x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | | 23-3011702 |
(State or Other Jurisdiction of | | (IRS Employer |
Incorporation or Organization) | | Identification No.) |
| Large Accelerated Filer ¨ | Accelerated Filer x |
| Non-accelerated Filer ¨ | Smaller Reporting Company ¨ |
| | Page |
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PART I. | FINANCIAL INFORMATION | 1 |
| | |
Item 1. | Financial Statements | 1 |
| | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 |
| | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 33 |
| | |
Item 4. | Controls and Procedures | 34 |
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PART II. | OTHER INFORMATION | 35 |
| | |
Item 1. | Legal Proceedings | 35 |
| | |
Item 1A. | Risk Factors | 35 |
| | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35 |
| | |
Item 3. | Defaults Upon Senior Securities | 35 |
| | |
Item 4. | Mine Safety Disclosures | 35 |
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Item 5. | Other Information | 35 |
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Item 6. | Exhibits | 35 |
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Signatures | 36 | |
Exhibit Index | 37 |
i | ||
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
ASSETS | | | | | | | |
| | | | | | | |
Current assets | | | | | | | |
Cash | | $ | 4,644,462 | | $ | 2,615,805 | |
Short-term investments, restricted | | | 53,257 | | | 53,248 | |
Accounts and other receivable, net | | | 2,132,403 | | | 1,733,742 | |
Inventory | | | 1,801,909 | | | 1,170,097 | |
Prepaid expenses and other current assets | | | 1,624,224 | | | 737,445 | |
Deferred costs, current portion | | | 211,776 | | | 136,436 | |
| | | | | | | |
Total current assets | | | 10,468,031 | | | 6,446,773 | |
| | | | | | | |
Property and equipment, net | | | 894,621 | | | 2,440,081 | |
Deferred costs | | | 538,488 | | | 180,783 | |
Intangible assets, net | | | 33,860,537 | | | 34,135,287 | |
Goodwill | | | 1,128,517 | | | 1,128,517 | |
| | | | | | | |
Total assets | | $ | 46,890,194 | | $ | 44,331,441 | |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| | | | | | | |
Current liabilities | | | | | | | |
Accounts payable and accrued expenses | | $ | 5,176,773 | | $ | 2,812,371 | |
Deferred revenues, current portion | | | 2,502,254 | | | | |
Note payable, current portion | | | 1,800,000 | | | | |
| | | | | | | |
Total current liabilities | | | 9,479,027 | | | 2,812,371 | |
| | | | | | | |
Notes payable | | | 4,034,010 | | | 2,100,000 | |
Deferred revenues | | | 1,542,446 | | | | |
Derivative and other liabilities | | | 913,087 | | | 1,415,159 | |
| | | | | | | |
Total liabilities | | | 15,968,570 | | | 6,327,530 | |
| | | | | | | |
Commitments and contingencies | | | | | | | |
| | | | | | | |
Conditionally redeemable common stock (909,091 issued and outstanding) | | | 500,000 | | | | |
| | | | | | | |
Stockholders' equity | | | | | | | |
Common stock; $.0001 par value, authorized 200,000,000 shares; 2013 issued and outstanding - 105,190,479 shares; 2012 issued and outstanding - 93,808,386 shares | | | 10,428 | | | 9,381 | |
Common stock issuable | | | 432,100 | | | 489,100 | |
Additional paid-in capital | | | 116,309,680 | | | 108,485,646 | |
Accumulated deficit | | | (86,330,584) | | | (70,980,216) | |
| | | | | | | |
Total stockholders' equity | | | 30,421,624 | | | 38,003,911 | |
| | | | | | | |
Total liabilities and stockholders' equity | | $ | 46,890,194 | | $ | 44,331,441 | |
1 | ||
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
| | 2013 | | 2012 | | 2013 | | 2012 | | ||||
Revenues | | | | | | | | | | | | | |
Product sales | | $ | 2,925,971 | | $ | 1,703,311 | | $ | 7,541,874 | | $ | 5,203,675 | |
License fees | | | 67,063 | | | | | | 67,063 | | | 3,154,722 | |
Royalties | | | 244,350 | | | 56,000 | | | 369,646 | | | 103,021 | |
Other revenue | | | 128,835 | | | | | | 128,835 | | | | |
| | | | | | | | | | | | | |
Total revenues | | | 3,366,219 | | | 1,759,311 | | | 8,107,418 | | | 8,461,418 | |
| | | | | | | | | | | | | |
Cost of revenues | | | | | | | | | | | | | |
Cost of sales | | | 2,817,386 | | | 992,277 | | | 5,439,401 | | | 2,815,623 | |
Cost of royalties | | | 32,504 | | | 5,658 | | | 41,578 | | | 10,774 | |
| | | | | | | | | | | | | |
Total cost of revenues | | | 2,849,890 | | | 997,935 | | | 5,480,979 | | | 2,826,397 | |
| | | | | | | | | | | | | |
Gross profit | | | 516,329 | | | 761,376 | | | 2,626,439 | | | 5,635,021 | |
| | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | |
Salaries and wages | | | 1,967,965 | | | 1,745,520 | | | 6,011,337 | | | 5,586,743 | |
Consulting expenses | | | 415,947 | | | 501,058 | | | 1,596,576 | | | 1,784,401 | |
Professional fees | | | 385,344 | | | 336,446 | | | 827,198 | | | 1,002,947 | |
Research, development, trials and studies | | | 922,999 | | | 1,006,049 | | | 3,050,038 | | | 2,454,615 | |
General and administrative expenses | | | 1,433,611 | | | 1,380,449 | | | 5,415,768 | | | 4,082,400 | |
| | | | | | | | | | | | | |
Total operating expenses | | | 5,125,866 | | | 4,969,522 | | | 16,900,917 | | | 14,911,106 | |
| | | | | | | | | | | | | |
Loss from operations | | | (4,609,537) | | | (4,208,146) | | | (14,274,478) | | | (9,276,085) | |
| | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | |
Interest, net | | | (378,587) | | | (262,008) | | | (1,323,900) | | | (797,140) | |
Change in fair value of derivative liabilities | | | 5,789 | | | 689,264 | | | 250,349 | | | 442,743 | |
Change in fair value of contingent consideration | | | | | | | | | | | | (4,334,932) | |
Inducement expense | | | | | | | | | | | | (1,513,371) | |
Settlement of contingency | | | | | | | | | | | | (471,250) | |
Other | | | 12,076 | | | 576 | | | 12,331 | | | (529) | |
| | | | | | | | | | | | | |
Total other income (expenses) | | | (360,722) | | | 427,832 | | | (1,061,220) | | | (6,674,479) | |
| | | | | | | | | | | | | |
Loss before provision for income taxes | | | (4,970,259) | | | (3,780,314) | | | (15,335,698) | | | (15,950,564) | |
Income tax provision | | | 4,890 | | | 4,609 | | | 14,670 | | | 13,827 | |
| | | | | | | | | | | | | |
Net loss | | | (4,975,149) | | | (3,784,923) | | | (15,350,368) | | | (15,964,391) | |
| | | | | | | | | | | | | |
Preferred dividends: | | | | | | | | | | | | | |
Series D preferred stock | | | | | | | | | | | | 13,562 | |
| | | | | | | | | | | | | |
Net loss to common stockholders | | $ | (4,975,149) | | $ | (3,784,923) | | $ | (15,350,368) | | $ | (15,977,953) | |
| | | | | | | | | | | | | |
Loss per common share | | | | | | | | | | | | | |
Basic and diluted | | $ | (0.05) | | $ | (0.04) | | $ | (0.15) | | $ | (0.20) | |
| | | | | | | | | | | | | |
Weighted average shares outstanding | | | | | | | | | | | | | |
Basic and diluted | | | 104,890,396 | | | 91,214,635 | | | 102,891,983 | | | 78,502,867 | |
2 | ||
| | Nine Months Ended | | ||||
| | September 30, | | ||||
| | 2013 | | 2012 | | ||
| | | | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
Net loss | | $ | (15,350,368) | | $ | (15,964,391) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | |
Bad debt expense, net of recoveries | | | 42,775 | | | 21,295 | |
Depreciation and amortization | | | 875,084 | | | 841,167 | |
Stock-based compensation | | | 537,958 | | | 1,847,233 | |
Change in fair value of derivative liabilities | | | (250,349) | | | (442,743) | |
Change in fair value of contingent consideration | | | | | | 4,334,932 | |
Settlement of contingency | | | | | | 471,250 | |
Amortization of deferred costs | | | 186,931 | | | 102,327 | |
Non-cash interest expense - amortization of debt discount | | | 222,282 | | | 475,656 | |
Deferred income tax provision | | | 14,670 | | | 13,827 | |
Loss (Gain) on disposal of assets | | | (594,173) | | | 49,494 | |
Effect of amendment to contingent consideration | | | 1,006,159 | | | | |
Loss on extinguishment of debt | | | 19,867 | | | | |
Effect of issuance of warrants for term loan modification | | | 303,517 | | | | |
Inducement expense | | | | | | 1,513,371 | |
Change in operating assets and liabilities, net of those acquired: | | | | | | | |
Accounts and other receivable, net | | | (441,436) | | | (121,543) | |
Inventory | | | (631,812) | | | (554,444) | |
Prepaid expenses and other current assets | | | (561,095) | | | 111,455 | |
Accounts payable and accrued expenses | | | 2,364,402 | | | 715,824 | |
Deferred revenues | | | 4,044,700 | | | (654,721) | |
Other liabilities | | | 124,212 | | | 6,392 | |
| | | | | | | |
Net cash used in operating activities | | | (8,086,676) | | | (7,233,619) | |
| | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
Property and equipment acquisitions | | | (600,373) | | | (1,736,129) | |
Cash acquired in business combination | | | | | | 24,563 | |
Proceeds from sale of equipment | | | 2,139,672 | | | 335,077 | |
| | | | | | | |
Net cash provided by (used in) investing activities | | | 1,539,299 | | | (1,376,489) | |
| | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
Proceeds from issuance of debt | | | 4,235,797 | | | | |
Proceeds from issuance of common stock, net | | | 4,910,237 | | | 8,336,925 | |
Redemption of preferred stock | | | | | | (169,986) | |
Repayment of note payable | | | (570,000) | | | | |
Proceeds from option and warrant exercises | | | | | | 4,066,959 | |
Dividends paid on preferred stock | | | | | | (36,595) | |
| | | | | | | |
Net cash provided by financing activities | | | 8,576,034 | | | 12,197,303 | |
| | | | | | | |
Net increase in cash | | | 2,028,657 | | | 3,587,195 | |
Cash, beginning of period | | | 2,615,805 | | | 2,246,050 | |
| | | | | | | |
Cash, end of period | | $ | 4,644,462 | | $ | 5,833,245 | |
3 | ||
4 | ||
5 | ||
Description | | Level 1 | | Level 2 | | Level 3 | | Total | | ||||
| | | | | | | | | | | | | |
Liabilities at September 30, 2013: | | | | | | | | | | | | | |
Embedded conversion options | | $ | | | $ | | | $ | 358,339 | | $ | 358,339 | |
| | | | | | | | | | | | | |
Total measured at fair value | | $ | | | $ | | | $ | 358,339 | | $ | 358,339 | |
| | | | | | | | | | | | | |
Liabilities at December 31, 2012: | | | | | | | | | | | | | |
Embedded conversion options | | $ | | | $ | | | $ | 780,960 | | $ | 780,960 | |
| | | | | | | | | | | | | |
Total measured at fair value | | $ | | | $ | | | $ | 780,960 | | $ | 780,960 | |
Description | | Balance at December 31, 2012 | | Established in 2012 | | Modification of Convertible Debt Agreement | | Conversion to Common Stock | | Change in Fair Value | | Effect of Extinguishment of Debt | | Balance at September 30, 2013 | | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
Derivative liabilities: | | | | | | | | | | | | | | | | | | | | | | |
Embedded conversion options | | $ | 780,960 | | $ | | | $ | 250,361 | | $ | (244,477) | | $ | (250,349) | | $ | (178,156) | | $ | 358,339 | |
6 | ||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
| | 2013 | | 2012 | | 2013 | | 2012 | | ||||
| | | | | | | | | | | | | |
Revenue from U.S. product sales | | $ | 2,754,438 | | $ | 1,448,451 | | $ | 6,592,163 | | $ | 4,461,469 | |
Revenue from non-U.S. product sales | | | 171,533 | | | 254,860 | | | 949,711 | | | 742,206 | |
| | | | | | | | | | | | | |
Total revenue from product sales | | $ | 2,925,971 | | $ | 1,703,311 | | $ | 7,541,874 | | $ | 5,203,675 | |
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
Trade receivables | | $ | 1,058,544 | | $ | 1,133,400 | |
Other receivables | | | 1,138,532 | | | 643,051 | |
| | | 2,197,076 | | | 1,776,451 | |
| | | | | | | |
Less allowance for doubtful accounts | | | (64,673) | | | (42,709) | |
| | $ | 2,132,403 | | $ | 1,733,742 | |
7 | ||
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
Raw materials | | $ | 70,886 | | $ | 79,090 | |
Finished goods | | | 1,731,023 | | | 1,091,007 | |
| | | | | | | |
| | $ | 1,801,909 | | $ | 1,170,097 | |
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
Prepaid insurance | | $ | 58,999 | | $ | 61,519 | |
Prepaid fees and rent | | | 94,041 | | | 186,407 | |
Deposits and advances | | | 588,870 | | $ | 409,604 | |
Prepaid royalties | | | 755,207 | | | 6,250 | |
Other Current Assets | | | 127,107 | | | 73,665 | |
| | | | | | | |
| | $ | 1,624,224 | | $ | 737,445 | |
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
Medical equipment | | $ | 1,128,357 | | $ | 3,033,792 | |
Office equipment | | | 86,001 | | | 87,163 | |
Manufacturing equipment | | | 307,971 | | | 303,143 | |
Leasehold improvements | | | 390,911 | | | 390,911 | |
| | | 1,913,240 | | | 3,815,009 | |
Less accumulated depreciation | | | (1,018,619) | | | (1,374,928) | |
| | $ | 894,621 | | $ | 2,440,081 | |
8 | ||
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
Trademarks | | $ | 2,310,000 | | $ | 2,310,000 | |
Technology | | | 2,355,000 | | | 2,355,000 | |
Customer relationships | | | 708,000 | | | 708,000 | |
In-process research and development | | | 29,585,000 | | | 29,585,000 | |
| | | | | | | |
Total | | $ | 34,958,000 | | $ | 34,958,000 | |
Less accumulated amortization | | | (1,097,463) | | | (822,713) | |
| | $ | 33,860,537 | | $ | 34,135,287 | |
9 | ||
10 | ||
2014 | | 366,500 | |
2015 | | 366,500 | |
2016 | | 366,500 | |
2017 | | 366,500 | |
2018 | | 366,500 | |
Thereafter | | 2,718,600 | |
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | | | | | | |
Trade payables | | $ | 3,043,250 | | $ | 1,434,166 | |
Accrued compensation and benefits | | | 1,044,808 | | | 833,141 | |
Accrued professional fees | | | 175,950 | | | 156,205 | |
Accrued interest | | | 1,875 | | | 750 | |
Other payables | | | 910,890 | | | 388,109 | |
| | $ | 5,176,773 | | $ | 2,812,371 | |
| | September 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
Derivative liability, long-term portion | | | 358,338 | | $ | 780,960 | |
Long-term portion of convertible debt, net of unamortized discount | | | 264,483 | | | 462,815 | |
Deferred rent | | | 129,499 | | | 58,005 | |
Deferred tax liability | | | 64,670 | | | 50,000 | |
Interest payable | | | 39,764 | | | 33,379 | |
Conditional grant payable | | | 30,000 | | | 30,000 | |
Accrued term loan fee | | | 26,333 | | | | |
| | $ | 913,087 | | $ | 1,415,159 | |
11 | ||
12 | ||
13 | ||
14 | ||
Source | | # of Shares | | Total Proceeds | | ||
| | | | | | | |
Sale of shares pursuant to registered direct offering | | | 9,090,911 | | $ | 5,000,001 | |
Sale of shares pursuant to October 2010 equity purchase agreement | | | 450,000 | | $ | 303,000 | |
Sale of shares pursuant to February 2013 equity purchase agreement | | | 150,000 | | $ | 58,500 | |
Issuance of shares in lieu of cash for fees incurred pursuant to February 2013 equity purchase agreement | | | 376,463 | | $ | | |
Issuance of shares for conversion of 4% Convertible Notes | | | 1,000,219 | | $ | | |
Issuance of shares for release of security interest in patents | | | 250,000 | | $ | | |
Issuance of shares to Class 4A Equity shareholder pursuant to June 2002 Reorganization Plan | | | 27,000 | | $ | | |
Issuance of shares in lieu of cash for consultants | | | 37,500 | | $ | | |
| | | | | | | |
Totals | | | 11,382,093 | | $ | 5,361,501 | |
Three Months Ended | | Nine Months Ended | | ||||||||
September 30, 2013 | | September 30, 2013 | | ||||||||
Options Granted | | Exercise Price | | Options Granted | | Exercise Price | | ||||
| | | | | | | | | | | |
| 12,500 | | $ | 0.46 | | | 1,028,000 | | | $0.45 - $0.53 | |
15 | ||
| | # Outstanding | | ||||
Equity Instrument | | September 30, 2013 | | December 31, 2012 | | ||
| | | | | | | |
Fitch/Coleman Warrants(1) | | | 975,000 | | | 975,000 | |
August 2009 Warrants(2) | | | 1,070,916 | | | 1,070,916 | |
April 2010 Warrants(3) | | | 1,295,138 | | | 1,295,138 | |
October 2010 Warrants(4) | | | 1,488,839 | | | 1,488,839 | |
Guarantor 2011 Warrants(5) | | | 916,665 | | | 916,665 | |
February 2012 Inducement Warrants(6) | | | 1,180,547 | | | 1,180,547 | |
February 2012 Aldagen Warrants(7) | | | 2,115,596 | | | 2,115,596 | |
February 2013 MidCap Warrants(8) | | | 1,079,137 | | | | |
February 2013 Subordination Warrants(9) | | | 800,000 | | | | |
February 2013 Worden Warrants(10) | | | 250,000 | | | | |
February 2013 RDO Warrants(11) | | | 6,363,638 | | | | |
February 2013 PA Warrants(12) | | | 136,364 | | | | |
Other warrants(13) | | | 200,000 | | | 200,000 | |
Options issued under the Long-Term Incentive Plan(14) | | | 8,665,893 | | | 7,866,953 | |
(1) | These warrants were issued in connection with the August 2, 2007 Term Sheet Agreement and Shareholders’ Agreement with the Company’s then outside patent counsel, Fitch Even Tabin & Flannery and The Coleman Law Firm, and have a 7.5 year term. The strike prices on the warrants are: 325,000 at $1.25 (Group A); 325,000 at $1.50 (Group B); and 325,000 at $1.75 (Group C). The Company may call up to 100% of these warrants, provided that the closing stock price is at or above the following call prices for ten consecutive trading days: Group A $4/share; Group B $5/share; Group C $6/share. If the Company exercises its right to call, it shall provide at least 45 days notice for one-half of the warrants subject to the call and at least 90 days notice for the remainder of the warrants subject to the call. |
| |
(2) | These warrants were issued in connection with the August 2009 financing, are voluntarily exercisable at $0.51 per share and expire in February 2014. These amounts reflect adjustments for an additional 420,896 warrants due to anti-dilutive provisions. These warrants were previously accounted for as a derivative liability through January 28, 2011. At that time, they were modified to remove non-standard anti-dilution clauses and the associated derivative liability and related deferred financing costs were reclassified to APIC. |
| |
(3) | These warrants were issued in connection with the April 2010 Series D preferred stock offering, are voluntarily exercisable at $0.54 per share and expire on April 9, 2015. |
| |
(4) | These warrants were issued in connection with the October 2010 financing. They have an exercise price of $0.60 and expire on April 7, 2016. These warrants were previously accounted for as a derivative liability through January 28, 2011. At that time, they were modified to remove non-standard anti-dilution clauses and the associated derivative liability and related deferred financing costs were reclassified to APIC. |
| |
(5) | These warrants were issued pursuant to the Guaranty Agreements executed in connection with the Promissory Note issued in April 2011. These warrants have an exercise price of $0.50 per share and expire on April 28, 2016. |
| |
(6) | These warrants were issued in connection with the February 2012 warrant exercise agreements executed with certain existing Cytomedix warrant holders. These warrants have an exercise price of $1.42 per share and expire on December 31, 2014. |
| |
(7) | These warrants were issued in February 2012 in connection with the warrant exchange agreements between Cytomedix and various warrant holders of Aldagen. These warrants have an exercise price of $1.42 per share and expire on December 31, 2014. |
16 | ||
(8) | These warrants were issued in connection with the February 2013 financing. They are voluntarily exercisable, have an exercise price of $0.70 per share and expire on February 19, 2020. |
| |
(9) | These warrants were issued in connection with the February 2013 financing, have an exercise price of $0.70 per share, and expire on February 19, 2018. They are only exercisable if the JPNT Note remains outstanding on or after 04-28-2015 (50% of total) and 04-15-2016 (remainder). |
| |
(10) | These warrants were issued in connection with the February 2013 financing. They are voluntarily exercisable, have an exercise price of $0.70 per share, and expire on February 19, 2020. |
| |
(11) | These warrants were issued in connection with the February 2013 registered direct offering. They are voluntarily exercisable, have an exercise price of $0.75 per share, and expire on February 22, 2018. |
| |
(12) | These warrants were issued to the placement agent in connection with the February 2013 registered direct offering. They are exercisable on or after August 21, 2013, have an exercise price of $0.66 per share, and expire on February 22, 2018. |
| |
(13) | These warrants were issued to a consultant in exchange for services provided. They are voluntarily exercisable, have an exercise price of $1.50 per share, and expire on February 24, 2014. There is no call provision associated with these warrants. |
| |
(14) | These options were issued under the Company’s shareholder approved Long-Term Incentive Plan. |
17 | ||
18 | ||
19 | ||
| | 2013 | | |
| | | | |
Conversion of convertible debt to common stock | | $ | 260,420 | |
Common Stock issued for committed equity financing facility | | | 204,015 | |
Warrants issued for loan modification | | | 151,758 | |
Warrants issued for term loan | | | 568,324 | |
Common stock and warrants issued for release of security interest in patents | | | 325,693 | |
Common stock issued for professional services | | | 17,850 | |
Common stock issued for settlement of contingency | | | 39,150 | |
20 | ||
21 | ||
22 | ||
| |
23 | ||
24 | ||
25 | ||
| | Three Months Ended September 30, | | | |||||||||||||
| | 2013 | | | 2012(1) | | | ||||||||||
| | Pre-license(1) | | | Post-license | | | Total | | | Total | | | ||||
| | | | | | | | | | | | | | | | | |
Sales | | $ | 911,000 | | | $ | 2,015,000 | | | $ | 2,926,000 | | | | 1,703,000 | | |
| | | | | | | | | | | | | | | | | |
COGS | | | 597,000 | | | | 2,220,000 | | | | 2,817,000 | | | | 992,000 | | |
| | | | | | | | | | | | | | | | | |
Gross profit/(Loss) | | | 314,000 | | | | (205,000) | | | | 109,000 | | | | 711,000 | | |
| | | | | | | | | | | | | | | | | |
Excluding non-cash items: | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 55,000 | | | | 45,000 | | | | 100,000 | | | | 168,000 | | |
| | | | | | | | | | | | | | | | | |
Cash gross profit/(loss) | | $ | 369,000 | | | $ | (160,000) | | | $ | 209,000 | | | $ | 879,000 | | |
| | | | | | | | | | | | | | | | | |
Gross margin | | | 34 | % | | | -10 | % | | | 4 | % | | | 42 | % | |
| | | | | | | | | | | | | | | | | |
Cash gross margin | | | 41 | % | | | -8 | % | | | 7 | % | | | 52 | % | |
26 | ||
27 | ||
| | Nine Months Ended September 30, | | | |||||||||||||
| | 2013 | | | 2012(1) | | | ||||||||||
| | Pre-license(1) | | | Post-license | | | Total | | | Total | | | ||||
| | | | | | | | | | | | | | | | | |
Sales | | $ | 5,527,000 | | | $ | 2,015,000 | | | $ | 7,542,000 | | | | 5,204,000 | | |
| | | | | | | | | | | | | | | | | |
COGS | | | 3,219,000 | | | | 2,220,000 | | | | 5,439,000 | | | | 2,816,000 | | |
| | | | | | | | | | | | | | | | | |
Gross profit/(Loss) | | | 2,308,000 | | | | (205,000) | | | | 2,103,000 | | | | 2,388,000 | | |
| | | | | | | | | | | | | | | | | |
Excluding non-cash items: | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 402,000 | | | | 45,000 | | | | 447,000 | | | | 420,000 | | |
| | | | | | | | | | | | | | | | | |
Cash gross profit/(loss) | | $ | 2,710,000 | | | $ | (160,000) | | | $ | 2,550,000 | | | $ | 2,808,000 | | |
| | | | | | | | | | | | | | | | | |
Gross margin | | | 42 | % | | | -10 | % | | | 28 | % | | | 46 | % | |
| | | | | | | | | | | | | | | | | |
Cash gross margin | | | 49 | % | | | -8 | % | | | 34 | % | | | 54 | % | |
28 | ||
29 | ||
30 | ||
| | September 30, | | September 30, | | ||
| | 2013 | | 2012 | | ||
| | (in millions) | | ||||
| | | | | | | |
Cash flows used in operating activities | | $ | (8.1) | | $ | (7.2) | |
Cash flows provided by (used in) investing activities | | $ | 1.5 | | $ | (1.4) | |
Cash flows provided by financing activities | | $ | 8.6 | | $ | 12.2 | |
31 | ||
| | Payments due by December 31, | | |||||||||||||||||||
Contractual obligations at September 30, 2013 | | Total | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | Thereafter | | |||||||
| | (in thousands) | | |||||||||||||||||||
Long-Term debt (1) | | $ | 7,859 | | $ | 632 | | $ | 2,398 | | $ | 2,197 | | $ | 2,631 | | $ | - | | $ | - | |
Operating leases | | | 1,556 | | | 180 | | | 288 | | | 288 | | | 288 | | | 272 | | | 240 | |
Purchase obligations | | | 453 | | | 150 | | | 303 | | | - | | | - | | | - | | | - | |
| | $ | 9,868 | | $ | 962 | | $ | 2,989 | | $ | 2,485 | | $ | 2,919 | | $ | 272 | | $ | 240 | |
32 | ||
| • | Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; |
| • | Level 2, defined as observable inputs other than Level I prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
| • | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
33 | ||
34 | ||
35 | ||
| CYTOMEDIX, INC. | |
| | |
Date: November 12, 2013 | By: | |
| | /s/ Martin P. Rosendale |
| | Martin P. Rosendale, CEO |
| | (Principal Executive Officer) |
Date: November 12, 2013 | By: | |
| | /s/ Steven A. Shallcross |
| | Steven A. Shallcross, CFO |
| | (Principal Financial and Accounting Officer) |
36 | ||
Number | | Exhibit Table |
| | |
2.1 | | First Amended Plan of Reorganization with All Technical Amendments (Previously filed on June 28, 2002, as exhibit to Current Report on Form 8-K and incorporated by reference herein). |
2.2 | | Amended and Restated Official Exhibits to the First Amended Plan of Reorganization of Cytomedix, Inc. with All Technical Amendments (Previously filed on May 10, 2004, as exhibit to Form 10-QSB for the quarter ended March 31, 2004 and incorporated by reference herein). |
2.3 | | Asset Purchase Agreement by and among Sorin Group USA, Inc., Cytomedix Acquisition Company and Cytomedix, Inc, dated as of April 9, 2010 (Previously filed on April 12, 2010 as exhibit to the Current Report on Form 8-K and incorporated by reference herein). |
2.4 | | Exchange and Purchase Agreement by and among, Cytomedix, Inc., Aldagen, Inc., a Delaware corporation and Aldagen Holdings, LLC, dated February 8, 2012 (Previously filed on February 9, 2012, as exhibit to Current Report on Form 8-K and incorporated by reference herein). |
3(i) | | Restated Certificate of Incorporation of Cytomedix, Inc. (Previously filed on November 7, 2002, as exhibit to Form 10-QSB for quarter ended June 30, 2001 and incorporated by reference herein). |
3(i)(1) | | Amendment to Restated Certificate of Incorporation of Cytomedix, Inc. (Previously filed on November 15, 2004, as exhibit to Form 10-QSB for quarter ended September 30, 2004 and incorporated by reference herein). |
3(i)(2) | | Certificate of Amendment to the Certificate of Incorporation (Previously filed on July 1, 2010 as exhibit to the Current Report on Form 8-K and incorporated by reference herein). |
3(i)(3) | | Certificate of Amendment to the Certificate of Incorporation (previously filed on May 21, 2012 as exhibit to the Current Report on Form 8-K and is incorporated by reference herein). |
3(i)(4) | | Certificate of Amendment to the Certificate of Incorporation (previously filed on June 6, 2013 as an exhibit to the Current Report on Form 8-K and is incorporated by reference herein). |
3(ii) | | Restated Bylaws of Cytomedix, Inc. (Previously filed on November 7, 2002, as exhibit to Form 10-QSB for quarter ended June 30, 2001 and incorporated by reference herein). |
4.1 | | Form of Warrant (Previously filed on April 12, 2010 as exhibit to the Current Report on Form 8-K and incorporated by reference herein). |
4.2 | | Form of Warrant (Previously filed on October 8, 2010 as exhibit to the Current Report on Form 8-K and incorporated by reference herein). |
4.3 | | Form of Warrant (Previously filed on May 16, 2011 as exhibit to the Quarterly Report on Form 10-Q and incorporated by reference herein). |
4.4 | | Form Warrant (Previously filed on February 9, 2012, as exhibit to Current Report on Form 8-K and incorporated by reference herein). |
4.5 | | Form of Investor Warrant (Previously filed on February 20, 2013, as exhibit to Current Report on Form 8-K and incorporated by reference herein). |
4.6 | | Form of Warrant (Previously filed on February 20, 2013, as exhibit to Current Report on Form 8-K and incorporated by reference herein). |
10.1 | | Distributor and License Agreement with Arthrex, Inc. dated August 7, 2013. |
10.2 | | Consent and First Amendment to Security Agreement dated August 7, 2013. |
21 | | List of Subsidiaries (Previously filed on March 18, 2013, as exhibit to Annual Report on Form 10-K and incorporated by reference herein). |
31.1 | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act. |
31.2 | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |
32.1 | | Certificate of Chief Executive Officer pursuant to 18 U. S. C. ss. 1350. |
32.2 | | Certificate of Chief Financial Officer pursuant to 18 U. S. C. ss. 1350. |
| | |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Calculation Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
37 | ||
DISTRIBUTOR AGREEMENT AND LICENSE
THIS DISTRIBUTOR AGREEMENT AND LICENSE is made and entered into as of August 7, 2013 (this “Agreement”), between CYTOMEDIX, INC., a Delaware corporation, with principal office at 209 Perry Parkway, Suite 7, Gaithersburg, MD 20877 (“Cytomedix”), and ARTHREX, INC., a Delaware corporation, with its principal office at 1370 Creekside Boulevard, Naples, FL 34108-1945 (“Distributor”). Each of Cytomedix and Distributor is hereinafter referred to as a “Party” and collectively the “Parties.”
R E C I T A L S
A. Cytomedix is the owner of certain rights pursuant to which it has commercialized a multi-functional cell separation device which produces concentrated platelet rich plasma for use in the operating room and clinic offered as the Angel® Concentrated Platelet Rich Plasma System.
B. Distributor has facilities and experience in the distribution, sale and service of medical devices in the Territory (defined below), and desires to become the exclusive and non-exclusive distributor and an authorized service provider for the Products (defined below) in the Field of Use (defined below), pursuant to the terms of this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties intending to be legally bound agree as follows:
1. DEFINITIONS. When used herein, capitalized terms shall have the following meanings:
“Affiliate” means, in respect of any specified Person, any other Person which, but only for so long as such other Person, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, through the ownership of voting securities or other equity interests, and the terms “controlled” and “common control” have correlative meanings.
“Arthrex Kit” means the kits designed by Arthrex for PRP production from whole blood and from bone marrow.
“Change of Control” means: (i) the direct or indirect sale or other disposition (in one or more related transactions to one or more parties) of all or substantially all of the assets of a Party, or (ii) the direct or indirect transfer of 50% or more of the outstanding voting interest of a Party, whether in a single transaction or series of related transactions.
“Cytomedix Marks” means any and all trademarks, trade names, service marks, service names, logos and similar proprietary rights whether now or in the future owned, controlled or licensed by Cytomedix and currently used or to be used in connection with the Products.
“Exclusive Field of Use” the use of the Product in the Territory for all uses in human and veterinary applications other than human chronic wound care which is expressly excluded and the Non-Exclusive Field of Use.
“Field of Use” means Exclusive Field of Use and the Non-Exclusive Field of Use within the Territory.
“Gross Sales Revenue” means the total consideration invoiced by Distributor from the commercialization and sale of the Products by Distributor.
“Intellectual Property Rights” means, collectively, Patents, Trade Secrets, Copyrights, Trademarks, moral rights, trade names, rights in trade dress and all other intellectual property rights and proprietary rights, whether arising under the laws of the United States or any other state, country or jurisdiction in the world, including all rights or causes of action for infringement or misappropriation of any of the foregoing. For purposes of this Agreement: (a) “Patents” shall have the meaning set forth below; (b) “Trade Secrets” shall mean all right, title and interest in all trade secrets and trade secret rights arising under common law, state law, federal law or laws of foreign countries; (c) “Copyrights” shall mean all copyrights, and all other literary property and authorship rights, and all right, title, and interest in all copyrights, copyright registrations, certificates of copyright and copyrighted interests throughout the world; and (d) “Trademarks” shall mean all right, title and interest in all trademark, service mark, trade name and trade dress rights arising under the common law, state law, federal laws and laws of foreign countries, and all right, title, and interest in all trademark, service mark, trade name and trade dress applications and registrations interests throughout the world.
“Know-how” means any and all current and future know-how, technical information, technical knowledge, unpatentable inventions, manufacturing procedures, methods, trade secrets, processes, formulas, documentation and other tangible or intangible property or rights relating to the Products, whether or not capable of precise separate description but which alone, or when accumulated, gives to the Person acquiring it an ability to study, test, formulate, manufacture, produce or market something which it otherwise would not have known to study, test, formulate, manufacture, produce or market in the same or similar way.
“Non-Exclusive Field of Use” means use of the Products in the human non-surgical dermal and non-surgical aesthetics markets.
“Patent” means any patent application or patent, including all of the following kinds and their equivalents outside the United States (as applicable): provisional, converted provisional (or regular), divisional, continuation, continuation-in-part, and substitution applications; and regular utility, re-issue, re-examination, renewal and extended patents (including Supplementary Protection Certificates), as well as all right, title and interest in all letters patent or equivalent rights and applications for letters patent or rights, industrial and utility models, industrial designs, petty patents, patents of importation, patents of addition, certificates of invention and other government issued or granted indicia of invention ownership, including any reissue, extension, division, continuation or continuation-in-part applications throughout the world.
“Person” means any natural person or any corporation, partnership, limited liability company, business association, joint venture or other entity.
“Product” means the cell separations device and single use processing kits listed in Exhibit A-1 attached hereto.
2 |
“Territory” means worldwide.
“Point of Shipment” as defined in the Uniform Commercial Code as adopted by the State of Delaware refers to Cytomedix’s manufacturing facilities.
“Sale Transaction” means a transaction pursuant to which Distributor acquires from Cytomedix all or substantially all of the assets constituting the Products including, but not limited to, the Intellectual Property.
“Transition Event” means an event linked to the transition from Cytomedix to Arthrex, sourcing or manufacturing the disposables and/or capital equipment associated with the Product.
2. DISTRIBUTION RIGHTS AND OBLIGATIONS.
(a) Appointment as Exclusive Distributor. Subject to the agreements set forth in Schedule 7(a), Cytomedix hereby appoints Distributor as an exclusive Cytomedix distributor within the Territory for the Exclusive Field of Use and as a non-exclusive distributor within the Territory for the Non-Exclusive Field of Use, to market, distribute and sell the Products to all existing and potential customers (“Customers”) within the Territory and Field of Use, subject to compliance with the terms and conditions of this Agreement. Distributor shall use best efforts to market, distribute and sell the Products, consistent with the terms and conditions of this Agreement. Additionally, Distributor shall provide post-sale Customer service for the Products in the Territory under the terms set forth in this Agreement.
(i) Term of Initial Appointment. Subject to earlier termination or renewal as provided in Section 8 below, Distributor’s initial appointment shall be for the Initial Term (defined herein). If prior to the expiration of the Initial Term the parties have not entered into a Sale Transaction, then this Agreement shall automatically renew for the Renewal Term (defined herein), unless Distributor provides written notice of non-renewal no later than one year prior to the expiration of the Initial Term.
(ii) Limited License of Intellectual Property. Cytomedix grants to Distributor a limited, non-royalty bearing, nontransferable, non-sublicensable, exclusive license with regard to Cytomedix Intellectual Property solely for the purposes of and to the extent necessary for Distributor to use, market, sell, offer to sell, import, distribute or service the Products manufactured and supplied by or for Cytomedix in the Territory and within the Field of Use to Customers during the Term of this Agreement.
(b) Distributor Option to Assume Manufacturing and Supply of Products. At any time the Distributor, on written notice to Cytomedix, may assume responsibility for the manufacture and supply of the Products, either by assuming Cytomedix existing manufacturing and supply agreements or by entering into new manufacturing and supply agreements. Upon such written notice Distributor and Cytomedix shall enter into a Patent License Agreement pursuant to which Cytomedix shall grant Distributor a license to all Intellectual Property necessary for the manufacture of the Products. Notwithstanding the foregoing, Cytomedix may continue to source Product for its continued sale and distribution of Product for the Non-Exclusive Field of Use and the chronic wound market. Upon a Transition Event, Distributor shall purchase all Products currently in production in accordance with the forecast provisions of Section 2(e) herein.
(c) Appointment of Sub-Distributors. The Parties agree that Distributor’s rights and obligations under this Agreement will, subject to terms and limitations contained in this Agreement, be discharged and administered directly by Distributor and may include the use of contractors, subcontractors, and agents, in a manner substantially similar to the method that Distributor currently utilizes to operate its existing businesses. Distributor shall remain responsible to Cytomedix for any and all acts and omissions of such sub-distributors and agents.
3 |
(d) Promotion of Product; Advertising.
(i) Promotion. During the Term of this Agreement, Distributor shall use its best efforts to develop a customer base and market, sell and distribute the Product within the Territory. Distributor shall advertise and otherwise promote the Product in a commercially reasonable manner and furnish appropriate Product information and promotional materials to its Customers in a fashion similar to that used with Distributor’s other products.
(ii) Translation of Materials. Distributor shall bear the cost and responsibility to create and maintain all literature required, in all languages required, in order to market, sell, distribute and service the Product in the Territory, including without limitation all labeling, package inserts, instruction manuals, registrations, sales literature and other promotional materials for the Product. All translated materials must be approved by Cytomedix prior to release and distribution. Distributor must attach a written statement with the translated materials submitted to Cytomedix for approval certifying that the translation does not misrepresent the claims of the original English-language material and is an accurate translation.
(iii) Recognition of Patents and Patents Pending. Subject to rules, regulations and codes controlling the labeling and packaging of the Products, Distributor shall include on each Product or proximal Product packaging, a printed statement substantially similar to “shall apply or cause to have applied to all Licensed Product or associated packaging, the following notice”
“Manufactured and licensed under U.S. Patent Nos. 7,060,018 and 7,407,472, patents pending and their foreign counterparts.”
This notice may be modified by mutual consent of the parties as reasonably necessary to comply with applicable patent marking provisions of the U.S. patent laws.
(e) Forecasting of Products. Prior to the Transition Event, Distributor shall annually provide to Cytomedix a rolling forecast of Distributor’s requirements for the Product for the twelve (12) month period commencing that quarter. The requirements for the first quarter period of each forecast shall constitute a firm and binding Purchase Order for Product, and shall be delivered to Distributor in full prior to the end of the same quarter. The remaining rolling quarterly forecast shall constitute non-binding estimates of Product and requirements for the period described; provided that, the 2nd quarter in any forecast shall be varied by no more than 20% when reported in the subsequent binding forecast, unless agreed to by Cytomedix. The 4th quarter of each forecast are non-binding and may be modified by Distributor at any time in its sole discretion. Cytomedix will not guarantee fulfillment of orders constituting an aggregate increase in firm order quantities over forecasted quantities for a given quarter in excess of 20%. In addition to the forecast, Distributor is encouraged to provide Cytomedix at any time with advance non-binding notice of expected significant changes to the existing quarterly forecast for purposes of production planning.
(f) Trademark License. Cytomedix hereby grants to Distributor the non-exclusive, royalty-free right and license to use designated Cytomedix Marks. Distributor agrees not to alter, obliterate, deface or remove any Cytomedix Marks displayed on any Product or its packaging, or add any name, brand or trademark thereto without the prior written consent of Cytomedix. Except as provided in this Agreement, nothing herein shall grant to Distributor any right, title or interest in the Cytomedix Marks, which right, title and interest shall be vested in Cytomedix. Distributor shall immediately notify Cytomedix if, during the term of this Agreement, Distributor becomes aware of any other Person who is using any trademark, trade name, service mark, service name or logo that is substantially or confusingly similar to those owned or used by Distributor pursuant to the authority granted by Cytomedix hereunder.
4 |
(g) Regular Communication. The Parties will meet telephonically or face-to-face no less than quarterly to review, among other things, sales performance, progress on sales metrics, on hand inventory levels, customer usage information, and make such adjustments and changes as are agreed to by the Parties.
(h) Reservation of Title. Cytomedix reserves to itself and retains all right, title and interest in and to all Intellectual Property related to the Products and to any modifications, enhancements, improvements and upgrades thereto. Distributor may not duplicate, translate, decompile, reverse engineer or adapt any Product or component parts thereof without Cytomedix’s prior written consent.
(i) No Other Rights. Except as expressly provided in this Agreement, no right, title, or interest is granted by Cytomedix to Distributor hereunder. Cytomedix may distribute products other than the Product within the Territory, either directly or indirectly through distributors, and no right, title or interest is granted by Cytomedix to Distributor relating to such product.
(j) Other Information Reporting. Distributor shall provide to Cytomedix, at Distributor’s expense and in English, each and every Product-related quality and/or performance complaint within two (2) business days after receipt of such complaint by Customer. Distributor shall use a complaint reporting form agreed upon by the parties for reporting the information to Cytomedix. In addition, Distributor shall notify Cytomedix of any reportable incident within twenty four (24) hours and as outlined in the vigilance procedure agreed upon by the Parties. Detailed information of action(s) taken to resolve any reported complaint shall be communicated to Cytomedix within three (3) business days after completion of the actions.
(k) Post-Sale Service, Technical Assistance, and Support. Distributor shall provide to its Customers post-sale service, technical assistance and support for Products sold by Distributor in the Territory, at Distributor’s sole cost and expense (other than warranty claims in accordance with this Agreement). Prior to the Transition Event, all Product parts used by Distributor in providing service shall be procured from Cytomedix pursuant to the terms of this Agreement. At the request of Customers, Distributor shall timely respond to Customer calls and claims with respect to the Product and provide any applicable training for Customers.
(l) Customer Telephone Support. Distributor shall provide direct end-customer telephone support involving routine (order entry, shipping, billing) and advanced (complaint processing, problem investigation, and technical application) customer service through its customer “hotline.” Any specialized support requiring highly specialized product expertise may be directed towards Cytomedix. For purposes of this Section 2(l), “highly specialized product expertise” shall mean technical product application or scientific subject matter expertise related to the Product use by Customers.
3. TERMS OF PURCHASE OF PRODUCT.
(a) Terms and Conditions. Until such time as Distributor elects to assume the responsibility for manufacturing and supplying the Products in accordance with Section 2(b) herein, Distributor shall purchase all Products from Cytomedix, which shall thereafter be resold by Distributor to its Customers. Distributor shall purchase and resell to Customers the Minimum Purchase Requirements described in Exhibit A-4. In the event Distributor does not resell the Minimum Purchase Requirements during the applicable period set forth on Exhibit A-4, then Distributor and Cytomedix shall agree upon a minimum Royalty payment to be paid to Cytomedix. All purchases of Product and parts hereunder shall be subject to the provisions of this Agreement. Unless otherwise agreed in writing, nothing contained in any purchase order submitted pursuant to this Agreement shall in any way modify or add any provision to this Agreement. In the event of a conflict between the terms of any purchase order and the provisions of this Agreement, the provisions of this Agreement shall govern.
5 |
(b) Prices and Royalties.
(i) Prior to the Transition Event, all prices for Product purchased by Distributor hereunder shall be Free Carrier (“FCA”), Cytomedix’s Point of Shipment. The initial transfer price to Distributor for each Product and part is set forth opposite such Product or part in Exhibit A-2 (“Transfer Price”), and such initial Transfer Price will remain fixed through the first twelve (12) months of the Effective Date of this Agreement. Thereafter, the Transfer Price to Distributor for such Product may only be increased by Cytomedix based upon an increase in Cytomedix’s direct cost of production of such Product. Cytomedix shall provide Distributor written notice of any increase as soon as practical following Cytomedix receiving notice of such cost increase from its Supplier.
(ii) Distributor shall additionally pay to Cytomedix a percentage of Gross Sales Revenues from the sales of Products as a royalty, including minimum annual royalty (“Royalty”). The Royalty percentage and the Minimum Annual Royalty are as set forth on Exhibit A-3. No later than thirty (30) days after the end of each fiscal quarter, Distributor shall deliver to Cytomedix a written report detailing: (i) the number of Devices and Disposables sold, (ii) Gross Sales Revenues generated from the sales, and (iii) the resulting Royalty owed to Cytomedix. The Royalty owed to Cytomedix shall be paid by Distributor to Cytomedix by wire transfer of immediately available funds in U.S. dollars to the account specified below or to such other account as may be specified by Cytomedix or its designee in writing:
[_]
Such Royalty shall be paid to such account within forty –five (45) days after the end of each fiscal quarter. Cytomedix shall have the right to audit the records of Distributor relating to Gross Sales Revenues at any time during the normal business hours upon reasonable advance written notice. The audit will be performed by an independent third party at Cyomedix’s sole expense. If the audit determines that Cytomedix was not paid the full Royalty owed, Distributor shall pay the amount of any shortfall within five (5) business days of notice by Cytomedix and submission of the audit findings. If Distributor fails to pay such shortfall within such five (5) business day cure period, then interest shall accrue on such shortfall (from the date it was due) at fifteen percent (15%) per annum.
(c) Upfront Payment. In consideration of the grant of rights hereunder (including the assignment of existing Customer agreements and relationships, transfer of ownership of all related Devices, and assignment of physician consulting agreements) and the initial purchase of Devices in accordance with Section 3(d) below, Distributor shall pay to Cytomedix concurrently with the full execution of this Agreement, an upfront payment of Five Million United States dollars ($5,000,000) by wire transfer of immediately available funds. The upfront payment is not refundable and is in addition to and not a prepayment of any Royalty or other sums payable to Cytomedix under this Agreement. Distributor shall have the opportunity to accept the terms of any Customer, Consulting, or Distributor agreement or relationship and may elect, upon written notice to Cytomedix, reject such agreement or relationship. Any termination fee arising out of such termination shall be the responsibility of Cytomedix.
6 |
(d) Initial Purchase of Product. Simultaneously with the full execution of this Agreement, Distributor shall submit a purchase order for the purchase of two hundred (200) Devices, at no charge, to be delivered by February 1, 2014.
(e) Certain Taxes. The parties acknowledge that the purchase prices of Product set forth in Exhibit A-2 do not include any sales, excise, use, value added or other government taxes or duties that may be applicable to the export, import or purchase of the Product, including all income and income-based taxes imposed on Cytomedix under applicable laws in Territory, which taxes shall be the sole responsibility of Distributor and Distributor agrees that it will bear all such taxes and duties. When Cytomedix has the legal obligation to collect and/or pay such taxes or duties, the appropriate amount shall be added to Distributor’s invoice and paid by Distributor to Cytomedix, unless Distributor provides Cytomedix with a valid tax exemption certificate authorized by the appropriate governmental taxing authority, or provides proof of payment to such authority.
(f) Order and Acceptance. Prior to the Transition Event, all orders for Product shall be by means of a written purchase order which shall be submitted to Cytomedix at Cytomedix’s address for notice purposes set forth in Section 10(d), and shall request a delivery date. Orders may be placed by telephone, facsimile transmission or, upon the parties’ agreement, by e-mail; provided, however, that a signed confirming purchase order is received by Cytomedix no later than ten (10) business days after such order. Cytomedix shall notify Distributor in writing within a reasonable period of time from submission of the purchase order of any rejected order and the reason(s) for such rejection.
(g) Invoicing; Payment. Prior to the Transition Event, Cytomedix shall submit an invoice to Distributor with each shipment of Product ordered by Distributor. Such invoice shall be due and payable thirty (30) days following the date of such invoice. All invoices shall be sent to Distributor’s address for notice purposes set forth in Section 10(d), without regard to the actual shipping address for the Products. Each such invoice shall state Distributor’s aggregate and unit purchase price for Product in the relevant shipment, plus any freight, taxes or other costs incident to the purchase or shipment initially paid by Cytomedix and to be borne by Distributor hereunder. Distributor shall make all payments to Cytomedix under this Agreement in United States dollars in immediately available funds to a bank account designated by Cytomedix in such invoice, or otherwise designated by Cytomedix in writing. Distributor shall not take any credits or offsets against amounts billed Distributor by Cytomedix without Cytomedix’s prior written consent.
(h) Shipping; Risk of Loss.
(i) Prior to the Transition Event, all Product delivered by Cytomedix pursuant to this Agreement shall be suitably packed for surface or air shipment, in Distributor’s sole discretion, in a bulk shipping carton per the Customer requirements set forth in the applicable purchase order, marked for shipment to such location or locations as Distributor may designate, and delivered to Distributor or its carrier, FCA, Cytomedix’s Point of Shipment. Risk of loss of Product shall pass to Distributor upon delivery to the carrier at the FCA Point of Shipment.
(ii) Cytomedix shall ship all Product in accordance with Distributor’s delivery instructions specified in Distributor’s purchase orders; provided, however, that if Distributor does not provide delivery instructions with respect to the carrier to be used, Cytomedix may use its customary carrier. Partial shipments are allowed. All freight, insurance and other shipping expenses, as well as any special packing expenses, shall be paid by Distributor. Distributor shall also bear all applicable taxes and duties that may be assessed against the Product after delivery to the carrier at the FCA Point of Shipment.
(iii) Cytomedix shall use its good faith efforts to ship the Products within a reasonable amount of time after receipt and acceptance of Distributor’s purchase order for the Product, consistent with Cytomedix’s shipping procedures in place from time to time. All shipments of Product shall be deemed to conform to the relevant purchase order unless Cytomedix receives from Distributor, no later than fifteen (15) days after the receiving date of a given shipment, written notice specifying the shipment, the purchase order number and the exact nature of the discrepancy between the shipment and the order.
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4. WARRANTIES; REMEDIES FOR NON-CONFORMING PRODUCT.
(a) Device Warranty. Cytomedix’s Device warranty is attached hereto as Exhibit A-5.
(b) Customer Warranties. Distributor shall pass on to their Customers the Device warranty set forth in Section 4(a). Distributor may offer further incremental warranty provisions and benefits at its discretion and sole expense.
(c) Return Materials Procedure. There are no rights of return for cash. Device returns are allowed under Cytomedix’s warranty program. All Device returns must be approved by Cytomedix and assigned a Return Material Authorization (“RMA”) number. To obtain an RMA number prior to return, the Distributor shall notify Cytomedix of the description of the Device, quantity, reason for return, serial number of device and date of purchase of Device to be returned. All Device returns from Distributor shall be sent directly to Cytomedix or its designee, insured by Distributor. The RMA number shall be prominently displayed on the outside of the shipping box and the Products shall be packaged to protect them from shipping damage. Repair for costs of damage due to improper packaging will be the responsibility of the Distributor.
(d) Return Procedure for Disposables. As used in this Agreement, a “non-conformity” means any failure of a Disposable to conform to the specifications or packaging or quality of that Disposable as it is to be delivered by Cytomedix to Distributor under this Agreement. In the event Distributor, through the inspection of a Disposable, discovers any non-conformity, or in the event Distributor discovers or becomes aware of a non-conformity of a Disposable, and Distributor intends to make a claim to Cytomedix with respect to such Disposable for a replacement Disposable, Distributor shall notify Cytomedix in writing of such non-conformity and claim in writing within fifteen (15) days after the discovery of such non-conformity. If Distributor makes a timely non-conformity Disposable claim, Cytomedix shall complete its investigation of Distributor’s non-conformity claim within fifteen (15) days of receipt of Distributor’s written notice of such claim. During such latter fifteen (15) day period, Distributor shall, upon the request of Cytomedix, furnish Cytomedix with a reasonable number of samples of the rejected Disposable(s) for Cytomedix to inspect and/or test or, in the case where testing is not required, shall otherwise provide Cytomedix with a reasonable opportunity to have the relevant Disposable(s) inspected by or for Cytomedix in order for Cytomedix to be able to confirm or rebut Distributor’s findings/claims as to the relevant non-conformity. If Cytomedix does not challenge such a claim by Distributor, or it is determined, in spite of such a challenge, that there is a non-conformity in any such Disposable(s), Distributor’s sole remedy, and Cytomedix only obligation to Distributor as a result of such non-conformity, shall be for Cytomoedix to replace such non-conforming Disposable(s) with a corresponding conforming Disposable(s).
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5. ADDITIONAL OBLIGATIONS OF DISTRIBUTOR.
(a) Compliance with Laws. Distributor shall comply in all respects with the laws and regulations (including, without limitation, health and safety regulations) applicable to the marketing, distribution, sale and service of Product within the Territory. Distributor shall monitor the appropriate information sources in the Territory for material changes in such laws and regulations relating to the distribution of Product within the Territory and notify Cytomedix in writing of all such material changes. The Distributor shall track Customer shipment by lot number to assist Cytomedix in performing any field corrective actions.
(b) Non- United States Registrations and Clinical Studies. Cytomedix shall own all registrations and clearances in the Territory for the Products with the Food and Drug Administration and its foreign equivalents. As required from time to time under the laws of any province or state within the Territory, Distributor shall at its sole expense apply for and use its commercially reasonable efforts to obtain in Cytomedix’s name all approvals, registrations, licenses and permits that are required to market, distribute, sell and service the Product within such Territory. Cytomedix shall be responsible for interacting with the Food and Drug Administration, unless and only to the extent Distributor seeks additional indications (and a corresponding 510(k) application) for the Product. Distributor shall be responsible for interacting with foreign regulators and facilitating registration of the Product and any test centers for the Product in the Territory other than the United States. Distributor shall be responsible for all costs associated with the registration filing and associated testing within the Territory, other than the United States (except and to the extent of any additional indications for the Product). Distributor shall furnish to Cytomedix copies of all applications, and all registrations, licenses and permits obtained therefrom, for the Product. Distributor shall be responsible, at its expense, for sponsoring and supporting any clinical trials or studies useful to (i) expedite market adoption of the Product in the Territory, (ii) establish equivalence with standards of care and competitive systems or technology, and (iii) establish the safety and efficacy of the Products.
(c) U.S. Export Controls. Distributor understands and acknowledges that Cytomedix is subject to regulation by agencies of the United States Government, including, without limitation, the United States Department of Commerce, the United States Department of the Treasury, and the United States Food and Drug Administration, which prohibit export or diversion of certain products and technology to certain countries. Any and all obligations of Cytomedix to provide the Product, documentation, or any media in which any of the foregoing is contained, as well as any other technical assistance shall be subject in all respects to such United States laws and regulations as shall from time to time govern the license and delivery of technology and products abroad by Persons subject to the jurisdiction of the United States, including the Export Administration Act of 1979, as amended, any successor legislation, and the Export Administration Regulations issued by the Department of Commerce, Bureau of Export Administration. Distributor agrees to cooperate with Cytomedix, including, without limitation, providing required documentation, in order to obtain export licenses or exemptions therefrom.
(d) Customer Notification. Cytomedix will be responsible for initiating product recalls. Distributor shall be responsible for notifying Customers of Product recalls. Distributor shall timely submit a written report to Cytomedix of the recall status of the Products.
(e) Customer Database. Distributor shall provide to Cytomedix within one (1) business day all Customer information, to include the Customer name, contact, address, e-mail, phone number and purchase history, as necessary (i) to comply with a mandatory reportable incident; or (ii) as part of a response to a matter of law; or (iii) as part of a response to any valid request made to Cytomedix by the Food and Drug Administration or a local or foreign equivalent agency, and for which the absence of a complete response will be a violation of applicable codes, rules or laws or may otherwise place a Product registration or other Product certification at risk of revocation or cancellation and/or if user safety, to include Customers and patients, is an issue. Any such disclosure of Customer information by Distributor to Cytomedix under this Section 5(e) shall be in accordance with this Agreement.
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(f) Minimum On Hand Inventory. Distributor shall maintain such on-hand quantities of Product in its inventory to ensure reasonable and timely response to Customer order volume throughout the Territory. Such minimum on-hand quantity shall be determined by the Distributor and will be similar to the minimum on-hand inventory quantities established for similar products offered for sale by the Distributor.
(g) Order Processing. Distributor will provide order processing, which includes order to cash cycle, as well as warehousing and distribution support, shipping, invoicing, and related services with respect to its sale of Products to end-users.
(h) Regulatory Relationships. Distributor shall communicate with regulatory agencies within the countries where the Products are registered, sold or serviced by Distributor for purposes of monitoring and maintaining any necessary documents or filings required for Distributor to conduct sales of the Products.
(i) Training Requirements. Distributor shall provide sales training similar to the training provided for Distributor’s other products to Distributor’s sales and technical service organizations involved in selling the Products.
(j) No Conflicting Commitments. Distributor shall not enter into any third party commitments or contracts for Product sales or service and repair that supersedes or conflicts with the terms and conditions of this Agreement.
(k) Distribution of Competitive Products. Distributor agrees not to, directly or indirectly, distribute or otherwise offer for sale products that produce a discrete output fraction containing platelets and leukocytes (Buffy Coat based system) that is a separate fraction from other component fractions for use or sale in the exclusive field of use within the territory.
(l) Commercialization Resources and Diligence. Distributor shall apply best efforts to the marketing, sales and customer support of the Products similar to the effort and resources Distributor applies to its other products.
6. OBLIGATIONS OF CYTOMEDIX.
(a) Compliance with Laws. Notwithstanding Section 5 of this Agreement, Cytomedix will obtain and maintain at its expense the necessary regulatory clearances in the United States supporting the approval and clearance of the Products. Cytomedix will assist Distributor, at Distributor’s expense, in obtaining further regulatory clearances in Cytomedix’s name for the Products. In accordance with Section 5(b), Distributor shall bear the expense of such registrations unless negotiated and agreed to between the parties in a signed written document. Cytomedix shall comply in all material respects with all laws and regulations within the United States applicable to the manufacture, labeling, packaging and sale of the Product. Cytomedix shall supply to Distributor only Products which have 510(k) clearance or for which an application for such clearance has been filed.
(b) Support. Cytomedix shall provide consultation to Distributor concerning technical aspects, regulatory approvals, and use of the Product from time to time as reasonably requested by Distributor. Cytomedix shall also provide consultation to Distributor regarding regulatory approvals within the Territory.
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(c) Scientific and Technical Information. Cytomedix shall provide to Distributor scientific and technical information available to Cytomedix and required for distribution to obtain any registrations, licenses and permits required for the sale and distribution of the Product within the Territory, or to respond to inquiries from Customers or governmental or regulatory authorities.
(d) Product Training. Cytomedix shall provide Product training for Distributor’s product managers and field application specialists on an as-needed basis to enable Distributor to promote the sale of Product and to perform post-sale customer training, technical assistance and support for its Customers. Such Product training shall be conducted, at times and locations requested by Distributor and agreed upon by Cytomedix, and will be free of charge, provided, however, that Distributor shall be responsible for all out-of-pocket expenses incurred in connection with such Product training, including travel, airfare and lodging expenses incurred by Distributor’s personnel while attending such training. In addition, Cytomedix will provide Product updates and service bulletins as they become available.
(e) Information Reporting. Cytomedix shall provide to Distributor, at Cytomedix’s expense, (i) information regarding any discovered defects in the Product, or any malfunction or deterioration in the performance of the Products, and (ii) any inadequacy in the labeling or the instructions for use. Distributor is responsible for disseminating the information to Customers and sales representatives as appropriate.
(f) Registrations, Licenses and Patents. During the Term of this Agreement, Cytomedix shall, as necessary to support approval, registration and licensing of the Products by Distributor in the Territory: (a) maintain all current regulatory files, registrations and licenses for Products outside of the Territory, (b) maintain and pay fees associated with any third party intellectual property licenses, if any, necessary to practice the rights granted under this Agreement, and (c) maintain and pay the associated filing and maintenance fees for all patents owned by Cytomedix.
(g) Responsible Person. Distributor shall notify the competent authorities in Territory that it has been designated as the person responsible for the marketing and distribution of the Product within the Territory, and Distributor’s address for notice purposes in Section 10(d) shall be the registered place of business for such purposes.
(h) Inventory Requirement. Cytomedix or its contracted manufacturers will maintain no less than forty five (45) days’ finished goods inventories of Products based upon Distributor’s annual unit forecast, updated on a rolling quarterly basis, pursuant to Section 2(e) above, and forty five (45) days’ inventory of service and support parts, based on historical usage, to assure supply of Product for Customers.
(i) Distribution of Competitive Products. Cytomedix agrees not to, directly or indirectly, distribute or otherwise offer for sale products that produce a discrete output fraction containing platelets that is a separate fraction from other component fractions for use or sale in the exclusive field of use within the Territory.
(j) Transition of Territory Status. Distributor shall review the distribution agreements set forth on Schedule 7(a). If Distributor does not wish to continue these agreements, upon the earliest of the termination provisions, renewal or expiration date of any third party distribution agreement, Cytomedix shall take such actions necessary to terminate or not renew those agreements listed on Schedule 7(a) and identified by Distributor in writing in accordance with the terms of such agreements, such that the Distributor shall thereafter be the sole and exclusive distributor for the Products in the affected territory for the Exclusive Field of Use. Upon the termination or non-renewal of such agreements, each affected territory shall become the Exclusive Territory. All existing agreements are listed in Schedule 7(a). Any fees associated with termination will be the responsibility of Cytomedix.
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(k) New Kit Development. Cytomedix agrees to provide the necessary engineering and technical support to assist Distributor in the production of the Arthrex Kits.
(l) Indemnity Obligations. Cytomedix will indemnify, hold harmless and upon Distributor’s request, defend at its own expense Distributor and its officers, directors, employees, agents, representatives, successors and assigns (collectively, the “Distributor Indemnified Persons”) from and against any loss, claim, cost, suit, action, liability, judgment, decree, damage or expense including reasonable attorney’s fees, imposed upon, incurred by or asserted against the Distributor Indemnified Persons, arising from any third party claim, demand or action arising from (i) the infringement or misappropriation of the intellectual property rights of a third party by a Product or use thereof, or Distributor’s use of the Cytomedix Marks, pursuant to this Agreement and (ii) any defect in the manufacturing or design of a Product.
(m) Cytomedix agrees to maintain customer service resources including staff until Distributor assumes the customer service responsibilities.
7. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
(a) Cytomedix. Cytomedix hereby represents and warrants to Distributor that:
(i) Cytomedix is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate power and authority to own, lease and operate its properties and to carry on its businesses as it is currently being conducted. Cytomedix has all necessary corporate power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Cytomedix.
(ii) The execution, delivery and performance by Cytomedix of this Agreement and the consummation of the transactions contemplated hereby do not violate or conflict with the Certificate of Incorporation or Bylaws of Cytomedix, any material contract, agreement or instrument to which Cytomedix is a party or by which it or its properties are bound, or any judgment, decree, order or award of any court, governmental body or arbitrator by which Cytomedix is bound, or any law, rule or regulation applicable to Cytomedix.
(iii) Cytomedix holds valid licenses to third party intellectual property, if any, necessary to practice the rights granted in this Agreement. Further, Cytomedix is the sole, exclusive and lawful owner of all right, title and interest in and to the applicable Cytomedix technology incorporated in the Product (“Applicable Cytomedix Technology”) and to the Cytomedix Marks, free and clear of all liens, claims, security interests or other restrictions or encumbrances (collectively, “Liens”), except for the Liens in favor of MidCap Funding III, LLC, as agent for the ‘Lenders’ under and as defined in the Credit Agreement defined below (together with its successors and assigns, the “Agent”; and collectively with the Lenders, the “Secured Parties”) and a Lender under that certain Credit and Security Agreement, dated as of February 19, 2013, by and among Cytomedix, Cytomedix Acquisition Company, LLC and Aldagen, Inc., as borrowers, and the Secured Parties (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) and the other ‘Financing Documents’ (as defined in the Credit Agreement) executed in connection with the Credit Agreement (as used herein, the “Financing Documents”). Except as set for in Schedule 7(a), Cytomedix has not granted to any other Person any license, franchise or other rights to acquire, use or exploit the Applicable Cytomedix Technology within the Territory (or any portion thereof). Cytomedix has the right to grant the distribution and other rights to Distributor hereunder.
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(iv) Cytomedix has in place, and shall have in place during the time that the manufacturing of the Products remains under its regulatory control: (1) a quality management system that meets the requirements of ISO 13485:2003 and 21CFR820; (2) an ISO 13485 certificate issued by a Notified Body, and required FDA registrations; (3) good manufacturing practice (GMP) controls at all manufacturing facilities associated with Product; (4) a change management system to control internal and supplier processes, so that changes to processes, contact materials and devices/components are approved by Cytomedix prior to implementation; (5) special process validations, specifically for cleaning, sterile barrier packaging and sterilization; and (6) sterilizers which maintain proper ISO certifications.
(b) Distributor. Distributor hereby represents and warrants to Cytomedix that:
(i) Distributor is a company duly organized and existing under the laws of Territory, and has all power and authority to own, lease and operate its properties and to carry on its businesses as currently conducted. Distributor has all necessary power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Distributor.
(ii) The execution, delivery and performance by Distributor of this Agreement and the consummation of the transactions contemplated hereby do not violate or conflict with the Certificate of Incorporation or Bylaws of Distributor, any material contract, agreement or instrument to which Distributor is a party or by which it or its properties are bound, or any judgment, decree, order or award of any court, governmental body or arbitrator by which Distributor is bound, or any law, rule or regulation applicable to Distributor.
(iii) Distributor and its Affiliates have the distribution facilities and personnel reasonably necessary to perform its functions and otherwise carry out its obligations under the terms of this Agreement.
8. TERM AND TERMINATION.
(a) Term. The term of this Agreement shall commence on the date hereof and shall continue for five (5) years (the “Initial Term”), unless earlier terminated pursuant to Section 8(b). If prior to the expiration of the Initial Term there has not been a Sale Transaction, unless Distributor gives written notice no later than one year following one year prior to the expiration of the Initial Term, this Agreement shall be automatically renewed for one additional three (3) year period (the “Renewal Term” and together with Initial Term, the “Term”).
(b) Termination of Agreement. This Agreement may be terminated as follows:
(i) The parties may terminate this Agreement upon their mutual written agreement.
(ii) Cytomedix may terminate this Agreement if Distributor breaches any of its material representations, warranties, covenants or obligations under this Agreement and such breach continues for a period of thirty (30) days following Distributor’s receipt of written notice from Cytomedix setting forth the nature of such breach.
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(iii) Distributor may terminate this Agreement if Cytomedix breaches any of its material representations, warranties, covenants or obligations under this Agreement and such breach continues for a period of thirty (30) days following Cytomedix’s receipt of written notice from Distributor setting forth the nature of such breach.
(iv) One Party may terminate immediately this Agreement by written notice to the other Party upon the occurrence of any of the following events: (i) the other Party is or becomes insolvent or unable to pay its debts as they become due within the meaning of the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute; or (ii) the other Party appoints or has appointed a receiver for all or substantially all of its assets, or makes an assignment for the benefit of its creditors; or (iii) the other Party files a voluntary petition under the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute; or (iv) the other Party has filed against it an involuntary petition under the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute, and such petition is not dismissed within ninety (90) days.
(v) Cytomedix may terminate this Agreement if Distributor fails to purchase the Minimum Purchase Requirements on Exhibit A-4.
(c) Effect of Termination.
(i) The expiration or earlier termination of this Agreement shall not relieve any party of any of its rights or liabilities arising prior to or upon such expiration or earlier termination.
(ii) Within ten (10) business days following the effective date of the expiration or earlier termination of this Agreement, Distributor shall provide to Cytomedix a complete inventory of Product in Distributor’s possession, in transit between Distributor’s authorized locations or in transit to Distributor from Cytomedix or otherwise in Distributor’s control. Cytomedix may inspect Distributor’s Product inventory and audit Distributor’s records in the manner provided herein above.
(iii) If Distributor gives written notice of its intention not to renew for the Renewal Term in accordance with this Agreement, then Distributor and Cytomedix shall meet to establish a transition plan. In addition to establishing a transition plan, Distributor shall:
(1) make available any existing inventory of Product to Cytomedix, including any Product that has been customized by Distributor;
(2) transfer and assign all regulatory certifications or licenses related to the Product;
(3) provide Customer information needed to facilitate the orderly transition of the sale and marketing of the Product;
(4) transition all manufacturing and vendor agreements;
(5) negotiate in good faith to provide a license to use any Distributor Intellectual Property related to or used in the sale of the Products by the Distributor pursuant to this Agreement; and
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(6) take any other action reasonably requested by Cytomedix to facilitate the orderly transition of the sale and marketing of the Product in the Territory following expiration of the Initial Term.
(iv) Notwithstanding the expiration or earlier termination of this Agreement, Distributor may continue to market, distribute and sell Products within the Territory after the expiration or earlier termination of this Agreement until the earlier of (i) the date that Distributor has sold all of its Product inventory existing as of the effective date of expiration or earlier termination and (ii) the six (6)-month anniversary of the effective date of expiration or earlier termination.
(d) Force Majeure. Neither Party shall be liable to the other Party for non-performance of or delay in performing its obligations hereunder to the extent that performance is rendered impossible by strike, riot, war, acts of God, acts of terrorism, earthquake, fire, flood, governmental acts or orders or restrictions, failure of suppliers, or any other reason to the extent that the failure to perform is beyond the reasonable control of the non-performing party.
9. CONFIDENTIALITY.
(a) Confidentiality. Each party acknowledges that, in the course of performing its duties and obligations under this Agreement, certain information that is confidential or proprietary to such party (“Confidential Information”) will be furnished by the other party or such other party’s representatives. Each party agrees that any Confidential Information furnished by the other party or such other party’s representatives will not be used by it or its representatives except in connection with, and for the purposes of, the promotion, marketing, distribution and sale of Products under this Agreement and, except as provided herein, will not be disclosed by it or its representatives without the prior written consent of the other party. Notwithstanding the foregoing, the parties agree that all Confidential Information shall be clearly marked “CONFIDENTIAL” or, if furnished in oral form, shall be stated to be confidential by the party disclosing such information at the time of such disclosure and reduced to a writing by the party disclosing such information which is furnished to the other party or such other party’s representatives within forty-five (45) days after such disclosure.
(b) Exceptions. The confidentiality obligations of each party under Section 9(a) do not extend to any Confidential Information furnished by the other party or such other party’s representatives that (i) is or becomes generally available to the public other than as a result of a disclosure by such party or its representatives, (ii) was available to such party or its representatives on a non-confidential basis prior to its disclosure thereto by the other party or such other party’s representatives, (iii) was independently developed without the use of the other party’s Confidential Information by representatives of such party who did not have access to the other party’s Confidential Information, as established by contemporaneous written records, or (iv) becomes available to such party or its representatives on an non-confidential basis from a source other than the other party or such other party’s representatives; provided, however, that such source is not bound by a confidentiality agreement with the other party or such other party’s representatives.
(c) Authorized Disclosure. Notwithstanding any other provision of this Agreement, each Party may disclose Confidential Information of the other Party: (i) to the extent required to comply with applicable legal requirements including as part of regular securities law reporting requirements and/or in accordance with securities regulatory authority or securities exchange rules, demands and/or practice; (ii) to the extent and to the persons and entities required by rules of the National Association of Securities Dealers; provided, however, that the responding Party shall first have given prompt notice to the other Party hereto to enable it to seek any available exemptions from or limitations on such disclosure requirement and shall reasonably cooperate in such efforts by the other Party; or (iii) as necessary to file or prosecute patent applications, prosecute or defend litigation or otherwise establish rights or enforce obligations under this Agreement, but only to the extent that any such disclosure is necessary.
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(d) Compelled Disclosure. In the event that either party or its representatives are requested or become legally compelled (by oral questions, interrogatories, requests for information or document subpoena, civil investigative demand or similar process) to disclose any Confidential Information furnished by the other party or such other party’s representatives or the fact that such Confidential Information has been made available to it, such party agrees that it or its representatives, as the case may be, will provide the other party with prompt written notice of such request(s) so that the other party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, or that the other party waives compliance with the provisions of this Agreement, such party agrees that it will furnish only that portion of such Confidential Information that is legally required and will exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded to that portion of such Confidential Information and other information being disclosed.
(e) Ownership of Confidential Information. The party disclosing or otherwise furnishing Confidential Information to the other party will retain the exclusive ownership of all right, title and interest in and to such Confidential Information.
(f) Survival. The obligations of the parties under this Section 9 shall survive the expiration or earlier termination of this Agreement for a period of three (3) years.
10. GENERAL PROVISIONS.
(a) Independent Contractors. The relationship of Cytomedix and Distributor established by this Agreement is that of independent contractors, and nothing shall be deemed to create or imply any employer/employee, principal/agent, partner/partner or co-venturer relationship, or that the parties are participants in a common undertaking. Neither party may direct or control the activities of the other party or incur or assume any obligation on behalf of the other party or bind such other party to any obligation for any purpose whatsoever.
(b) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without reference to rules of conflicts or choice of laws. Any dispute or issue arising hereunder, including any alleged breach by Distributor, not resolved pursuant to Section 10(m) shall be heard, determined and resolved by an action commenced in the federal or state courts in Wilmington, Delaware, which the parties hereby agree shall have the exclusive jurisdiction over the issues and the parties. Distributor hereby agrees to submit itself to the jurisdiction of the federal and state courts in Wilmington, Delaware and waives the right to make any objections based on the exclusive jurisdiction or venue in such courts. The Delaware courts shall have the right to grant all relief to which each party is or shall be entitled hereunder, including all equitable relief as the Court may deem appropriate. Distributor hereby consents to service of process by registered mail.
(c) Entire Agreement. This Agreement, including the Exhibits, sets forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior oral and written, and all contemporary oral, negotiations, agreements and understandings with respect to the same.
(d) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, facsimile or telex, or by registered or certified mail (postage prepaid, return receipt requested), to the other party at the following address (or at such other address for which such party gives notice hereunder):
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If to Distributor:
ARTHREX, INC.
1370 Creekside Boulevard
Naples, FL 34108-1945
Attn:
Telephone:
Facsimile:
If to
CYTOMEDIX, INC.
209 Perry Parkway, Suite 7
Gaithersburg, MD 20877
Attention: Office of the CEO
Telephone: (240) 499-2680
Facsimile:
(e) Assignment and Binding Effect. Except as otherwise provided in this Agreement, neither Party may, directly or indirectly, assign its rights or delegate its duties under this Agreement without the prior written consent of the other Party; provided that Cytomedix may assign this Agreement (i) to an Affiliate, (ii) to a successor to all or substantially all of the business or assets of Cytomedix, (iii) in connection with a Change of Control and/or (iv) to any Secured Party in connection with its rights under the Credit Agreement and the other Financing Documents. No permitted assignment of rights or delegation of duties under this Agreement shall relieve the assigning or delegating party of its liabilities hereunder. For purposes of this Agreement, either Party shall be deemed to have assigned this Agreement in the event of a Change of Control with respect to such Party. Subject to the foregoing, this Agreement is binding upon, and inures to the benefit of, the parties and their respective successors and permitted assigns.
(f) Partial Invalidity. If any provision of this Agreement is held to be invalid by a court of competent jurisdiction, then the remaining provisions shall remain, nevertheless, in full force and effect. The parties agree to renegotiate in good faith any term held invalid and to be bound by the mutually agreed substitute provision in order to give the most approximate effect intended by the parties.
(g) No Waiver; Amendment. No waiver of any term or condition of this Agreement shall be valid or binding on any party unless agreed to in writing by the party to be charged. The failure of either party to enforce at any time any of the provisions of the Agreement, or the failure to require at any time performance by the other party of any of the provisions of this Agreement, shall in no way be construed to be a present or future waiver of such provisions, nor in any way affect the validity of either party to enforce each and every such provision thereafter. This Agreement may not be amended or modified except by the written agreement of the Parties.
(h) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one instrument.
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(i) Consent Not Unreasonably Withheld. No party given the right to approve or consent to any matter shall unreasonably withhold, condition or delay its approval or consent. The failure to respond in writing within any specified time period shall be deemed unconditioned approval of or consent to the relevant matter, provided that the party requesting such approval or consent gives written notice requesting a response at least two (2) business days prior to the expiration of the specified time period, if any.
(j) Construction; Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any section, recital, exhibit, schedule and party references are to this Agreement unless otherwise stated. No party, nor its counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all provisions of this Agreement shall be construed in accordance with their fair meaning, and not strictly for or against any party.
(k) Further Assurances. Each party agrees to cooperate fully with the other and execute such instruments, documents and agreements and take such further actions to carry out the intents and purposes of this Agreement.
(l) Press Releases and Announcements. Except as may be contemplated hereunder, neither party may issue any press release, product any professional publications or make any public announcement concerning the transactions contemplated by this Agreement without the prior consent of the other party, except for any releases, publications or announcements which may be required by or, in such party’s discretion, reasonably necessary under applicable law, in which case the party proposing to make such release or announcement will allow the other party a reasonable opportunity to review and comment on such release, publications or announcement in advance of such issuance or making.
(m) Alternative Dispute Resolution.
(i) Any controversy, dispute or claim arising out of or relating to this Agreement (or the breach hereof) that cannot be resolved by good faith negotiation between or among the parties may be finally submitted to the American Arbitration Association (“AAA”) for final and binding arbitration pursuant to the Commercial Arbitration Rules of the AAA. Such arbitration shall be held in Wilmington, Delaware, before a single arbitrator who shall be a retired federal or Delaware state judge. The arbitrator may enter a default decision against any party who fails to participate in the arbitration proceedings. The decision of the arbitrator shall be final, unappealable and binding, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be authorized to award any relief, whether legal or equitable, to the party so entitled to such relief.
(ii) In respect of any suit, action or other proceeding relating to the enforcement of any award rendered by the arbitrator, each party irrevocably submits to the non-exclusive jurisdiction of any state or federal court located in the City of Wilmington, State of Delaware.
(iii) The arbitrator shall be authorized to apportion its fees and expenses and the reasonable attorney’s fees and expenses of the parties as the arbitrator deems appropriate. In the absence of any such apportionment, the prevailing party in any arbitration or other proceeding shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable fees of attorneys and other professionals.
(iv) The parties agree that this Section 10(m) has been included to resolve rapidly and inexpensively any claims or disputes between them with respect to this Agreement, and that this Section 10(m) shall be grounds for dismissal of any action commenced by any party in any court with respect to any controversy, dispute or claim arising out of or relating to this Agreement (or the breach hereof).
18 |
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed.
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CYTOMEDIX, INC. |
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By: | /s/ Martin P. Rosendale | |||
Name: | Martin P. Rosendale | |||
Title: | CEO | |||
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ARTHREX, INC. |
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By: | /s/ R. Scott Price | |||
Name: | R. Scott Price | |||
Title: | VP |
19 |
CONSENT AND FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS CONSENT AND FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Agreement”) is dated as of August 7, 2013, by and among CYTOMEDIX, INC., a Delaware corporation (“Cytomedix”), CYTOMEDIX ACQUISITION COMPANY, LLC, a Delaware limited liability company (“Acquisition”), ALDAGEN, INC., a Delaware corporation (“Aldagen”, and collectively with Cytomedix and Acquisition, the “Borrowers”), MIDCAP FUNDING III, LLC, a Delaware limited liability company in its capacity as agent (“Agent”) for the lenders under the Credit Agreement (as defined below) (“Lenders”), and the Lenders.
W I T N E S S E T H:
WHEREAS, Borrowers, Lenders and Agent are parties to that certain Credit and Security Agreement, dated as of February 19, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein have the meanings given to them in the Credit Agreement except as otherwise expressly defined herein), pursuant to which Lenders have agreed to provide to Borrowers certain loans and other extensions of credit in accordance with the terms and conditions thereof; and
WHEREAS, pursuant to Section 7.1 of the Credit Agreement, Borrowers have requested that Agent and Lenders consent to the licensing of certain Material Intellectual Property to Arthrex, Inc. pursuant to that certain Distributor Agreement and License, dated as of August 7, 2013 between Borrower and Arthrex, Inc., as distributor, in the form attached hereto as Exhibit A (the “Arthrex License Agreement”), and Agent and Lenders are willing to grant such consent subject to, and in accordance with, the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrowers, Lenders and Agent hereby agree as follows:
1. Acknowledgment of Obligations. Borrowers hereby acknowledge, confirm and agree that all Term Loans made prior to the date hereof, together with interest accrued and accruing thereon, and fees, costs, expenses and other charges owing by Borrowers to Agent and Lenders under the Credit Agreement and the other Financing Documents, are unconditionally owing by Borrowers to Agent and Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditor’s rights generally.
2. Consent.
(a) License Agreement. Notwithstanding anything to the contrary in the Credit Agreement and/or any of the other Financing Documents and subject to the terms and conditions of this Agreement, including, without limitation, Section 7 of this Agreement, Agent and Lenders hereby consent to the licensing of certain Material Intellectual Property to Arthrex, Inc. pursuant to and in accordance with the terms of the Arthrex License Agreement, so long as no Default or Event of Default has occurred and is continuing or, after giving effect to this Agreement, would result and provided that Borrowers shall not be permitted to amend the Arthrex License Agreement or Arthrex License Documents, if any, or enter into any other agreements that have the effect of modifying the terms of the Arthrex License Agreement without the prior written consent of Agent and Lenders.
3. Amendments to Credit Agreement. Subject to the terms and conditions of this Agreement, including, without limitation, the conditions to effectiveness set forth in Section 7 below, the Credit Agreement shall be amended as follows:
(a) Section 6.15 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof the following new Section 6.15 to read in its entirety as follows:
“6.15 Minimum Sales. Borrower shall not permit its net sales as of any Testing Date to be less than the minimum amounts set forth on Schedule 6.15, opposite such Testing Date set forth on such Schedule 6.15”
(b) Section 6.16 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof the following new Section 6.16 to read in its entirety as follows:
“6.16 [Reserved].”
(c) The Credit Agreement is hereby amended by inserting the following new Section 6.17 to read in its entirety as follows:
“6.17 Arthrex Royalty Payments. Borrower shall not permit the Arthrex Royalty Payments paid to Borrower under and pursuant to the Arthrex License Agreement for any specified Arthrex Testing Period (as set forth on Schedule 6.17) as of any Arthrex Testing Date (as set forth on Schedule 6.17) to be less than the minimum amounts set forth on Schedule 6.17, opposite such Arthrex Testing Date as set forth on such Schedule 6.17.”
(d) The Credit Agreement is hereby further amended by inserting the following new Section 6.19 to read in its entirety as follows:
“6.19 Arthrex Deposit Account; Procedures for Arthrex Royalty Payments. By not later than September 6, 2013, 2013, Borrower shall deliver to Agent a Control Agreement with respect to the Arthrex Deposit Account, duly executed and delivered by the applicable Borrower and Arthrex Bank. Borrower shall deposit all Arthrex Royalty Payments paid to Borrower under and pursuant to the Arthrex License Agreement into the Arthrex Deposit Account. Two (2) Business Days after an Arthrex Royalty Payment for the applicable Arthrex Testing Period (as set forth on Schedule 6.17) has been deposited in the Arthrex Deposit Account, provided that no Default or Event of Default has occurred and is continuing, Borrower shall be permitted to request in writing that Agent transfer the Arthrex Royalty Payments made during any such applicable Arthrex Testing Period (as set forth on Schedule 6.17), and within two (2) Business Days of such written request, Agent shall transfer the Arthrex Royalty Payment to Borrower for the immediately preceding quarter from the Arthrex Deposit Account into the Designated Funding Account.”
(e) Section 10.1 of the Credit Agreement is hereby amended by deleting clause (e) of such section in its entirety and substituting in lieu thereof the following new clause (e) to read in its entirety as follows:
“(e) (A)(i) any Credit Party or counterparty defaults under any Material Agreement (after any applicable grace period contained therein), (B) a Material Agreement shall be terminated by a third party or parties party thereto prior to the expiration thereof, (C) there is a loss of a material right of a Credit Party under any Material Agreement to which it is a party or (D) any Credit Party fails to receive any payment owing to it, when due under any Material Agreement, (ii) (A) any Credit Party fails to make (after any applicable grace period) any payment when due (whether due because of scheduled maturity, required prepayment provisions, acceleration, demand or otherwise) on any Indebtedness (other than the Obligations) of such Credit Party or such Subsidiary having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than Fifty Thousand Dollars ($50,000) (“Material Indebtedness”), (B) any other event shall occur or condition shall exist under any contractual obligation relating to any such Material Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of (without regard to any subordination terms with respect thereto), the maturity of such Material Indebtedness or (C) any such Material Indebtedness shall become or be declared to be due and payable, or be required to be prepaid, redeemed, defeased or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, (iii) any Credit Party defaults (beyond any applicable grace period) under any obligation for payments due or otherwise under any lease agreement for such Credit Party’s principal place of business or any place of business that meets the criteria for the requirement of an Access Agreement under Section 7.2 or for which an Access Agreement exists or was required to be delivered, (iv) (A) the occurrence of any breach or default under any terms or provisions of any Subordinated Debt Document or under any Subordination Agreement, (B) the occurrence of any event requiring the prepayment of any Subordinated Debt or (C) the delivery of any notice with respect to any Subordinated Debt or pursuant to any Subordination Agreement that triggers the start of any standstill or similar period under any Subordination Agreement, or (v) any Borrower makes any payment on account of any Indebtedness that has been subordinated to any of the Obligations, other than payments specifically permitted by the terms of such subordination;”
(f) Section 15 of the Credit Agreement is hereby amended by deleting the definitions of “Material Agreement” and “Maturity Date”, in each case in its entirety, and substituting in lieu thereof the following new definitions to read in their entirety as follows:
“‘Material Agreement’ means (i) the agreements listed in the Disclosure Schedule, (ii) the Arthrex License Agreement and Arthrex License Documents, (iii) each agreement or contract to which a Credit Party is a party involving the receipt or payment of amounts in the aggregate exceeding One Hundred Thousand Dollars ($100,000) per year (excluding (a) any agreement or contract that involves payment by the Borrower to another party for materials or supplies (but, for the avoidance of doubt, not equipment) and services in the ordinary course of business, but specifically including all such agreements relating to licensure of Intellectual Property and (b) employment offers or employment agreements), (iv) all lease or other occupancy agreements for the principal office or any other business location of Borrower or its Subsidiaries, and (v) any agreement or contract to which such Credit Party or its Subsidiaries is a party the termination of which could reasonably be expected to result in a Material Adverse Change.”
“‘Maturity Date’ means, (i) if the Subsequent Equity Event has occurred, August 19, 2016 or (ii) if the Subsequent Equity Event has not occurred, February 19, 2016.”
(g) Section 15 of the Credit Agreement is hereby further amended by inserting the following new definitions in appropriate alphabetical order:
“‘Arthrex’ means Arthrex, Inc.”
“‘Arthrex Bank’ means the depository institution where the Arthrex Deposit Account is located.”
“‘Arthrex Deposit Account’ means Borrower’s Deposit Account, account number 1360659573, or, if acceptable to Agent, another Deposit Account owned by Borrower and maintained with a bank reasonably acceptable to Agent and, in any case, set up solely for the purpose of receiving the Arthrex Royalty Payment and over which Agent has been granted control pursuant to a Control Agreement.”
“‘Arthrex License Agreement’ means that certain Distributor Agreement and License, dated as of August __, 2013 between Borrower and Arthrex, as distributor, as amended, restated, supplemented or otherwise modified from time to time (provided that, for the avoidance of doubt, any amendment, restatement, supplementation or other modification thereto shall require the consent of the Agent and Lenders pursuant to Section 7.11).”
“‘Arthrex License Documents’ means, collectively, the Arthrex License Agreement and any other license agreements or other documents entered into or delivered in connection with the Arthrex License Agreement.”
“‘Arthrex Royalty Payment’ means any royalty payment paid to Borrower under and pursuant to the Arthrex License Agreement.”
“‘Arthrex Testing Date’ means each date identified as a ‘Testing Date’ on Schedule 6.17 hereto.”
“‘Arthrex Upfront Payment’ means that certain upfront payment to Borrower in the amount of five million and no/100 dollars ($5,000,000) made in accordance with Section 3(c) of the Arthrex License Agreement.”
“‘First Amendment Effective Date’ means August ___, 2013.”
“‘Subsequent Equity Event’ means (a) the closing on and consummation of, at any time after the First Amendment Effective Date but prior to September 1, 2013, an equity securities issuance and sale transaction pursuant to which Borrower shall have completed the authorization, issuance and sale of additional shares of the capital stock of Borrower pursuant to a private placement or public offering (including through the exercise of warrants to purchase capital stock of Borrower), and which such additional shares of capital stock shall not be subject to any mandatory repurchase or redemption provisions or put rights, or any other similar provisions or rights, in favor of any holder thereof that are exercisable at any time before the date which is ninety-one (91) days after the date the Obligations are paid in full or otherwise constitute Indebtedness under the definition set forth herein or be subject to any provisions requiring the mandatory payment of any dividends at any time (not including any dividends payable in equity of the Borrower) and (b) Borrower shall have received net cash proceeds of at least five hundred thousand and no/100 dollars ($500,000) in the aggregate (subject to no clawback, escrow or other terms limiting Borrower’s ability to freely use such proceeds) from such Subsequent Equity Event and shall have deposited such net cash proceeds into a deposit account or securities account subject to a Control Agreement and shall have delivered to Agent evidence reasonably satisfactory to Agent of the occurrence of such Subsequent Equity Event and the deposit of such proceeds; provided that, for the avoidance of doubt, such Subsequent Equity Event shall be in addition to, and separate from, (x) the Initial Equity Event, (y) the Arthrex Upfront Payment and (z) any other payment made under the Arthrex License Agreement.”
(h) The AMORTIZATION SCHEDULE (FOR EACH CREDIT FACILITY) is hereby deleted in its entirety and replaced with the new AMORTIZATION SCHEDULE attached hereto as Exhibit B.
(i) The INTELLECTUAL PROPERTY SCHEDULE is hereby deleted in its entirety and replaced with the new INTELLECTUAL PROPERTY SCHEDULE attached hereto as Exhibit C.
(j) Schedule 6.15 is hereby deleted in its entirety and replaced with the new Schedule 6.15 attached hereto as Exhibit D.
(k) A new Schedule 6.17 shall be incorporated into the Agreement in form and substance as attached hereto as Exhibit E.
4. Termination of Credit Facility #2 Commitment. Notwithstanding anything in the Credit Agreement to the contrary, any commitment to lend the Applicable Commitment referred to as “Credit Facility #2” and/or “Tranche 2” in the amount of three million and no/100 dollars ($3,000,000) is hereby terminated and the terms of such “Credit Facility #2” set forth on the Credit Facility Schedule are hereby deleted in their entirety.
5. No Other Amendments or Consents. Except for the consent and amendments set forth and referred to in Sections 2, 3 and 4 above, the Credit Agreement and the other Financing Documents shall remain unchanged and in full force and effect. Nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any of Borrowers’ Obligations or to modify, affect or impair the perfection or continuity of Agent’s security interests in, security titles to or other liens, for the benefit of itself and the Lenders, on any Collateral for the Obligations.
6. Representations and Warranties. To induce Agent and Lenders to enter into this Agreement, each Borrower does hereby warrant, represent and covenant to Agent and Lenders that (i) each representation or warranty of Borrowers set forth in the Credit Agreement is hereby restated and reaffirmed as true and correct in all material respects on and as of the date hereof as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period), (ii) no Default or Event of Default has occurred and is continuing as of the date hereof, and (iii) each Borrower has the power and is duly authorized to enter into, deliver and perform this Agreement and this Agreement is the legal, valid and binding obligation of each Borrower enforceable against such Borrower in accordance with its terms.
7. Condition Precedent to Effectiveness of this Agreement. This Agreement shall become effective as of the date (the “Amendment Effective Date”) upon which Agent shall have received each of the following:
(a) one or more counterparts of this Agreement duly executed and delivered by Borrowers, Agent and Lenders, in form and substance satisfactory to Agent and Lenders;
(b) evidence in form and substance satisfactory to Agent that the Arthrex Deposit Account has been opened;
(c) a fully executed copy of the Arthrex License Agreement in the form attached hereto as Exhibit A, executed and delivered by the parties thereto; and
(d) evidence in form and substance satisfactory to Agent that Borrower has received the Arthrex Upfront Payment into a Collateral Account.
8. Release.
(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and each Lender and their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, Lenders and all such other persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any Borrower or any of its successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the Amendment Effective Date, including, without limitation, for or on account of, or in relation to, or in any way in connection with the Credit Agreement or any of the other Financing Documents or transactions thereunder or related thereto.
(b) Each Borrower understands, acknowledges and agrees that its release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.
9. Covenant Not To Sue. Each Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by Borrowers pursuant to 7 above. If any Borrower or any of its successors, assigns or other legal representatives violates the foregoing covenant, Borrowers, for themselves and their successors, assigns and legal representatives, agree to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result of such violation.
10. Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel.
11. Severability of Provisions. In case any provision of or obligation under this Agreement shall be invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
12. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MARYLAND APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS.
14. Entire Agreement. The Credit Agreement and the other Financing Documents as and when modified through this Agreement embody the entire agreement between the parties hereto relating to the subject matter thereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter thereof.
15. No Strict Construction, Etc. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Time is of the essence for this Agreement.
16. Costs and Expenses. Each Borrower absolutely and unconditionally agrees to pay or reimburse upon demand for all reasonable fees, costs and expenses incurred by Agent and the Lenders that are Lenders on the Closing Date in connection with the preparation, negotiation, execution and delivery of this Agreement and any other Financing Documents or other agreements prepared, negotiated, executed or delivered in connection with this Agreement or transactions contemplated hereby.
[Remainder of page intentionally blank; signature pages follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year specified at the beginning hereof.
BORROWERS: | |||
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CYTOMEDIX, INC. |
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By: | /s/ Martin P. Rosendale | ||
Name: | Martin P. Rosendale | ||
Title: | CEO | ||
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CYTOMEDIX ACQUISITION COMPANY, LLC |
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By: | Cytomedix, Inc., its Sole Member | ||
By: | /s/ Martin P. Rosendale | ||
Name: | Martin P. Rosendale | ||
Title: | CEO | ||
ALDAGEN, Inc. | |||
By: | /s/ Martin P. Rosendale | ||
Name: | Martin P. Rosendale | ||
Title: | CEO |
AGENT AND LENDER: | |||
MIDCAP FUNDING III, LLC | |||
By: | /s/ Josh Groman | ||
Name: | Josh Groman | ||
Title: | Authorized Signatory |
Exhibit 31.1
CERTIFICATION
I, Martin P. Rosendale, certify that:
1. | I have reviewed this Form 10-Q of Cytomedix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2013 | /s/ Martin P. Rosendale | |
Martin P. Rosendale, CEO | ||
(Principal Executive Officer) |
A signed original of this written statement has been provided to Cytomedix, Inc. and will be retained by Cytomedix, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 31.2
CERTIFICATION
I, Steven A. Shallcross, certify that:
1. | I have reviewed this Form 10-Q of Cytomedix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2013 | /s/ Steven A. Shallcross | |
Steven A. Shallcross, CFO | ||
(Principal Financial and Accounting Officer) |
A signed original of this written statement has been provided to Cytomedix, Inc. and will be retained by Cytomedix, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. §1350
Pursuant to 18 U.S.C. §1350 and in connection with the Quarterly Report on Form 10-Q of Cytomedix, Inc. (the “Company”) for the fiscal period ended September 30, 2013 (the “Report”), I, Martin P. Rosendale, Chief Executive Officer of the Company, hereby certify that to the best of my knowledge and belief:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period. |
Date: November 12, 2013 | /s/ Martin P. Rosendale | |
Martin P. Rosendale, CEO | ||
(Principal Executive Officer) |
A signed original of this written statement has been provided to Cytomedix, Inc. and will be retained by Cytomedix, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. §1350
Pursuant to 18 U.S.C. §1350 and in connection with the Quarterly Report on Form 10-Q of Cytomedix, Inc. (the “Company”) for the fiscal period ended September 30, 2013 (the “Report”), I, Steven A. Shallcross, Chief Financial Officer of the Company, hereby certify that to the best of my knowledge and belief:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period. |
Date: November 12, 2013 | /s/ Steven A. Shallcross | |
Steven A. Shallcross, CFO | ||
(Principal Financial and Accounting Officer) |
A signed original of this written statement has been provided to Cytomedix, Inc. and will be retained by Cytomedix, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Deferred Revenue
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9 Months Ended | |
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Sep. 30, 2013
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Deferred Revenue [Abstract] | ||
Deferred Revenue Disclosure [Text Block] | Note 12 Deferred Revenue Deferred revenue consists of prepaid licensing revenue of approximately $1,900,000, as a result of the Arthrex Agreement, and deferred sales of approximately $2,100,000 from the purchase of Angel centrifuges and disposables by Arthrex that are warehoused by the Company for fulfillment of orders during the Transition Services period. Revenue related to the purchase of Angel centrifuges and disposables during the Transition Services period are recognized upon delivery to the point of sale. Revenue related to prepaid licensing is recognized on a straight-line basis over 5 years, the term of the Arthrex Agreement. Approximately $67,000 of revenue related to the prepaid license was recognized for the nine months ended September 30, 2013. |
Deferred Revenue (Details Textual) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Deferred Licensing Revenue | $ 1,900,000 | $ 1,900,000 | ||
Deferred Revenue | 2,100,000 | 2,100,000 | ||
Deferred Licensing Revenue, Recognized Period | 5 years | |||
Licenses Revenue | $ 67,063 | $ 0 | $ 67,063 | $ 3,154,722 |
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