For
the purposes of this Agreement, each Party is an independent contractor and not
an agent or employee of the other Party. 
Neither Party shall have authority to make any statements,
representations, or commitments of any kind, or to take any action which shall
be binding on the other Party, except as may be explicitly provided for herein
or authorized in writing.

 

17.2.                        Counterparts.

 

This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, and all of which together shall be deemed to be one and the
same instrument.

 

17.3.                        Headings.

 

All headings in this Agreement are for convenience
only and shall not affect the meaning of any provision hereof.

 

17.4.                        Binding Effect.

 

This Agreement shall inure to the benefit of and be
binding upon the Parties and their respective lawful successors and assigns.

 

51

 

17.5.                        Assignment.

 

Neither Party may
assign or transfer this Agreement or its rights and obligations under this
Agreement without the prior written consent of the other Party, which consent
may be given or withheld in its sole discretion, and any such assignment or
transfer shall be null and void and entitle the non-assigning party to
terminate this Agreement forthwith. 
Notwithstanding the foregoing, either Party must assign this Agreement
(and shall be permitted to do so without the consent of the other Party) in
connection with the sale of all or substantially all of its assets (whether by
merger, consolidation or otherwise); provided, however, that in
no event shall any such assignment release either Party from its
responsibilities under this agreement unless the assignee has agreed in writing
to assume all of the obligations of assignor hereunder.  Notwithstanding the foregoing, ANIKA shall
be permitted to sublicense or outsource to Affiliates or Third Parties the
manufacturing and supply of Licensed Products only upon prior written notice
and approval by ORTHO, not to be unreasonably withheld; provided, however, that
ANIKA shall be responsible for the compliance by such sublicensee with all
applicable terms of this Agreement and the Quality Agreement.

 

17.6.                        Amendment and Waiver.

 

This
Agreement may be amended, supplemented, or otherwise modified at any time, but
only by means of a written instrument signed by both Parties.  Any waiver of any rights or failure to act
in a specific instance shall relate only to such instance and shall not be
construed as an agreement to waive any rights or fail to act in any other
instance, whether or not similar.

 

17.7.                        Governing Law.

 

This Agreement and
the legal relations among the Parties shall be governed by and construed in
accordance with the laws of the State of New York, USA, irrespective of any
choice of laws or conflict-of-law principles.

 

17.8.                        Severability.

 

In the event that
any provision of this Agreement shall, for any reason, be held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid or unenforceable provision had not been included herein.

 

17.9.                        Entire Agreement.

 

This Agreement
constitutes the entire agreement between the Parties with respect to the
subject matter hereof and supersedes any and all prior or contemporaneous oral
and prior written agreements and understandings.

 

52

 

17.10.                  Advice of Counsel.

 

ORTHO and ANIKA
have each consulted counsel of their choice regarding this Agreement, and each
acknowledges and agrees that this Agreement shall not be deemed to have been
drafted by one party or another and will be construed accordingly.

 

17.11.                  Force Majeure.

 

Neither Party
shall lose any rights hereunder or be liable to the other Party for damages or
losses on account of failure or delay of performance by the defaulting Party if
the failure or delay is occasioned by (i) any fire, explosion, unusually severe
weather, natural disaster or Act of God (ii) epidemic; any nuclear, biological,
chemical, or similar attack; any other public health or safety emergency; any
act of terrorism; and any action reasonably taken in response to any of the
foregoing; (iii) any act of declared or undeclared war or of a public enemy, or
any riot or insurrection; (iv) any disruption in transportation,
communications, electric power or other utilities, or other vital
infrastructure; or any means of disrupting or damaging internet or other
computer networks or facilities; (v) any strike, lockout or other labor dispute
or action; (vi) any action taken in response to any of the foregoing events by
any civil or military authority; or (vii) any other event beyond such Party’s
control, provided that the Party claiming force majeure has exerted all
reasonable efforts to avoid or remedy such force majeure; provided, however,
that in no event shall a Party be required to settle any labor dispute or
disturbance.  Notwithstanding the
foregoing, this Section 17.11 shall not operate to relieve either Party from
performance of any obligation for more than ninety (90) days.

 

17.12.                  Further Actions.

 

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

 

17.13.                  No Trademark Rights.

 

Except as
otherwise explicitly provided herein, no right, express or implied, is granted
by this Agreement to use in any manner the name “ANIKA” or “ORTHO”, or any
other trade name or trademark of the other Party or its Affiliates in
connection with the performance of the Agreement.

 

17.14.                  Notices.

 

All notices
hereunder shall be in writing and shall be deemed given if delivered personally
or by facsimile transmission (receipt verified), email (receipt acknowledged),
mailed by registered or certified mail (return receipt requested), postage prepaid,
or sent by express courier service, to the Parties at the following address (or
at such other address for a Party as shall be specified by like notice; provided,
that notices of a change of address shall be effective only upon receipt
thereof).

 

53

 

If
to ANIKA,

 

addressed
to:

 

ANIKA
THERAPEUTICS INC.

160
New Boston Street

Woburn,
MA 01801

Attention:  Chief Executive Officer

Facsimile:  (781) 932-3360

Email:
csherwood@anikatherapeutics.com

 

With
a copy to:

 

Goodwin
Procter LLP

Exchange
Place

Boston,
MA 02109

Attention:  H. David Henken, P.C.

Facsimile:  (617) 523-1231

Email:
dhenken@goodwinprocter.com

 

If
to ORTHO:

 

addressed
to:

 

OrthoNeutrogena
Division of Ortho-McNeil Pharmaceutical, Inc.

5760
W. 96th Street

Los
Angeles, CA 90045

Attention:
General Manager

Facsimile: 310-410-5945

Email:
dbrown5@neuus.jnj.com

 

With
a copy to:

 

Office
of General Counsel

Johnson
& Johnson

One
Johnson & Johnson Plaza

New
Brunswick, NJ 08933

Attention:
Phil Johnson

Facsimile:   732-524-2788

Email:
pjohnson@corus.jnj.com

 

Each of the
Parties consent to the personal jurisdiction of the U.S. Federal Courts and
agree to accept any legal process served upon such Party at the addresses
specified above for such Party.

 

54

 

17.15.                  Waiver.

 

Except as
specifically provided for herein, the waiver from time to time by either of the
Parties of any of their rights or their failure to exercise any remedy shall
not operate or be construed as a continuing waiver of same or of any other of
such Party’s rights or remedies provided in this Agreement.

 

17.16.                  Bankruptcy.

 

All
rights and licenses granted under or pursuant to this Agreement by each Party
are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
Title 11, U.S. code (the “Bankruptcy Code”), licenses of rights to
“intellectual property” as defined under Section 101(60) of the Bankruptcy
Code.  The Parties agree that ORTHO
shall retain and may fully exercise all of its rights and elections under the
Bankruptcy Code.  The licensor agrees,
during the term of this Agreement, to create and maintain current copies or, if
not amenable to copying, detailed descriptions or other appropriate
embodiments, of all such intellectual property.  The Parties further agrees that in the event of the commencement
of a bankruptcy proceeding by or against it under the Bankruptcy Code, the
licensee shall be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property, and all embodiments of such
intellectual property, and same, if not already in its possession, shall
promptly be delivered to licensee (a) upon such commencement of a bankruptcy
proceeding upon written request therefore by licensee, unless licensor elects
to continue to perform all of its obligations under this Agreement, or (b) if
not delivered under (a) above, upon the rejection of this Agreement by or on
behalf of licensor upon written request therefore by licensee.

 

17.17.                  Compliance with Environment, Safety And
Industrial Hygiene.

 

With respect to all environmental, safety and
industrial hygiene matters related to ANIKA’s activities under this Agreement,
ANIKA shall (i) comply with all applicable laws and regulations issued by
national, state and local authorities, and (ii) implement corrective action
which may be reasonably requested by ORTHO to correct an violations of laws or
regulations regarding environmental, safety and industrial hygiene

 

17.18.                  Child Labor Employment Practices.

 

ANIKA agrees to comply with the following PPC
Corporate Policy relating to the Employment of Child Labor:

 

(a)           No person under the age of 16 shall be employed, and
no other young person (under age of 18) shall be employed unless such
employment is in compliance with the International Labor Organizations
Convention 138 Concerning Minimum Age;

 

(b)           No young person (under age 18) shall be required to
work more than 48 regular hours and 12 hours overtime per week nor more than
six (6) days per week; and

 

55

 

(c)           No young person (under age 18) shall be
employed unless such employment is in compliance with all applicable laws and
regulations concerning, age, hours, compensation, health and safety.

 

17.19.      DAMAGES.  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, NEITHER PARTY SHALL IN ANY
EVENT BE LIABLE TO THE OTHER FOR PUNITIVE, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING OUT OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF
PROFITS.

 

56

 

IN
WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.

 

	
  ORTHO-MCNEIL
  PHARMACEUTICAL, INC.

  	
  ANIKA
  THERAPEUTICS, INC.

  
	
  acting
  through its

  	
   

  
	
  ORTHONEUTROGENA
  DIVISION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Dave
  Brown

  	
   

  	
  Charles
  H. Sherwood, Ph.D

  
	
   

  	
  General Manager

  	
   

  	
  President and CEO

  
						

 

 

EXHIBIT A 

 

PRODUCT SPECIFICATIONS

 

 

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A-1

 

EXHIBIT B

 

ARBITRATION

 

Any controversy or
claim arising out of or relating to this Agreement shall be resolved by
arbitration before a single arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”) then
pertaining (available at www.adr.org), except where those rules conflict with
this provision, in which case this provision controls.  Any court with jurisdiction shall enforce
this clause and enter judgment on any award. 
The arbitrator shall be selected within twenty business days from
commencement of the arbitration from the AAA’s National Roster of Arbitrators
pursuant to agreement or through selection procedures administered by the
AAA.  Within 45 days of initiation of
arbitration, the Parties shall reach agreement upon and thereafter follow
procedures, including limits on discovery, assuring that the arbitration will
be concluded and the award rendered within no more than six months from
selection of the arbitrator or, failing agreement, procedures meeting such time
limits will be designed by the AAA and adhered to by the Parties.  In connection with the arbitration
proceeding, the arbitrator shall order the prompt exchange of relevant
documents by each party; each party may take up to two depositions as of right,
and the arbitrator may in his or her discretion allow additional depositions
upon good cause shown by the moving party; however, the arbitrator shall not
have the power to order the answering of interrogatories or the response to
requests for admission.  In connection
with any arbitration, each party shall provide to the other, no later than
fourteen (14) days before the date of the arbitration, the identity of all
persons that may testify at the arbitration and a copy of all documents that
may be introduced at the arbitration or considered or used by a party’s witness
or expert.  The arbitration shall be
held in Boston, MA and the arbitrator shall apply the substantive law of New
York, except that the interpretation and enforcement of this arbitration
provision shall be governed by the Federal Arbitration Act.  From the date of initiation of arbitration
and until such time as any matter has been finally settled by arbitration, the
running of the time periods contained in Article VII as to which Party must
cure a breach of this Agreement shall be suspended as to the subject matter of
the dispute.  Prior to commencement of
arbitration, emergency relief is available from any court to avoid irreparable
harm.  THE ARBITRATOR SHALL NOT AWARD
EITHER PARTY PUNITIVE, EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES, OR
ATTORNEYS FEES OR COSTS.

 

Prior to
commencement of arbitration, the Parties must attempt to mediate their dispute
using a professional mediator from AAA, the CPR Institute for Dispute
Resolution, or like organization selected by agreement or, absent agreement,
through selection procedures administered by the AAA.  Within a period of 45 days after the request for mediation, the
Parties agree to convene with the mediator, with business representatives
present, for at least one session to attempt to resolve the matter.  In no event will mediation delay
commencement of the arbitration for more than 45 days absent agreement of the
Parties or interfere with the availability of emergency relief.

 

B-1

 

ANIKA
THERAPEUTICS ANNOUNCES WORLDWIDE DEVELOPMENT AND COMMERCIALIZATION PARTNERSHIP
WITH ORTHONEUTROGENA

 

– Agreement Meets Key
Corporate Objective

 

For Clinical Development Of
Cosmetic Tissue Augmentation Product –

 

WOBURN,
Mass. July    , 2004 – Anika Therapeutics, Inc. (NASDAQ:ANIK) today
announced the signing of an exclusive worldwide development and
commercialization partnership with the OrthoNeutrogena Division of Ortho-McNeil
Pharmaceutical, Inc, for its hyaluronic acid (HA)
based cosmetic tissue augmentation (CTA) therapy.  CTA is under development  for the correction of dermal defects such
as wrinkles, folds and scars, as well as lip augmentation.

 

Under the terms of the multi-year agreement,
Anika will receive an initial payment of $1 million with additional milestone
payments to be made upon receipt of final marketing approval from the U.S. Food
and Drug Administration (FDA), receipt of a European CE Mark, and upon
achievement of other sales and development targets.  The agreement also provides royalties and transfer payments for
the supply of CTA products.

 

Earlier this
month, Anika commenced a pivotal Phase III U.S. clinical trial to evaluate
CTA’s effectiveness for correcting nasolabial folds.  Under the agreement, Ortho Neutrogena is to fund this pivotal
Phase III trial and support Anika in its development of this CTA product, as
well as possible future line extensions.

 

Anika
President and Chief Executive Officer Charles H. Sherwood, Ph.D., said the
agreement meets Anika’s goal of establishing a relationship for its CTA therapy
with a premier dermatology company with global marketing and distribution
capability.  “Ortho Neutrogena is an
excellent partner to bring CTA into the expanding aesthetic marketplace.  Ortho Neutrogena contributes worldwide
expertise and unsurpassed product quality as one of the largest fully
integrated pharmaceutical dermatology groups. 
They are well positioned to contribute to the development and
advancement of other potential HA-based dermatological products, as well.”

 

About Anika Therapeutics, Inc.

 

Headquartered
in Woburn, Mass., Anika Therapeutics, Inc. (www.anikatherapeutics.com)
develops, manufactures and commercializes therapeutic products and devices
intended to promote the repair, protection and healing of bone, cartilage and
soft tissue.  These products are based
on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found
throughout the body.  Anika’s currently
approved products include OrthoVisc®, a treatment for osteoarthritis
of the knee available internationally and marketed in the U.S. by Ortho Biotech
Products, L.P., and Hyvisc®, a treatment for equine osteoarthritis
marketed in the U.S. by Boehringer Ingelheim Vetmedica, Inc.  Anika manufactures AmviscTM and
Amvisc PlusTM, HA viscoelastic products for ophthalmic surgery, for
Bausch & Lomb.  It also produces
CoEaseTM, which is marketed by

 

C-1

 

Advanced Medical Optics,
Inc., STAARVISCTM-II distributed by STAAR Surgical Company and
ShellgelTM for Cytosol Ophthalmics, Inc.

 

The statements made in this press release which are
not statements of historical fact are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including, without limitation, statements that
may be identified by words such as “expectations,” “remains,” “focus,”
“expected,” “prospective,” “expanding,” “building,” “continue,” “progress,”
“efforts,” “hope,” “believe,” “objectives,” “opportunities,” “will,” “seek,” and
other expressions which are predictions of or indicate future events and trends
and which do not constitute historical matters identify forward-looking
statements. The statements are based upon the current beliefs and expectations
of management and are subject to significant risks, uncertainties and other
factors.  The Company’s actual results
could differ materially from any anticipated future results, performance or
achievements described in the forward-looking statements as a result of a
number of factors including:  its
ability to successfully commence and/or complete the pivotal U.S. clinical
trial of the CTA product or its other products on a timely basis or at all, and
that it obtains clinical safety and efficacy data to support any pre-market
approval application and/or FDA or other U.S. or foreign regulatory approvals
of such products; that such approvals will not be obtained in a timely manner
or without the need for additional clinical trials; and the results of its
research and product development efforts and their relative success and timing
of regulatory approvals, commercialization of the Company’s products; the risk
that the Company’s new arrangements with OrthoNeutrogena will not result in any
meaningful sales or will be terminated at an earlier date in accordance with
its terms, or that OrthoNeutrogena will fail to perform as it has committed to
under the agreement, or that any of the milestones in this agreement will not
be achieved.  Even if the Company is
successful with its CTA product or its other products, there can be no
assurance that it will be successful with other potential products.  Certain other factors that might cause the
Company’s actual results to differ materially from those in the forward-looking
statements include those set forth under the headings “Business” “Risk Factors
and Certain Factors Affecting Future Operating Results” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
each of the Company’s Annual Report on Form 10-K for the year ended December
31, 2003 and its Quarterly Report on Form 10-Q for the quarter ended March 31,
2004 and Current Reports on Form 8-K, current Reports on Form 8-K, as well as
those described in the Company’s other press releases and SEC filings.

 

C-2

EXHIBIT D

 

ANIKA’s Insurance Requirements

 

1.0                               Definitions

 

“ANIKA”

 

2.0                               Insurance Requirements

 

ANIKA shall procure and maintain, at all times, and at
its own expense, until final completion of the work covered by the contract,
and during the time period following the final completion if ANIKA is required
to return and perform additional work, for any reason whatsoever, the types of
insurance(s) specified below.

 

A.                                    Commercial General Liability

 

ANIKA
shall provide coverage on a Commercial General Liability Occurrence Coverage
Form (or equivalent) with limits of not less than $1,000,000 each occurrence,
$1,000,000 products/completed operations aggregate, $1,000,000 personal
injury/advertising injury aggregate and $2,000,000 general aggregate.  ANIKA will endeavor to inform ORTHO of any
exclusions or amendments to the policy form which would result in direct impact
to ORTHO.  ANIKA’s policy shall be
specifically endorsed with Chubb Form to include ORTHO, its subsidiaries, and
its directors, officers and employees, as an Additional Insured, as respects
negligence caused by ANIKA as a result of this Agreement.  ANIKA shall supply ORTHO with the above
proof of insurance and forms as required upon the signing of this Agreement,
but ORTHO’s failure to demand such proof or forms shall not waive ORTHO’s
rights to such coverage as specified herein.

 

B.                                    Automobile Liability

 

ANIKA
shall provide coverage on a Business Auto Policy Form (or equivalent) for hired
and non-owned automobiles with a limit of liability in an amount no less than
$1,000,000 each accident.

 

C.                                    Workers’ Compensation

 

ANIKA
shall provide Workers’ Compensation Form (or equivalent) in accordance with the
laws of the State of MA, and any other applicable jurisdiction, covering all
employees who are to provide service under this Agreement.  Employers’ Liability coverage is required
with limits of not less than the following:

 

	
  Bodily Injury by Accident

  	
   

  	
  $500,000 Each Accident

  	
   

  
	
  Bodily Injury by Disease

  	
   

  	
  $500,000 Each Employee

  
	
  Bodily Injury by Disease

  	
   

  	
  $500,000 Policy Limit

  

 

D-1

 

D.                                    Excess Liability

 

ANIKA
shall provide Umbrella Liability coverage with a limit of liability no less
than $5,000,000 each occurrence, $5,000,000 aggregate.

 

E.                                      Miscellaneous

 

All
insurance companies must be authorized to do business in the States where
business is being transacted covering all operations under this Agreement.  All insurance companies must be rated A or
better with a financial rating of VII or better in the most recent A. M. Best’s
Rating Guide.

 

All
insurers will endeavor to provide for thirty (30) days’ prior written notice to
ORTHO of cancellation.

 

Certificates
of insurance for all required coverages shall be provided to ORTHO prior to
commencement of any work on the project.

 

D-2

 

EXHIBIT E

 

QUALITY AGREEMENT

 

E-1

 

QUALITY
AGREEMENT

 

OrthoNeutrogena

 

Los
Angeles, California

 

&

 

 Pharmaceutical Sourcing Group Americas (PSGA)

 

with

 

Anika Therapeutics, Inc. (ANIKA)

 

E-2

 

QUALITY  AGREEMENT

 

The purpose of this
agreement is to ensure a mutual understanding of key responsibilities to assure
OrthoNeutrogena products are produced, by Anika Therapeutics Inc., according to
specifications and comply with all governing regulations and corporate
policies.  It is acknowledged that this
will be a continuously evolving process. 
To the extent this document conflicts or is inconsistent with the  License Agreement to which it is appended,
the text of the  License Agreement shall
in all respects prevail and control.  It
is understood and agreed that the terms of this Quality Agreement shall apply
to products described under Scope of this agreement.

 

E-3

 

TABLE OF CONTENTS

 

	
  SECTION NUMBER & TITLE

  	
   

  
	
   

  	
   

  
	
  1. 
  MAIN CONTACTS

  	
   

  
	
   

  	
   

  
	
  2. 
  OBJECTIVES

  	
   

  
	
   

  	
   

  
	
  3.  SCOPE

  	
   

  
	
   

  	
   

  
	
  4. 
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  5.  QSR/REGULATORY/AUDITS

  	
   

  
	
   

  	
   

  
	
  6. 
  MATERIALS

  	
   

  
	
   

  	
   

  
	
  7.  MANUFACTURING/PACKAGING

  	
   

  
	
   

  	
   

  
	
  8.  STABILITY / RETAIN SAMPLES

  	
   

  
	
   

  	
   

  
	
  9.  PRODUCT COMPLAINTS

  	
   

  
	
   

  	
   

  
	
  10.  EXPIRATION DATING / LOT NUMBERING

  	
   

  
	
   

  	
   

  
	
  11.  SPECIFICATIONS

  	
   

  
	
   

  	
   

  
	
  12.  ORTHONEUTROGENA RELATED NON-CONFORMANCES

  	
   

  

 

E-4

 

	
  13.  ORTHONEUTROGENA PRODUCT RELEASES

  	
   

  
	
   

  	
   

  
	
  14. VALIDATION

  	
   

  
	
   

  	
   

  
	
  15. 
  SUPPLIERS

  	
   

  
	
   

  	
   

  
	
  16.  ORTHONEUTROGENA RELATED CHANGE CONTROL

  	
   

  
	
   

  	
   

  
	
  17.  MEDICAL DEVICE REPORTS

  	
   

  
	
   

  	
   

  
	
  18. 
  RECALLS

  	
   

  
	
   

  	
   

  
	
  19. TECHNICAL SUPPORT

  	
   

  
	
   

  	
   

  
	
  20.
  ANIKAQUARTERLY QUALITY MEASUREMENT REPORTS

  	
   

  
	
   

  	
   

  
	
  21. AGREEMENT MAINTENANCE

  	
   

  
	
   

  	
   

  
	
  22. GMP COMPLIANCE
  RESPONSIBILITIES

  	
   

  
	
   

  	
   

  
	
  23. APPROVALS

  	
   

  

 

E-5

 

1.              Main Contacts:

 

OrthoNeutrogena:

 

	
  Name:

  	
   

  	
  Mary
  C. Getz, PhD

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Vice
  President, Quality Assurance

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
  (310)
  337-2112

  
	
   

  	
   

  	
   

  
	
  FAX:

  	
   

  	
  (310)
  337-2121

  
	
   

  	
   

  	
   

  
	
  e-mail:

  	
   

  	
  mgetz1@neuus.jnj.com

  

 

PSGA:

 

	
  Name:

  	
   

  	
  Joseph
  Crea

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Director,
  QA External Manufacturing

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
  (609)
  730-2879

  
	
   

  	
   

  	
   

  
	
  FAX:

  	
   

  	
  (609)
  730-2366

  
	
   

  	
   

  	
   

  
	
  e-mail:

  	
   

  	
  jcrea@psgus.jnj.com

  

 

E-6

 

 

	
  Name:

  	
   

  	
  Jorge Alfonseca

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Manager, QA External Manufacturing

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
  (609) 730-2347

  
	
   

  	
   

  	
   

  
	
  Fax: (609) 

  	
   

  	
  730-3591

  
	
   

  	
   

  	
   

  
	
  e-mail:

  	
   

  	
  jalfons@psgus.jnj.com

  

 

External Manufacturer:

 

	
  Name:

  	
   

  	
  Frank Luppino

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Vice President, Operations

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
  (781) 932-6616 x 136

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
   

  	
  (781) 932-9735

  
	
   

  	
   

  	
   

  
	
  e-mail:

  	
   

  	
  fluppino@anikatherapeutics.com

  

 

	
  Name:

  	
   

  	
  Paul Strati

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Director of Quality Assurance

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
  (781) 932-6616, ext. 142

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
   

  	
  (781) 932-9735

  
	
   

  	
   

  	
   

  
	
  Email:

  	
   

  	
  pstrati@anikatherapeutics.com

  

 

E-7

 

2.              Objectives:

 

2.1                                 To
document the responsibilities of Anika Therapeutics and Pharmaceutical Sourcing
Group Americas (PSGA)/ OrthoNeutrogena associated with the manufacture,
packaging, testing, storage, and release of product.

 

2.2                                 To
ensure a mutual understanding of key responsibilities, to ensure
OrthoNeutrogena products are produced according to agreed upon specifications,
and to ensure compliance with all applicable governing regulations and
corporate policies.

 

2.3                                 It
is acknowledged that this will be a continuously evolving process and that this
Quality Agreement may be amended with concurrence from all parties as
necessary.

 

 

3.              Scope:

 

3.1                                 Anika
Therapeutics is the contract manufacturer of the Licensed Products for
OrthoNeutrogena, Skillman, NJ.  PSGA QA
for External Manufacturing will serve as the representative of OrthoNeutrogena
Quality Assurance in interactions under this Quality Agreement.

 

	
  Product:

  	
   

  	
  (Trade Name tbd)

  
	
  Package Sizes:

  	
   

  	
  tbd

  
	
   

  	
   

  	
   

  
	
  Location:

  	
   

  	
  Anika Therapeutics, Inc.

  
	
   

  	
   

  	
  236 West Cummings Park

  
	
   

  	
   

  	
  Woburn, MA 
  01801

  

 

3.2                                 Any
external manufacturing or packaging services provided for OrthoNeutrogena by an
outside facility must conform at a minimum to the Quality Agreement terms and
conditions.  Anika is currently being
contracted to provide these services. 
This Quality Agreement is being implemented to delineate the
OrthoNeutrogena/PSGA and Anika quality objectives and responsibilities.

 

3.3                                 This
document constitutes a Quality Agreement only and is not intended to represent
a purchase contract.  The Quality
Agreement does not represent or replace the Licensed Agreement or any other
agreement and/or amendment(s) thereto between OrthoNeutrogena/PSGA Johnson
& Johnson and Anika Therapeutics.

 

4.              Definitions:

 

4.1                                 FDA:  United States Food and Drug Administration
or any successor entity (CBER-CDER).

 

4.2                                 PMA:  Pre-market approval

 

4.3                                 QSR:  Quality System Regulation covering medial
device Good Manufacturing Practices as defined in the regulations promulgated
under the Food, Drug and Cosmetic Act (FDCA).

 

4.4                                 Products:  Those products in Section 3, Scope.

 

4.5                                 MHRA:  Medicines and Health Care Product Regulatory
Agency

 

4.6                                 Responsibility:
These abbreviations will be used to identify the responsibilities outlined in
Section 19.

 

E-8

 

4.6.1                        A = Audit

 

4.6.2                        R =
Primary Responsibility

 

4.6.3                        D =
Ultimate Decision Maker

 

4.6.4                        S = Shared
Responsibility

 

4.7                                 Specifications:

 

4.7.1                        Master
Formula

 

4.7.2                        Test
Methods

 

4.7.3                        Product
(WIP (Work in-process)/Finished) Requirements

 

4.7.4                        Standard
Operating Procedures (SOPs)

 

4.7.5                        Labels
& Labelling

 

4.8                                 Product
Terms:

 

4.8.1                        Bulk:
Product stored in containers (drums, vessels, portable kettles etc.)

 

4.8.2                        Work in
Process (WIP): Product processed into its primary container needing further
processing and/or packaging.

 

4.8.3                        Finished
Product: Product completely packaged and in its final stage. No further
processing and/or packaging are required.

 

4.9                                 Non-Conformance:  Any planned or unplanned deviation from a
specification as defined in Section 4.7.

 

4.10                           First
Pass Acceptance:  The percentage of
batches made without any non-conformances, including laboratory deviations.

 

4.11                           Quality
Hold:  The cumulative number of days
that finished product is on hold due to pending non-conformance investigations
or other quality actions.

 

5.              QSR/Regulatory/Audits:

 

Anika
Therapeutics will manufacture, test, label, package and store Licensed Product
in compliance with the QSR.

 

Anika
Therapeutics will provide PSGA QA with a copy of the annual report submitted to
the FDA no later than 30 days from the established dates.

 

All
information and documentation from Anika shall be provided to the PSGA QA
contact designated in Section 1 or their designee. PSGA and
OrthoNeutrogena will be responsible for further distribution of documentation
between their respective groups.

 

Audits

 

E-9

 

For auditing
purposes, PSGA/OrthoNeutrogena assumes full access to Anika facility (except
restricted areas), used for manufacturing, filing, packaging, testing, and
storage of the product no more than once per year.

 

PSGA/ON will
provide Anika at least two weeks notice prior to scheduling an audit of the
Anika facility.

 

OrthoNeutrogena
representatives may accompany PSGA on the audit.

 

The Anika
response to any audit report findings must be received by PSGA within 30 days
of receipt of an audit report unless otherwise agreed upon by the two
companies.

 

Anika will
notify PSGA/ON within 2 business days of any FDA inspection or notice of
inspection by a regulatory agency (Note: no proprietary information related to
non-PSGA products/processes need be disclosed during said notification of
inspection).

 

Anika will
notify PSGA/ON by the end of the audit or more frequently if appropriate of any
issues that may impact OrthoNeutrogena products, including any general
systems/GMP issues found during these inspections.

 

Anika will
provide PSGA/ON with copies of any FDA 483 reports or similar reports relating
to the products or facility to the extent these may impact or reasonably be
expected to impact the Ortho- Neutrogena product.  Copy of the 483 forms can be redacted as necessary to protect
proprietary information.

 

Anika is
responsible for responding to any issues and observations found during these
inspections.  Anika, at their sole
discretion, may request additional participation from PSGA in responding to the
audit findings.

 

6.              Materials:

 

6.1                                 Raw
Materials:

 

6.1.1                        Certificate
of Analysis must accompany raw material(s) shipment(s) from the raw material
supplier.

 

6.1.2                        Anika will
be responsible for performing the chemical testing of such raw materials in
accordance with established specifications for the Licensed Product.

 

6.1.2.1               Anika will be
responsible for the maintenance of appropriate retained samples of raw
materials.

 

6.2                                 Components:

 

6.2.1                        Anika will
be responsible for all inspection and testing of components in accordance with
established specifications for the Licensed Product.

 

7.              Manufacturing
/ Packaging:

 

7.1                                 Anika
shall manufacture, package, test, and store the bulk, WIP, and finished product
in accordance with approved specifications for OrthoNeutrogena product and
current Good Manufacturing Practices.

 

7.2                                 The
manufacture of any penicillin or steroid product will not be allowed in the
same manufacturing facility used for the manufacture of the OrthoNeutrogena
Product.

 

E-10

 

7.3                                 Anika
is responsible for releasing the finished product for PSGA review, and the
overall quality/compliance of the product. 
A Certificate of Compliance will be provided to PSGA for each lot.  Additionally, the first six months of executed
production batch records will be subject to audit concurrent with release.  This audit may be performed at Anika’s
facility at PSGA’s discretion.

 

8.              Stability
/ Retain Samples:

 

8.1                                 Anika
will be responsible for withdrawing the required number of samples and
performing annual product stability analysis in accordance with approved test
methods and at test intervals identified in the stability specifications.

 

8.2                                 Anika
will maintain the required amount of retain samples of finished goods to
perform full testing from every commercial lot manufactured at Anika.  These retains will be held for one (1) year
past the expiration date.

 

8.3                                 All
stability results will be available to OrthoNeutrogena upon request.

 

9.              Product
Complaints:

 

OrthoNeutrogena
shall promptly communicate to ANIKA by facsimile, telephone or email (and
confirm any such telephone communications as instructed at the time) any
complaint received from uses of the Licensed Product(s).

9.1                                 Each
notification of a complaint shall contain, but not be limited to, the lot
number, dosage size, expiration for actual use and description of circumstances
involved in the failure of the Unit(s) in question. Each complaint notification
will contain all the information available to OrthoNeutrogena at the time,
including all information then available which is required in the Anika
Complaint form, and a summary of the proposed action to be taken by
OrthoNeutrogena to comply with its legal obligations. OrthoNeutrogena will
provide additional information promptly as it becomes available.
OrthoNeutrogena acknowledges that complaint investigation is the responsibility
of ANIKA, but OrthoNeutrogena reserves the right to directly contact its
customers.

 

9.2                                 Anika
will make reasonable efforts to complete their investigation, in writing to all
complaints within 30 business days of receipt, although some complaint
investigations due to their nature may take longer to complete.

 

9.3                                 Anika
Therapeutics, Inc. will provide OrthoNeutrogena with summary complaint data on
a quarterly basis.

 

10.       Expiration
Dating / Lot Numbering:

 

10.1                           Anika
will be responsible for providing OrthoNeutrogena QA the formats, layouts and
abbreviations for expiration dating and lot numbers.  The assignment of expiration dates will be identified in the
established specifications for Licensed Product.

 

10.2                           The
format, layout, and abbreviation for expiration date and lot number will be
approved in writing by OrthoNeutrogena and PSGA QA and must be documented in a
current PSGA specification. All labels must comply with approved labelling.

 

11.       Specifications:

 

11.1                           Anika
will be responsible for generating the required regulatory documentations.  Anika will supply OrthoNeutrogena/PSGA with
copies of documentation upon request.

 

E-11

 

11.2                           Specification
Types:

 

11.2.1                  Raw Material

 

11.2.1.1                                 Excipients

 

11.2.1.2                                 Actives

 

11.2.2                  Processing

 

11.2.3                  Bulk Product

 

11.2.4                  Packaging
(Including Primary Container)

 

11.2.5                  Finished Product

 

11.2.6                  Stability

 

12.       OrthoNeutrogena
Related Non-Conformances:

 

12.1                           Anika
will be responsible for investigating and documenting any non-conformance to
any process, material or product.

 

12.2                           Anika
will notify OrthoNeutrogena/PSGA on all non-conformances that impact product
integrity and potential release.

 

12.3                           Anika
will provide OrthoNeutrogena with non-conformance summary data on a quarterly
basis.

 

13.       OrthoNeutrogena
Product Release:

 

13.1                           PSGA QA
has decision-making authority for acceptance of product manufactured by Anika.

 

Anika
Therapeutics will not supply product that has been reworked unless such rework
is validated and approved for the product.

 

13.3
Anika is responsible for the storage and shipment of product prior to its
receipt by PSGA/OrthoNeutrogena in a manner consistent with the approved
labelling.

 

13.4                           Anika will ensure that shipments of
finished product meet the requirements of storage and shipping conditions as
specified for the manufactured product. PSGA will specify approved
carriers.  Carriers not approved by PSGA
will be initially approved by PSGA prior to use by Anika.

 

13.5Anika will provide OrthoNeutrogena/PSGA with summary batch release
data on a quarterly basis.  Summary data
will include:

 

E-12

 

13.5.1Number of batches
released

 

13.5.2Number of batches
rejected

 

14.       Validation:

 

14.1                           Anika will perform all process,
packaging, and cleaning validations, as required by its procedures and in
accordance with standard industry practice.

 

14.2                           Anika will perform laboratory test method
validations as required by its procedures and in accordance with standard
industry practice.

 

14.3                           Anika will write protocols and final
reports for required validations.  All
validation protocols and final reports may be audited by PSGA.

 

15.       Suppliers:

 

15.1                           Anika
will purchase raw materials and components only from approved suppliers

 

15.2                           Anika
will be responsible for conducting periodic audits of suppliers.  Audit reports are subject to audit by
OrthoNeutrogena/PSGA to the extent permitted by law and the applicable
contractual obligations of any such supplier.

 

15.3                           Anika
will be responsible for the qualification of new suppliers.

 

15.4                           Anika
will notify OrthoNeutrogena/PSGA of any supplier-related quality issues
impacting the Licensed Product.  Anika
is responsible for the coordination of component and raw material failure
investigations and corrective actions.

 

16.       OrthoNeutrogena-Related
Change Control:

 

16.1                           Anika
shall maintain a change control system and use it to record, track, justify and
approve changes.

 

16.2                           Anika
Therapeutics will notify OrthoNeutrogena/PSGA QA in advance of any changes in
processes, testing, and materials prior to implementation if such changes are
significant enough to affect finished product specifications or require
regulatory submission.

 

16.3                           Anika
will provide OrthoNeutrogena with a summary of Change Control activities on a
quarterly basis.

 

17.       Medical Device Reports: 

 

17.1                           Anika
shall be responsible for the reporting of all Medical Device reportable events
(MDR)) to the regulatory agencies as required by applicable laws.

 

17.2                           OrthoNeutrogena
shall notify ANIKA of potentially reportable events promptly but in no event
later than twenty-four (24) hours after the event. In addition, all such
notices by OrthoNeutrogena shall be consistent with the requirements of law in
applicable jurisdictions.

 

E-13

 

17.3                           Anika
will provide OrthoNeutrogena with a summary of Medical Device Reports on a
semi-annual basis.

 

17.4                           Anika
and OrthoNeutrogena will work together to investigate reportable events and
complaints, including gathering information from customers and end users.

 

18.       Recalls:

 

18.1                           ANIKA
shall be responsible for the coordination of any recall or field alert
activities.

 

18.2                           OrthoNeutrogena
shall be responsible for recalling product from end users and notifying end
users of any field alert activities.

 

19.       Technical Support:

 

19.1                           Technical
support will be mutually agreed upon as situations arise.

 

20.       Anika
Quarterly Quality Measurement Reports

 

20.1                           Anika
will provide OrthoNeutrogena with a quarterly Quality Measurement Report.  The report will include but will not be
limited to:

 

20.1.1                  List of batches
released

 

20.1.2                  Number of
batches rejected

 

20.1.3                  Non Conformances
(Primary raw material and component and Finished good)

 

20.1.4                  Confirmed Out of
Specification (OOS) events

20.1.5                  First Pass
Acceptance percentage

20.1.6                  Summary of
Change Control activities on licensed OrthoNeutrogena products

 

20.1.7                  Raw Material,
Component, and Bulk batch failure rates and corrective actions

 

20.1.8                  Quality holds

 

20.1.9                  Number of
inspections by FDA or other agency

 

21.       Agreement
Maintenance:

 

21.1                           This
agreement shall be reviewed annually.

 

21.2                           Modifications
can be made as required; any such modifications must be in writing and approved
by Anika, PSGA and OrthoNeutrogena.

 

21.3                           Record
Retention: Original signed copies of this Agreement must be maintained for
ten (10) years from the date of approval.

 

E-14

 

	
  22. Responsibilities:

  	
   

  	
  GMP COMPLIANCE RESPONSIBILITIES

  

 

	
  DUTIES

  	
   

  	
  Anika

  	
   

  	
  ON/PSGA

  	
   

  	
  N/A

  	
   

  	
  COMMENTS

  
	
  1.              RAW MATERIAL AND COMPONENTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications
  Development & Maintenance

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications
  Control in Plant/SOPs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  - Approved
  Suppliers

  - New Suppliers

  	
   

  	
  R

  R

  	
   

  	
  A

  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Receipt/Warehousing/Segregation
  of Materials

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Incoming
  inspection, sampling & testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Retest as
  necessary for release

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Retest for
  expiration

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Inventory
  Management & Accountability - FIFO

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Destruction
  of Waste Materials

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Retain
  Samples (Active RM)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Labelling
  Control & Accountability

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Disposition
  of Materials (Release/Reject)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Use of Materials
  out of Specifications - Deviations

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Suppliers
  Audits

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Supplier
  Audit (API)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  

 

E-15

 

	
  DUTIES

  	
   

  	
  Anika

  	
   

  	
  ON/PSGA

  	
   

  	
  N/A

  	
   

  	
  COMMENTS

  
	
  2.              BULK AND WORK-IN-PROGRESS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications
  Development and Maintenance

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Manufacturing
  Directions Development & Maint.

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications
  Control in Plant

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Area/Equipment
  Set Up & Inspection

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Sanitization
  - Manufacturing Areas

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Filling Machinery
  & Equipment Sanitization

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Line
  Clearance Procedure

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Batch Records
  issuance & maintenance

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Equipment
  -maintenance, integrity & calibration

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Environmental
  & Personnel monitoring

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Primary batch
  record review

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Cleaning
  Records & Logs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Dispensing
  records & logs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -In-Process
  Sampling analysis & testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Deviations
  from Bulk Parameters Specifications

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Development
  of Bulk and WIP Parameters/Annual Rev.

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Documentation
  System and SOPs/Int’l

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Changes to
  Process Parameters*

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Final Product
  Sampling and testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Disposition
  of Product (release/reject)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Destruction
  of Waste Materials

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  

 

* To the
extent changes meet the threshold in the change control section of this
agreement.

 

E-16

 

	
  DUTIES

  	
   

  	
  Anika

  	
   

  	
  ON/PSGA

  	
   

  	
  N/A

  	
   

  	
  COMMENTS

  
	
  3.              PACKAGING

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications Development & Maintenance

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications Control in Plant

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Line Clearance Procedure

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Environmental & Personnel monitoring

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Labelling controls & reconciliation (bottle,PI,carton)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Lot number, control

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Expiration Date Control

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Expiration Dating Development

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Cartoning & Bundling

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Palletizing and Storage

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Quarantine and Storage SOPs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Deviations from Packaging Specifications

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Product Sampling, Inspection and testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.              PRODUCT RELEASE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Specifications Development and Maintenance

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Quarantine Release SOPs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Product Release SOPs

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Standard Analytical & Microbiological Tests

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Batch record review

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Environmental monitoring review (air, water, steam, pressure)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Tests Problem Resolution procedures

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Deviation(s) reporting, investigations, retest & documentation

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Disposition of Product (release/rejection)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Evaluation of Finished Product with deviations from specifications

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Destruction of Waste Materials

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Quarantine & Quarantine Release procedures at Anika’s
  facility/Execute based on SOP

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Quarantine & Quarantine Release procedures at PSGA’s
  facility/Execute based on SOP

  	
   

  	
  A

  	
   

  	
  R

  	
   

  	
   

  	
   

  	
   

  
	
  -Certificates of Analysis

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  

 

E-17

 

	
  DUTIES

  	
   

  	
  Anika

  	
   

  	
  ON/PSGA

  	
   

  	
  N/A

  	
   

  	
  COMMENTS

  
	
  5.              STABILITY PROGRAM

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Stability Protocols/Documentation System

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Documentation Systems/SOPs in Plant

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Retain Sampling

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Stability Testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -New test Methods Development (validation, transfer, documentation)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Test Methods Implementation

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Equipment Records, calibrations, validations

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Result Handling

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Result Reporting to PSGA

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Stability alert - OOS Results

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Reporting (Internal, External)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -FDA Field Alert

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.              CUSTOMER COMPLAINTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Standard Operating Procedure-in plant investigation

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Logging/Receipt

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Retain Sampling, handling & testing

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Analysis

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -in plant laboratory

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -outside laboratory

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Synchrony on records with  OrthoNeutrogena

  	
   

  	
  S

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  -Reporting (Internal & External)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

E-18

 

	
  DUTIES

  	
   

  	
  Anika

  	
   

  	
  ON/PSGA

  	
   

  	
  N/A

  	
   

  	
  COMMENTS

  
	
  7.              GENERAL & FACILITY

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -SOPs, Guidelines, Practices and Policies

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Monitoring, Maintenance, Calibration of

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Water Systems (DI, WFI)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Clean Air System

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -HVAC System

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Steam System

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Pressure System

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Annual Product Review

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -Data Collection

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Written Report (Process, Analytical & Complaint Data)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -General Records Systems

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Documentation System in Plant

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Records Retention (Batch Records)

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Change Control in Plant

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Retain Samples Management

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Training and Education

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Process and Product Validation

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Facility and Systems

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Equipment

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Product

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -Revalidation

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  -New Products

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.              Compliance & PMA-related

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  - Adverse Drug Experience Reporting

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  - PMA compliance & Annual Report to FDA

  	
   

  	
  R

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
  - Recall coordination

  	
   

  	
  R

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  
	
  - FDA Field Alert

  	
   

  	
  R

  	
   

  	
  S

  	
   

  	
   

  	
   

  	
   

  

 

A = Audits

R = Primary Responsible

D = Ultimate Decision Maker

S = Shared Responsibility/Agree

 

E-19

 

23.                               Approval
Signatures

 

	
  Approved By:

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  Charles
  Sherwood, CEO, Anika Therapeutics, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Mary
  Getz, Vice President, Quality Assurance, Ortho-Neutrogena

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Paul
  Strati, Director of Anika Therapeutics QA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Joseph
  Crea, Director of PSGA QA External Manufacturing

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Frank
  Luppino, Vice President, Operations, Anika Therapeutics, Inc.

  	
   

  	
   

  

 

E-20

 

	
  Written By:

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  Jorge
  Alfonseca, Manager of PSGA QA External Manufacturing

  	
   

  	
   

  

 

E-21

 

History of Change

 

	
  Version

  Number

  	
   

  	
  Change Control

  Number

  	
   

  	
  Section

  	
   

  	
  Reason for Revision

  (Description of Change)

  
	
  1

  	
   

  	
  NA

  	
   

  	
  NA

  	
   

  	
  New
  Quality Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

E-22

 

Template History of Change

 

	
  Version

  Number

  	
   

  	
  Change

  Control Number

  	
   

  	
  Section

  	
   

  	
  Reason for Revision

  (Description of Change)

  
	
  1.0

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  New template

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

E-23

 

EXHIBIT F

 

ANIKA COMPLAINT FORM

 

	
  COMPLAINT FORM

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Complaint File Number:

  	
   

  	
  Complainant:

  
	
  Date Complaint Received:

  	
   

  	
  Address

  
	
  Method of Communication of Complaint:

  	
   

  	
  Address

  
	
   

  	
  Phone number

  
	
   

  	
   

  	
   

  
	
  Product Name:

  	
   

  	
  Product Lot Number:

  
	
   

  	
   

  	
   

  
	
  Complaint:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attach appropriate documentation to this
  form.

  
	
  1.

  	
   

  	
  Date Complaint Receipt Acknowledged:

  
	
  2.

  	
   

  	
  Was there a death, serious injury or
  serious illness?

  
	
  3.

  	
   

  	
  Any relationship of the device/drug to the
  reported incident?

  
	
  4.

  	
   

  	
  Is the event described in product labeling?

  
	
  5.

  	
   

  	
  Description of specific medical
  intervention action taken or withheld:

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Physician name:

  
	
  7.

  	
   

  	
  Description of patient condition:

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  ADE or MDR Reportable
  Event?  YES:
          NO:           (If yes, proceed
  to #4.)

  If NO state  Rationale:  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vigilance Reporting?  YES: 
          NO: 
          Date Reported: 
                   

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Date Failure Investigation Initiated:  If investigation
  was not initiated, state reason:

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  CAPA #: 
  If corrective action is not required, state
  rationale:

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Date Failure Investigation Closed:

  
					

 

F-1

 

	
  Required Documentation Obtained and
  Complaint Closed:

  	
   

  
	
   

  	
   

  
	
  Date of close-out to complainant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  QS/RA
  Signature:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
								

 

F-2

 

EXHIBIT G

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

 

	
  [*******]

  	
   

  	
  [***]

  	
   

  	
  [*****]

  	
   

  	
  [********]

  	
   

  	
  [********]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*******]

  	
   

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

  	
   

  	
  [**]

  	
   

  	
  [********]

  	
   

  	
  [********]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*******]

  	
   

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

  	
   

  	
  [**]

  	
   

  	
  [********]

  	
   

  	
  [********]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*******]

  	
   

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

  	
   

  	
  [**]

  	
   

  	
  [********]

  	
   

  	
  [********]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
  [*****]

  	
   

  	
  [*********]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [********]

  	
   

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

  	
   

  	
   

  	
   

  	
  [***]

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [********]

  	
   

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

  	
   

  	
   

  	
   

  	
  [***]

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  \

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
																			

 

G-1

 

Exhibit H

Current Development Plan

 

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

  	
   

  	
   

  
	
   

  	
   

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

  	
   

  	
   

  	
  [*******]

  
	
   

  	
   

  	
   

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

  	
   

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

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

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
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H-1

 

EXHIBIT I

 

Top Tier Rest of World
Countries

 

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I-1

 

EXHIBIT J

 

Form of ANIKA Confidentiality
and Non-Disclosure Agreement Provisions

 

This Agreement is effective the
           day of
                  
2004 between                                 
having an office at
                                         
and Anika Therapeutics, Inc., a corporation organized and existing under the
laws of the Commonwealth of Massachusetts and having a place of business at 160
New Boston Street, Woburn, Massachusetts 01801.

 

1.   Background. 
                                  
and Anika Therapeutics, Inc. intend to engage in
                     .  In the course of such discussions and negotiations,
it is anticipated that either party may disclose or deliver to the other party
certain of its trade secrets or confidential or proprietary information for the
purpose of enabling the other party to evaluate the feasibility of such
possible business relationship.  The
parties have entered into this Agreement in order to provide for the confidential
treatment of such trade secrets and confidential or proprietary information in
accordance with the terms of this Agreement. 
As used in this Agreement, the party disclosing its Proprietary
Information (as defined below) is referred to as the “Disclosing Party”; the
party receiving the other party’s Proprietary Information is referred to as the
“Recipient.”

 

2.   Proprietary
Information.  As used in this
Agreement, the term “Proprietary Information” shall mean all secrets or
confidential or proprietary information designated as “Confidential” in writing
by the Disclosing Party, whether by letter or by the use of an appropriate
proprietary stamp or legend, prior to or at the time any such trade secret or
confidential or proprietary information is disclosed by the Disclosing Party to
the Recipient.  Notwithstanding the
foregoing, any of the Disclosing Party’s Proprietary Information which is
orally or visually disclosed to the Recipient by the Disclosing Party, or is
disclosed in writing without an appropriate letter, proprietary stamp or
legend, shall constitute Proprietary Information if the Disclosing Party
identifies it as confidential at the time of disclosure and, within thirty (30)
days after such disclosure, delivers to the Recipient a written document or
documents, marked “Confidential”, describing such Proprietary Information and
referencing the place and date of such oral, visual, or written disclosure and
the names of the employees or officers of the Recipient to whom such disclosure
was made.

 

3.   Disclosure
of Proprietary Information.  For a
period of ten (10) years from the date of this Agreement, the Recipient shall
hold in confidence, and shall not disclose to any person outside its
organization, other than its lawyer and accountants, any of the Disclosing
Party’s Proprietary Information.  The
Recipient shall use such Proprietary Information only for the purpose for which
it was disclosed and shall not use or exploit such Proprietary Information for
its own benefit or the benefit of another without the prior written consent of
the Disclosing Party.  The Recipient
shall disclose

 

J-1

 

such Proprietary Information received by it under this Agreement only
to persons within its organization who have a need to know such Proprietary
Information in the course of the performance of their duties and who are bound
to protect the confidentiality of such Proprietary Information.

 

4.   Limitation
on Obligations.  The obligations of
the Recipient specified in Section 3 above shall not apply, and the Recipient
shall have no further obligations, with respect to any of the Disclosing
Party’s Proprietary Information to the extent that such Proprietary
Information:

 

(a)  is generally known to the
public at the time of disclosure or becomes generally known through no wrongful
act on the part of the Recipient ;

 

(b) 
is in the Recipient’s possession at the time of disclosure otherwise
than as a result of Recipient’s breach of any legal obligation;

 

(c) 
becomes known to the Recipient through disclosure by sources other than
the Disclosing Party, which sources have the legal right to disclose such
Proprietary Information;

 

(d)  
is required to be disclosed by the Recipient to comply with applicable
laws or governmental regulations, provided that the Recipient provides
prior written notice of such disclosure to the Disclosing Party and takes
reasonable and lawful actions to avoid and/or minimizes the extent of such
disclosure.

 

5.   Ownership
of Proprietary Information.  The
Recipient agrees that to the extent of its rights therein, the Disclosing Party
is and shall remain the exclusive owner of all of its rights in Proprietary
Information and all patent, copyright, trade secret, trademark and other
intellectual property rights.  No
license or conveyance of any such rights to the Recipient is granted or implied
under this Agreement.

 

6.   Return
of Documents.  The Recipient shall,
upon the request of the Disclosing Party, return to the Disclosing Party all
drawings, documents, and other tangible manifestations of the Disclosing
Party’s Proprietary Information received by the Recipient pursuant to this
Agreement (and all copies and reproductions thereof).

 

7.  Acknowledgement.  The parties acknowledge that Anika is a
public company and may be disclosing material non-public information
hereunder.  As such
                                
hereto acknowledges its obligations under the Federal securities laws to
refrain from trading while in possession of material non-public information.

 

J-2

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