ELUT 8-K
Elutia Inc. (ELUT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 7, 2025 (
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Item 1.01. | Entry Into a Material Definitive Agreement. |
Ligand Royalty Agreement Amendment
In 2017, Elutia Med LLC (“Elutia Med”), a wholly owned subsidiary of Elutia Inc. (the “Company” or “Elutia”), and Ligand Pharmaceuticals Incorporated (“Ligand”) entered into a royalty agreement dated as of May 31, 2017, as subsequently amended (the “Royalty Agreement”). The Royalty Agreement requires Elutia Med to pay Ligand 5.0% of future sales of the CanGaroo, ProxiCor, Tyke and VasCure products, and substantially similar products, such as EluPro, through May 31, 2027, subject to annual minimum payments of $4.4 million.
On October 1, 2025, Elutia Med entered into a Consent, Release and Amendment No. 3 to Royalty Agreement (the “Amendment”) with Ligand pursuant to which Ligand: (i) consented to the sale or license by Elutia and Elutia Med, pursuant to the terms and conditions set forth in that certain Asset Purchase Agreement dated September 8, 2025 (the “Purchase Agreement”) by and among the Company, Boston Scientific Corporation, a Delaware corporation (“BSC”) and Cardiac Pacemakers, Inc. (“CPI”, and collectively with BSC, the “Buyers”), of all Elutia’s and Elutia Med’s properties, rights, titles, interests and other tangible and intangible assets of every type, condition and description to the extent owned, licensed, used or held for use by them in connection with, relating to or necessary for the ownership or operation of the CIED Business (as defined below and in the Purchase Agreement) or the products covered by the Royalty Agreement, or otherwise used in or useful to the design, research, development, testing, seeking regulatory approval for, manufacturing, processing, packaging, labeling, marketing, using, promoting, storing, distributing, importing, exporting or sale of the products covered by the Royalty Agreement (the “CIED Assets”); and (ii) released its security interest in the CIED Assets. In partial consideration of Ligand entering into the Amendment, Elutia Med paid $1.1 million in accrued unpaid royalty obligations to Ligand.
The foregoing description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
Closing of Sale of CIED Business
As previously reported, on September 8, 2025, Elutia and Elutia Med (collectively, the “Sellers”) executed the Purchase Agreement with the Buyers. Subject to the terms and conditions of the Purchase Agreement, the Buyers agreed to purchase substantially all of the assets related to the Sellers’ business of researching, developing, administering, operating, commercializing, manufacturing, selling and marketing cardiac implantable electronic device (“CIED”) products, including its CanGaroo, CanGaroo RM, EluPro and CIED envelope products, including next generation CIED envelope products (collectively the “CIED Business”). The assets of the CIED Business constituted substantially all of the assets of Elutia’s Device Protection segment.
On October 1, 2025, the parties completed the sale of the CIED Business. In accordance with the Purchase Agreement, $8 million of the purchase price was deposited in escrow with a bank for twelve months as a customary indemnification fund in the event of certain post-closing Purchase Agreement breaches by Sellers. The remaining $80.3 million, which includes a preliminary inventory adjustment, was paid to or for the account of Sellers. The purchase price is also subject to possible adjustment based on the outcome of a post-closing inventory valuation.
At closing, the Sellers entered into a non-competition agreement pursuant to which they agreed to be subject to certain restrictive covenants in business lines related to the current CIED Business for five years, a transition services agreement pursuant to which Sellers have agreed to provide certain paid post-closing transitional support services to Buyers in connection with the transfer of the CIED Business (generally for periods of 12-30 months) and other documents and agreements customary for transactions similar to the CIED Business sale.
The foregoing description of the Purchase Agreement and the CIED Business sale does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Purchase Agreement is not intended to provide any other factual information about the Company, Elutia Med, BSC, CPI, or their respective owners, subsidiaries and affiliates. The representations, warranties and covenants contained in the Purchase Agreement: (i) were made solely for purposes of the Purchase Agreement and as of the date of the Purchase Agreement; (ii) were solely for the benefit of the parties to the Purchase Agreement; (iii) may be subject to qualifications and limitations agreed upon by the parties to the Purchase Agreement, including being qualified by confidential disclosures made for the purposes of allocating contractual risk among the parties to the Purchase Agreement instead of establishing these matters as facts; and (iv) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders of the Company. Investors and security holders of the Company should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company.
| Item 7.01 | Regulation FD Disclosure. |
On October 1, 2025, Elutia issued a press release announcing the closing of the sale of the CIED Business, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 7.01 (including Exhibit 99.1) of this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
| Item 8.01 | Other Events. |
At the closing of the CIED Business sale, the Company used approximately $27.8 million of the proceeds to pay in full and terminate that certain Credit Agreement, dated as of August 10, 2022, among Elutia, as Borrower, SWK Funding LLC, as Agent, and the lenders from time to time party thereto (as amended and supplemented from time to time).
| Item 9.01 | Financial Statements and Exhibits. |
(b) Pro forma financial information. The unaudited pro forma consolidated financial information of the Company as of June 30, 2025, for the six-month period ended June 30, 2025 and for each of the years ended December 31, 2024 and December 31, 2023 is filed as Exhibit 99.2 hereto and is incorporated herein by reference.
(d) Exhibits.
*Certain confidential information contained in this Exhibit, marked in brackets, has been omitted, because it is both not material and of the type of information that the registrant treats as private or confidential.
† Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.
‡ Certain confidential information contained in this Exhibit, marked in brackets, has been omitted, pursuant to Item 601(a)(6) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ELUTIA INC. | ||
| (Registrant) | ||
| Date: October 7, 2025 | By: | /s/ Matthew Ferguson |
| Matthew Ferguson | ||
| Chief Financial Officer | ||
Exhibit 10.2
CONSENT, RELEASE AND
AMENDMENT NO. 3 TO ROYALTY AGREEMENT
This Consent, Release and Amendment No. 3 to Royalty Agreement (this “Amendment”) is dated as of October 1, 2025 (the “Effective Date”), by and between Elutia Med LLC, a Delaware limited liability company (formerly known as Aziyo Med, LLC) (the “Company”), and Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Ligand” and, together with the Company, collectively, the “Parties” and each, a “Party”).
WHEREAS, the Parties previously entered into that certain Royalty Agreement dated as of May 31, 2017, as amended by that certain Amendment No. 1 to Royalty Agreement dated as of January 10, 2024, and that certain Subscription Agreement and Amendment No. 2 to Royalty Agreement dated May 8, 2025 (as further amended, restated, supplemented or otherwise modified from time to time, the “Royalty Agreement”; capitalized terms not expressly defined herein shall have the meaning ascribed to them in the Royalty Agreement);
WHEREAS, the Company and Guarantor (collectively, “Sellers”) are, among other things, engaged in the CIED Business (as defined in the CIED Purchase Agreement);
WHEREAS, the Company has advised Ligand that the Sellers intend to (a) sell or exclusively license to Boston Scientific Corporation, a Delaware corporation (“BSC”), and Cardiac Pacemakers Inc., a Minnesota corporation (“CPI” and together with BSC, the “Buyers”), pursuant to the terms and conditions set forth in that certain Asset Purchase Agreement dated as of September 8, 2025, by and between Buyers, on the one hand, and Sellers (the “CIED Purchase Agreement”), all properties, rights, titles, interests and other tangible and intangible assets of every type, condition and description to the extent owned, licensed, used or held for use by the Sellers in connection with, relating to or necessary for the ownership or operation of the CIED Business or the Products (each as defined in the CIED Purchase Agreement), or otherwise used in or useful to the design, research, development, testing, seeking regulatory approval for, manufacturing, processing, packaging, labeling, marketing, using, promoting, storing, distributing, importing, exporting or sale of the Products (as defined in the CIED Purchase Agreement) (the “CIED Sale Transaction”; the assets described in this paragraph are hereinafter referred to as the “CIED Assets”), and (b) use the sale proceeds received by Sellers in connection with the CIED Sale Transaction to (i) repay all obligations owing by Sellers to SWK Funding LLC, a Delaware limited liability company, and any other lenders in connection with the Senior Credit Facility as outstanding immediately prior to the effectiveness of this Amendment, (ii) pay certain transaction fees and expenses owing by Sellers in connection with the CIED Sale Transaction and (iii) for other working capital purposes (the use of proceeds described in the foregoing clauses (i), (ii) and (iii) are hereinafter referred to collectively as the “Use of CIED Sale Proceeds”); and
WHEREAS, in connection with the foregoing, the Company has requested that Ligand (a) provide its consent to the CIED Sale Transaction, (b) release its liens on the CIED Assets and (c) amend certain provisions of the Royalty Agreement, and Ligand has agreed to accommodate such requests, in each case, in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the mutual representations and warranties contained herein, the Parties hereto agree as follows:
1. Amendments to the Royalty Agreement.
(a) The
Parties hereby acknowledge and agree that the Royalty Agreement is hereby amended to delete the stricken text (indicated textually in
the same manner as the following example: stricken text) and to add the double-underlined
text (indicated textually in the same manner as the following example: double-underlined
text) as set forth on Annex A attached hereto.
(b) Schedule 3.08 to the Royalty Agreement is hereby deleted in its entirety. For the avoidance of doubt, all other Schedules to the Royalty Agreement shall not be modified or otherwise affected by this Amendment.
2. Consent. Notwithstanding anything to the contrary in the Royalty Agreement, including, without limitation, Section 5.05, Ligand hereby consents to (a) the CIED Sale Transaction on the terms and conditions set forth in the CIED Purchase Agreement and (b) the Use of CIED Sale Proceeds.
3. Full Release of CIED Assets. By its signature hereto, Ligand hereby (a) automatically and without further action by any Person releases, discharges, terminates and cancels its security interest, liens, rights, titles and interests in and to the CIED Assets, (b) acknowledges and agrees that, notwithstanding anything to the contrary set forth in the Royalty Agreement, on and as of the date hereof and as of the closing of the transactions contemplated by the CIED Purchase Agreement (the “CIED Closing”), neither the Royalty Related Collateral nor the General Collateral shall include any CIED Assets, (c) acknowledges and agrees that, notwithstanding anything to the contrary set forth in the Royalty Agreement, certain CIED Assets will be assigned and transferred to the Buyers following the CIED Closing, and neither the Royalty Related Collateral nor the General Collateral shall include any such CIED Assets and (d) acknowledges and agrees that, notwithstanding anything to the contrary set forth in the Royalty Agreement, neither the Royalty Related Collateral nor the General Collateral shall include any Excluded Patents (as defined in the CIED Purchase Agreement) following the CIED Closing. Ligand agrees to take all further actions, and provide to the Company all such commercially reasonable cooperation and assistance (including, without limitation, the execution and delivery of any and all documents or other instruments, in form and substance reasonably satisfactory to Ligand), reasonably requested by the Company to more fully and effectively effectuate the release set forth in this Section 3, all of the foregoing at the Company’s sole cost and expense. Notwithstanding anything to the contrary in this Amendment, the CIED Assets shall include all “Products”, “Acquired Assets” and “Excluded Patents” as set forth in the CIED Purchase Agreement. Notwithstanding anything to the contrary in this Amendment or the Royalty Agreement, the Buyers are intended third-party beneficiaries of this Section 3 and shall be entitled to enforce such provisions directly against the parties hereto and this Section 3 may not be amended without the prior written consent of the Buyers.
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4. No Waivers or other Amendments. All other terms and conditions of the Royalty Agreement remain unchanged, and the Royalty Agreement, as amended by this Amendment, shall remain in full force and effect according to its terms.
5. Counterparts. This Amendment may be signed in multiple counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same agreement. Delivery of counterpart signature pages hereof via facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof. The words “execution,” “signed,” “signature,” and words of like import in this letter agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written to become effective on the Effective Date.
| ELUTIA MED LLC | ||
| By: | /s/ Matt Ferguson | |
| Name: Matt Ferguson | ||
| Title: Chief Financial Officer | ||
Consent, Release and Amendment No. 3 to Royalty Agreement
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written to become effective on the Effective Date.
| LIGAND PHARMACEUTICALS INCORPORATED | ||
| By: | /s/ Tavo Espinoza | |
| Name: Tavo Espinoza | ||
| Title: Chief Financial Officer | ||
Consent, Release and Amendment No. 3 to Royalty Agreement
ANNEX A
RESTATED ROYALTY AGREEMENT
(See attached.)
EXECUTION
VERSION
ROYALTY AGREEMENT1
dated as of
May 31, 2017
by and between
AZIYOELUTIA
MED, LLC
and
LIGAND PHARMACEUTICALS INCORPORATED
1 This restated Royalty Agreement reflects modifications implemented pursuant to (i) that certain Amendment No. 1 to Royalty Agreement dated as of January 10, 2024 (the “First Amendment”), (ii) that certain Subscription Agreement and Amendment No. 2 to Royalty Agreement dated May 8, 2025 (the “Second Amendment”), and (iii) that certain Consent, Release and Amendment No. 3 to Royalty Agreement dated as of October 1, 2025 (the “Third Amendment”).
TABLE OF CONTENTS
Page
| ARTICLE I - Definitions | 1 | |
| SECTION 1.01. | Defined Terms | 1 |
| ARTICLE II - Payments by the Company; | 10 | |
| SECTION 2.01. | 10 | |
| SECTION 2.02. | Periodic Royalties | 11 |
| SECTION 2.03. | 12 | |
| SECTION 2.04. | Consent to Sale Transaction; No Assumed Obligations | 12 |
| ARTICLE III - Representations and Warranties of the Company | 12 | |
| SECTION 3.01. | Organization | 12 |
| SECTION 3.02. | Authorization | 13 |
| SECTION 3.03. | Governmental Authorization | 13 |
| SECTION 3.04. | Ownership | 13 |
| SECTION 3.05. | Litigation | 13 |
| SECTION 3.06. | Compliance with Laws | 14 |
| SECTION 3.07. | Conflicts | 14 |
| SECTION 3.08. | Current Indebtedness | 14 |
| SECTION 3.09. | Financial Statements | 14 |
| ARTICLE IV - Representations and Warranties of Ligand | 15 | |
| SECTION 4.01. | Organization | 15 |
| SECTION 4.02. | No Assignment; Authorization | 15 |
| SECTION 4.03. | Conflicts | 15 |
| ARTICLE V - Covenants | 15 | |
| SECTION 5.01. | Access; Information | 15 |
| SECTION 5.02. | Confidentiality; Press Release | 16 |
| SECTION 5.03. | Efforts; Further Assurance | 17 |
| SECTION 5.04. | Remedies Event | 17 |
| SECTION 5.05. | Indebtedness; Sale of Revenue Interests | 17 |
| SECTION 5.06. | 18 | |
| ARTICLE VI - Term and Termination | 18 | |
| SECTION 6.01. | Term | 18 |
| SECTION 6.02. | Extension of the Term | 18 |
| SECTION 6.03. | Effect of Termination | 18 |
| ARTICLE VII | 19 | |
| SECTION 7.01. | Survival | 19 |
| SECTION 7.02. | Notices | 19 |
| SECTION 7.03. | Successors and Assigns | 20 |
| SECTION 7.04. | Indemnification | 21 |
| SECTION 7.05. | No Implied Representations and Warranties | 22 |
| SECTION 7.06. | Independent Nature of Relationship | 22 |
| SECTION 7.07. | Entire Agreement | 23 |
| SECTION 7.08. | Amendments; No Waivers | 23 |
| SECTION 7.09. | Interpretation | 23 |
| SECTION 7.10. | Headings and Captions | 24 |
| SECTION 7.11. | Counterparts; Effectiveness | 24 |
| SECTION 7.12. | Severability | 24 |
| SECTION 7.13. | Expenses | 24 |
| SECTION 7.14. | Governing Law; Jurisdiction | 24 |
| ARTICLE VIII - Intercreditor Matters and Guarantee | 25 | |
| SECTION 8.01. | Ligand Interests; Recharacterization | 25 |
| SECTION 8.02. | Other Ligand Security | 26 |
| SECTION 8.03. | Priority | 26 |
| SECTION 8.04. | 27 | |
| SECTION 8.05. | 27 | |
| SECTION 8.06. | Termination or Release | 27 |
| ARTICLE IX - Remedies | 28 | |
| SECTION 9.01. | Remedies | 28 |
| SECTION 9.02. | Acceleration | 28 |
ROYALTY AGREEMENT
This ROYALTY AGREEMENT (as amended, supplemented
or otherwise modified from time to time, this “Agreement”) is dated as of May 31, 2017, by
and between AZIYOELUTIA
MED, LLC, a Delaware limited liability company (the “Company”);
and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation (“Ligand”).
RECITALS
Whereas, the Company wishes (i) to acquire from CorMatrix Cardiovascular, Inc. (the “Seller”) all of its assets related or applicable to, or used in connection with, its business of developing, manufacturing and commercializing the Products described herein (the “Sale Transaction”), and (ii) in connection with such Sale Transaction, to obtain the consent of Ligand to the Sale Transaction and enter into an agreement with Ligand setting forth the obligations of the Company to Ligand with respect to such acquired interests and the sale of the Products; and
Whereas, as a condition precedent to Ligand’s
entering into this Agreement, Aziyo Biologics,Elutia
Inc., a Delaware corporation and the parent of the Company (the “Guarantor”), has agreed to enter into a Guaranty
Agreement guarantying the obligations of the Company under Section 2.01, in substantially the form attached hereto as Exhibit A;
NOW, THEREFORE, in consideration of the mutual covenants, agreements and representations and warranties set forth herein, the parties hereto agree as follows:
ARTICLE I - Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:
“Affiliate” shall mean any Person that controls, is controlled by, or is under common control with another Person. For purposes of this definition, “control” shall mean direct or indirect ownership of a majority of the stock or other equity interests having the right to vote for the election of directors or other members of the governing body of the entity.
“Applicable Royalty
Percentage” shall mean (i) prior to the first $5,000,000 payment of the Buydown
Payment, twenty percent (20.0%) or (ii) following such payment, five percent (5.0%), provided that
if the second $5,000,000 installment of the Buydown Payment is not made on or before December 15, 2017, then the Applicable Royalty
Percentage shall be twenty percent (20.0%) from December 15, 2017, until such second payment is made..
“Asset Purchase Agreement” shall mean that certain Asset Purchase Agreement, dated as of May 31, 2017, by and among the Seller, the Company and the Guarantor setting forth the terms and conditions of the Sale Transaction.
“Audit Costs” shall mean, with respect to any audit of the books and records of the Company or its Subsidiaries with respect to amounts payable or paid under this Agreement, the reasonable out-of-pocket cost of such audit, including all fees, costs and expenses incurred in connection therewith.
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“Bankruptcy Event”. shall mean the occurrence of any proceeding being instituted by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or the Company taking any action to authorize any of the actions set forth above. Notwithstanding the foregoing, if such proceeding is instituted against the Company, no Bankruptcy Event shall have occurred unless such proceeding remains undismissed, undischarged or unbonded for a period of sixty (60) days.
“Books” shall mean all of the books and records of a Person, including ledgers, federal and state tax returns, records regarding the Person’s assets or liabilities, the General Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Business Day” shall mean any day other than a Saturday, a Sunday, any day which is a legal holiday under the laws of the State of New York, or any day on which banking institutions located in the State of New York are required by law or other governmental action to close.
“Buydown
PaymentCIED Assets”
shall have the meaning set forth in Section 2.01(a)given
to such term in the Third Amendment.
“CanGaroo
Product Change of Control” shall mean the first to occur of any Product
Change of Control in respect of the CanGaroo Products.
“CIED Sale Transaction” shall have the meaning given to such term in the Third Amendment.
“Collateral” means the Royalty Related Collateral and the General Collateral.
“Company” shall have the meaning set forth in the preamble.
“Company Change of Control” shall mean, with respect to the Company, the first to occur of any of the following transactions:
(a) the acquisition by any Person or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of any capital stock of the Company, if after such acquisition, such Person or group would be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, but assuming that any convertible securities owned by such Person or group or any controlled affiliates thereof are immediately exercisable), directly or indirectly, of securities of the Company representing a majority of the voting power of the Company;
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(b) a merger or consolidation of the Company, with any other Person, other than a merger or consolidation which would result in the Company's voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) a majority of voting power of the Company immediately after such merger or consolidation; or
(c) the bona fide sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any of its Subsidiaries of all or substantially all the assets of the Company and its Subsidiaries, taken as a whole.
“Confidential Information” shall mean, as it relates to the Company and its Affiliates and any of the Products, the Intellectual Property related to any of the Products, confidential business information, financial data and other like information (including ideas, research and development, know-how, formulas, schematics, compositions, technical data, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), client lists and tangible or intangible proprietary information or material, or such other information that either Party identifies to the other as confidential or the nature of which or the circumstances of the disclosure of which would reasonably indicate that such information is confidential or proprietary. Notwithstanding the foregoing definition, Confidential Information shall not include information that (a) is already in the public domain at the time the information is disclosed, (b) thereafter becomes lawfully obtainable from other sources who, to the knowledge of the recipient, have no obligation of confidentiality, (c) can be shown to have been independently developed by the recipient or its representatives without reference to any Confidential Information of the other Party or (d) is required to be disclosed under laws, rules and regulations of any Governmental Authority applicable to the Company or its Affiliates or Ligand or its Affiliates, as the case may be, or pursuant to the rules and regulations of any securities exchange or trading system or pursuant to any other laws, rules or regulations of any Governmental Authority having jurisdiction over the Company and its Affiliates or Ligand and its Affiliates.
“Depository Bank”
shall mean Silicon ValleyPNC
Bank.
“Effective Date” shall mean the date of the closing of the Sale Transaction.
“Excluded Assets” shall
mean (i) any deposit accounts exclusively used by the Company for payroll, payroll taxes and other employee wage and benefit payments
to or for the benefit of the Company’s employees, (ii) the Permitted CD Collateral Accounts (as defined in the MidCapSenior
Credit Facility), (iii) any fee interest in owned or leased real property (including fixtures related thereto), (iv) any “intent
to use” trademark application for which a statement of use has not been filed with the United States Patent and Trademark Office,
(v) any motor vehicles or other assets subject to certificates of title, (vi) any equity interests of subsidiaries that are
not wholly-owned subsidiaries to the extent a security interest on such equity interests is prohibited by the organizational or joint
venture documents relating to such equity interests, (vii) any voting equity interests of foreign subsidiaries in excess of 65% of
the outstanding voting equity interests of such subsidiaries and,
(viii) any assets over which the granting of a security interest in such assets would be prohibited by applicable law or contract
or that would require governmental consent, approval, license or authorization, in each case after giving effect to Section 9-406,
9-407, 9-408 or 9-409 of the Uniform Commercial Code in the applicable jurisdiction or any other applicable law or principle of equity,
and (ix) on and as of the Third Amendment Effective Date, the CIED Assets.
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“Excluded Costs” shall mean the following items to the extent permitted by generally accepted accounting principles: (i) value added or any other similar transaction taxes accrued on sales invoices, (ii) sales discounts and all kinds of rebates, (iii) any orders or parts thereof which are subsequently returned to the Company (or an Affiliate, agent or sublicensee thereof, as applicable) and refunded to the customer or wholesaler, (iv) charges for late payment collected from customers, registration charges and other service charges and (v) applicable shipping charges.
“Existing Liens” shall
mean (i) any liens or other security interests upon any assets of the Company for the benefit of the lenders and other secured parties
under the MidCapany Senior
Credit Facility, and (ii) the rights of the Seller and Cook Biotech Incorporation, an Indiana corporation, under the respective cross
license agreements entered into by the Company and each of them in connection with the Sale Transaction, as they may be amended or modified
from time to time.
“First Amendment Effective Date” shall have the meaning given to the term “Amendment Effective Date” in that certain Amendment No. 1 to Royalty Agreement dated January 10, 2024, by and between the Company and Ligand.
“Fiscal Month” shall mean each month-long period commencing on the first day of each calendar month during the Term, provided however that (a) the first Fiscal Month after the Effective Date shall commence on the day after the Effective Date and continue until the end of the first full Fiscal Month thereafter and (b) the last Fiscal Month of the Term shall end upon the expiration or termination of this Agreement.
“Fiscal Quarter” shall mean each three (3) month period commencing January 1, April l, July 1 or October 1, provided however that (a) the first Fiscal Quarter after the Effective Date shall commence on the day after the Effective Date and continue to the end of the first full Fiscal Quarter thereafter and (b) the last Fiscal Quarter of the Term shall end upon the expiration or termination of this Agreement.
“Fiscal Year” shall mean the calendar year.
“General Collateral” shall have the meaning set forth in Section 8.02.
“Governmental Authority” shall mean any government, court, regulatory or administrative agency or commission, or other governmental authority, agency or instrumentality, whether foreign, federal, state or local (domestic or foreign).
“Guarantor” shall have the meaning set forth in the Recitals.
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“Intellectual Property” shall mean all proprietary information; technical data; laboratory notebooks; clinical data; priority rights; trade secrets; know-how; confidential information; inventions (whether patentable or unpatentable and whether or not reduced to practice or claimed in a pending patent application); Patents; registered or unregistered trademarks, trade names, service marks, including all goodwill associated therewith; registered and unregistered copyrights and all applications thereof; in each case that are owned, controlled by, generated by, issued to, licensed to, licensed by or hereafter acquired by or licensed by the Company or any of its Subsidiaries.
“Intercreditor
Agreement” shall mean that certain Intercreditor Agreement, by and among the MidCap
Credit Facility Agentany intercreditor agreement between
or among a Senior Lender, Ligand, Guarantor and/or
the Company, dated as of May 31, 2017, as it may bein
each case, as amended, restated, supplemented or otherwise
modified from time to time.
“Knowledge of the Company” shall mean the current actual knowledge, information or belief held by Lode Debrabandere, Kevin Rakin and Michelle LeRoux Williams after reasonable inquiry by such person into the relevant subject matter.
“Ligand” shall have the meaning set forth in the preamble.
“Ligand Account” shall mean the following account (or such other account as Ligand may designate in writing (such designation to be made at least two (2) Business Days prior to any payment owing to Ligand under this Agreement)):
Ligand Pharmaceuticals, Inc.
[XXX]
Account No. [XXX]
Routing No. [XXX]
“Ligand Purchase Agreement” shall mean the Interest Purchase Agreement, dated as of May 3, 2016, between the Seller and Ligand.
“Losses” shall mean collectively, any and all claims, damages, losses, judgments, awards, penalties, liabilities, costs and expenses (including reasonable attorneys' fees and expenses) incurred in connection with defending any action, suit or proceeding.
“Main Account” shall mean the deposit account maintained by the Company at the Depository Bank with account number [XXX].
“Material Adverse Change"” shall mean, with respect to the Company and its Subsidiaries, any event, change, circumstance, occurrence, effect or state of facts that has caused or is reasonably likely to cause a material adverse change in the business, operations, assets or financial condition of the Company and its Subsidiaries, taken as a whole.
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“Material Adverse Effect” shall mean (a) the effect of a Material Adverse Change, (b) a material adverse effect on the validity or enforceability of this Agreement, (c) the inability or failure of the Company to make the payments provided in this Agreement, (d) a material adverse effect on the ability of the Company to perform any of its other material obligations under this Agreement or (e) any material adverse effect on the Products or the ability of the Company and its Subsidiaries to distribute, market and/or sell the Products.
“MidCap
Credit Facility” shall mean that certain Credit and Security Agreement (Revolving Loan) and that certain Credit and Security
Agreement (Term Loan), as each may be amended, amended and restated, supplemented or otherwise modified as of the date hereof, and as
each may be further amended, amended and restated. supplemented or otherwise modified
from time to time as permitted by the Intercreditor Agreement, by and among the Company and the Guarantor,
as Borrowers (as defined therein), MidCap Credit Facility Agent and the Lenders (as defined therein) party thereto.
“MidCap Credit
Facility Agent” shall mean MidCap Financial Trust, a Delaware statutory trust, in its capacity as administrative agent
under the MidCap Credit Facility or any successor thereto in such capacity.
“Minimum Annual
Royalty” shall mean with respect to (a) calendar year 2017, zero, (b) calendar year 2018, $1,250,000,
(c) calendar year 2019, $2,200,000, and (d) calendar yearyears
2020 and 2021, $2,750,000, (e) calendar year 2022, $1,375,000, and
(f) calendar year 2024 and each calendar year thereafter during the Term, $2,750,0004,400,000;
provided, however, that for the final Fiscal Year of the Term, the “Minimum Annual Royalty” shall
mean the applicable Minimum Annual Royalty multiplied by the fraction offor
any Fiscal Quarter during such Fiscal Year that is within the Term,
whether partial or full, shall mean the amounts set forth on Schedule 1 for such Fiscal Quarter; provided, further,
that if any Product, or any product enumerated in the definition of any Product (or in any Schedule referenced in any such definition),
is divested as a result of a Product Change of Control or if any Product is withdrawn from the market for regulatory or safety reasons
(excluding, in each case, the CIED Assets and any
Product Change of Control occurring in connection with the CIED Sale
Transaction), the Minimum Annual Royalty shall be reduced by an amount that is the product of (a) the applicable Minimum
Annual Royalty for the Fiscal Year in which such Product Change of Control or withdrawal takes place and for each Fiscal Year thereafter
times (b) the fraction representing (x) the total sales of such Product or enumerated product subject to such Product Change
of Control or withdrawal in the twelve (12) calendar months immediately preceding such Product Change of Control or withdrawal over (y) the
aggregate total sales of all Products in the twelve (12) calendar months immediately preceding such Product Change of Control or withdrawal.
For the avoidance of doubt, the Minimum Annual Royalty shall be adjusted according to the foregoing proviso immediately as of any Product
Change of Control or withdrawal (excluding any Product Change of Control
occurring in connection with the CIED Sale Transaction).
“Minimum Quarterly
Payment” shall mean, with respect to any Fiscal Quarter during the Term, an amount equal to the difference
between (i) the applicable Minimum Quarterly Royalty and (ii) the aggregate
Monthly Royalties paid to Ligand with respect to such Fiscal Quarter.
“Minimum Quarterly Royalty” shall mean the applicable Minimum Annual Royalty divided by four; provided, however, that for the final Fiscal Quarter of the Term, the “Minimum Quarterly Royalty” shall mean the applicable Minimum Annual Royalty divided by four multiplied by the fraction of such Fiscal Quarter that is within the Term.
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“Minimum Quarterly
Royalty Overpayment” shall have the meaning set forth in Section 2.02(b)(ii).
“Monthly Report” shall
mean, with respect to the relevant Payment Month of the Company, a report showing (a) the gross revenues of the Products for such
Payment Month, (b) the Net Sales Proceeds for such Payment Month, (c) the Excluded Costs for such Payment Month, and (d) a
reasonable calculation of the amount to which Ligand is entitled for such Payment Month pursuant to Section 2.02(a) of this
Agreement.
“Monthly
Royalty” shall
mean, with respect to each Payment Month, the amount due to Ligand
pursuant to Section 2.02(a) for such Payment
Month.
“Net Sales Proceeds”
shall mean the aggregate amount of sales proceeds received by the Company (or an Affiliate, agent or sublicensee thereof, as applicable)
and its Subsidiaries for Products in any PaymentFiscal
Month during the Term, less Excluded Costs.;
provided that, for the avoidance of doubt, on and as of the Third Amendment Effective Date, (a) no sales proceeds received by the
Company in connection with the CIED Asset Sale nor (b) any sale proceeds relating to the CIED Assets shall constitute Net Sales Proceeds
for any purpose hereunder.
“Obligations” shall mean any and all payment obligations of the Company under this Agreement.
“Pari Passu Collateral” shall
have the meaning set forth in the Intercreditor Agreement.
“Parties” shall mean Ligand, the Company and any other Person from time to time made party to this Agreement, each a “Party.”
“Patent” shall mean all patents, patent rights, patent applications, patent disclosures and invention disclosures issued or filed, together with all reissues, divisions, continuations, revisions, term extensions, substitutes, supplementary protection certificates, reexaminations, inter-partes reviews, post-grant oppositions or similar post-grant review proceedings, including the inventions claimed in any of the foregoing and any priority rights arising therefrom, that are issued or filed prior to the date hereof or during the remainder of the Term, which are owned by the Company or any Subsidiary.
“Payment
Month” shall
mean each month-long period commencing on the first day of each calendar month during the Term, provided however that
(a) the first Payment Month after the Effective Date shall commence
on the day after the Effective Date and continue until the end of the first full Payment Month
thereafter and (b) the last Payment Month of the Term shall end
upon the expiration or termination of this Agreement.
“Permitted Liens” shall mean (i) the Existing Liens, (ii) the security interests granted to Ligand pursuant to Article VIII, and (iii) any liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable.
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“Permitted Transaction” shall
mean any transaction (a) contemplated by the MidCapSenior
Credit Facility, as in effect on the Effective Date, or any refinancing facility with respect thereto and (b) during the Term whereby
the Company incurs, creates, assumes or permits to exist any indebtedness for borrowed money; provided that such transaction
(x) does not, except to the extent expressly contemplated by Section 8.06, result in any security interest granted
hereunder ceasing to be a valid and perfected security interest and (y) could not reasonably be expected to impair the ability of
the Company to comply with the requirements to make the payments set forth in Section 2.01, Section 2.02 or Section 2.03.
“Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, but not including a government or political subdivision or any agency or instrumentality of such government or political subdivision.
“Product Change of Control” shall mean, with respect to any Product, or any product enumerated in the definition of any Product (or in any Schedule referenced in any such definition), any sale or other transfer by the Company of substantially all of the assets primarily used to commercialize such Product or such enumerated product or of the exclusive right to commercialize such Product or such enumerated product.
“Products”
shall mean (a) SIS tissue sheet products that were (i) marketed or sold by the Seller under the trade name CorMatrix Carotid
Repair, CorMatrix Vascular Repair, CorMatrix Pericardial Repair & Reconstruction, Tyke or CorMatrix Cardiac Tissue Repair and
(ii) described in a Section 510(k) premarket notification cleared by the FDA on or prior to the Closing Date, (b) SIS
encasement structures for encapsulation of any cardiac implantable electronic device (CIED) that were (i) marketed or sold by the
Seller under the trade name CanGaroo or CorMatrix CanGaroo and (ii) described in a Section 510(k) premarket notification
cleared by the FDA on or prior to the Closing Date (the “CanGaroo Products”), and (c) any products substantially
similar in design and application to the Products specified in clauses (a) and (b) commercialized after the Closing Date during
the Term, including in each case specified in clauses (a) - (c), any modifications and improvements made to the tissue sheet structures
or the encasement structures of such Products that are to be commercialized for the applications in the AziyoElutia
Fields of Use, as defined in the Asset Purchase Agreement. For the purposes hereof, the term “Products” shall also mean and
include (x) CanGaroo Products for encasement of neurologic devices and other subcutaneous implantable device applications, and (y) CanGaroo
Products composed of SIS plus antibiotics. Schedule A sets forth a complete list of all of the Products at the Closing
Date. Notwithstanding any of the foregoing, on and as of the Third Amendment
Effective Date, the term “Products” shall not include any of the CIED Assets.
“Recharacterization” shall
have the meaning set forth in the recitals to the Intercreditor Agreement.
“Quarterly Royalty” shall mean, with respect to each Fiscal Quarter, the amount due to Ligand pursuant to Section 2.02(a) for such Fiscal Quarter.
“Recharacterization” shall mean the characterization of the Royalty Interests by final order of a bankruptcy court in connection with a Bankruptcy Event or any other court of competent jurisdiction as a loan or other financing instrument and the determination of such court that Ligand does not have an ownership interest in the Royalty Interests.
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“Regulatory Agency” shall mean a Governmental Authority with responsibility for the approval of the marketing and sale of surgical implants or other regulation of surgical implants.
“Regulatory Approvals” shall mean all approvals (including, without limitation, where applicable, pricing and reimbursement approval and schedule classifications), product and/or establishment licenses, registrations or authorizations of any Governmental Authority necessary for the manufacture, use, storage, import, export, transport, offer for sale, or sale of any of the Products.
“Remedies Event” shall
mean (x) a Bankruptcy Event, (y) a failure by the Company to make a payment pursuant to Section 2,01, Section 2.02 or Section 2.03, provided that
no such failure shall constitute a Remedies Event unless such failure shall remain uncured for thirty (30) days or (z) an Event of
Default (as defined in the MidCapSenior
Credit Facility) under the MidCapSenior
Credit Facility.
“Royalty Interests”
shall mean the right to receive on a monthlyquarterly
basis cash in an amount equal to the product of the Applicable Royalty Percentage multiplied by the Net Sales Proceeds during the Term,
pursuant to the terms and conditions of this Agreement. For the avoidance of doubt, Royalty Interests shall not constitute accounts or
payment intangibles (as each term is defined in the UCC) giving rise to such cash amounts.
“Royalty
Related Collateral” means (a) any accounts (as defined in Article 9 of the UCC) with respect to the Products
and the proceeds of such accounts, (b) the Special Account, (c) any intellectual
property acquired by the Company from the Seller and necessary for the production, marketing or sale of the Products, including those
set forth on Schedule B hereto and (c) any Equipment and Inventory (as defined in Article 9 of the UCC) used
in connection with the production of any Product.
“Sale Transaction” shall have the meaning set forth in the Recitals.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“Senior Credit Facility” shall mean, individually and collectively, any credit facility from time to time entered into between Company or any of its Affiliates, on the one hand, and one or more senior agents and/or lenders, on the other hand, in each case, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of the Intercreditor Agreement.
“Senior Credit Facility Lender” shall mean, individually and collectively, any senior agent or senior lender from time to time party to a Senior Credit Facility.
“SIS” shall mean a solid sheet extracellular matrix composition prepared from intestinal tissue.
“Special
AccountSubscription Agreement”
shall mean the deposit account maintained by the Company at the Depository Bank with account number [XXX].a
subscription agreement between the Company and Ligand in a form
as may be mutually agreed upon by the Parties.
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“Subsidiary” shall mean, with respect to the Company, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the voting power (other than securities or interests having such power only by reason of the happening of a contingency) are at the time owned beneficially or of record by the Company.
“Sweep
EventTerm” shall have
the meaning set forth in the Intercreditor AgreementSection 6.01.
“Third Amendment” shall mean that certain Consent, Release and Amendment No. 3 to Royalty Agreement dated as of the Third Amendment Effective Date by and between the Company and Ligand.
“Term”
shall have the meaning set forth in Section 6.01Third
Amendment Effective Date” shall mean October 1, 2025.
“Third Amendment Deferred Royalty Payment” shall mean all unpaid royalty obligations that have accrued under Article II of this Agreement as of the Third Amendment Effective Date with respect to the fiscal quarter ending June 30, 2025, and any prior periods (including without limitation, any accrued Monthly Royalties, Minimum Quarterly Royalties or Minimum Annual Royalties, as each such term was defined in this Agreement immediately prior to the effectiveness of the Third Amendment), in an aggregate amount equal to $1,100,000.
“Third Party” shall mean any Person other than Ligand and any Affiliate of Ligand or the Company or any Subsidiary of the Company.
“Transfer” shall have the meaning set forth in Section 8.06(c).
“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time.
ARTICLE II - Payments by the Company
SECTION 2.01. Buydown
Payment[Intentionally Omitted].
The
Company shall make a payment to Ligand in the amount of $10,000,000 (the “Buydown Payment”) in two (2) installments,
the first installment in the amount of $5,000,000 payable within thirty (30) days after the Effective Date but no later than June 30,
2017, and the second installment in the amount of $5,000,000 payable on or before December 15, 2017, each of which shall be paid
by wire transfer of immediately available funds to
the Ligand Account.
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SECTION 2.02. Periodic Royalties.
(a) MonthlyQuarterly
Royalties. The Company shall pay to Ligand, either by wire
transfer of immediately available funds (i)or,
upon mutual agreement of the Company and Ligand, by the issuance of shares of the Company’s Class A Stock pursuant to a Subscription
Agreement, in each case, within thirty (30) days after the end of each Payment MonthFiscal
Quarter, an amount equal to the Applicable Royalty Percentage multiplied by the Net Sales Proceeds (if any) received by the Company
during such Payment Month, and (ii) on the Closing Date, the monthly royalty amounts due and
owing by Seller under the Ligand Purchase Agreement for the Payment Months of March and April 2017 and when due the monthly
royalty amount of Seller thereunder for the Payment Month of May 2017.Fiscal
Quarter.
(b) Minimum Quarterly Payments.
With
(i) Subject to clause (b)(ii),
if, with respect to any Fiscal Quarter that begins after December 31, 2017, the
sum of (1), if the aggregate MonthlyQuarterly
Royalties paid to Ligand during the Fiscal Year that includesfor
such Fiscal Quarter plus (2) the Minimum Quarterly Payments made to Ligand during such Fiscal Year is less than the Minimum Quarterly
Royalty multiplied by the number of completed Fiscal Quarters in such Fiscal Year, then the Company shall pay to Ligand, either
by wire transfer of immediately available funds or, upon mutual
agreement of the Company and Ligand, by the issuance of shares of the Company’s Class A Stock pursuant to a Subscription Agreement,
in each case, within thirtysixty
(3060) days after
the end of such Fiscal Quarter, an amount equal to the difference between (A) the Minimum Quarterly Royalty multiplied by the number
of completed Fiscal Quarters in such Fiscal Year and (B) the sum of (1) the aggregate MonthlyQuarterly
Royalties paid to Ligand with respect to such Fiscal Year plus (2) the Minimum Quarterly Payments made to Ligand with respect to
such Fiscal Year.; provided
that, notwithstanding the foregoing or anything to the contrary set forth herein (including Section 2.02(a)), the Parties acknowledge
and agree that the Third Amendment Deferred Royalty Payments shall be paid by the Company within five (5) Business Days after the
closing of the CIED Sale Transaction.
(ii) Notwithstanding clause
(b)(i), if, with respect to any Fiscal Year that begins after December 31, 2017 in respect of which any Minimum
Quarterly Payment was made to Ligand, the aggregate Monthly Royalties paid in respect of such Fiscal Year exceed the applicable Minimum
Annual Royalty (the amount of any such Minimum Quarterly Payments made in any such Fiscal Year, the “Minimum Royalty Overpayment”), then
any subsequent payment obligation owing by the Company pursuant to this Agreement shall be automatically reduced and offset in the amount
of such Minimum Royalty Overpayment until such Minimum Royalty Overpayment is extinguished.
(c) Payments to Ligand. If the Company elects to make cash payments to Ligand, in lieu of stock issuances:
(i) Within
thirty (30) days following the end of each Payment MonthFiscal
Quarter, the Company shall disburse from the Special Account remit
by wire transfer of immediately available funds to the Ligand
Account an amount equal to the amount to which Ligand is entitled pursuant to Section 2.02(a) of this Agreement
(if any) for such Payment Month.Fiscal
Quarter; and
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(ii) Within sixty (60) days following the end of each Fiscal Quarter, the Company shall remit by wire transfer of immediately available funds to the Ligand Account an amount equal to the amount to which Ligand is entitled pursuant to Section 2.02(b) of this Agreement (if any) for such Fiscal Quarter.
(iii) If,
after any Sweep Event occurs, the "notice of exclusive control" giving rise to such Sweep Event is revoked prior to a Bankruptcy
Event, to the extent any Minimum Quarterly Royalty came due and was not paid pursuant to [Section 2.1(b)] of the lntercreditor Agreement
prior to such revocation, the Company shall pay such Minimum Quarterly Royalty within thirty (30) days of such revocation.
SECTION 2.03. Milestone
Payments[Intentionally Omitted].
(a) If
and when the aggregate amount of Net Sales Proceeds received by the Company during the Term equals $100,000,000, the Company shall pay
$5,000,000 to Ligand, which payment shall be made within forty-five (45) days thereof by wire transfer of immediately available funds
to the Ligand Account.
(b) If
and when the aggregate amount of Net Sales Proceeds received by the Company during the Term equals $300,000,000 or the occurrence of a
CanGaroo Product Change of Control during the Term, whichever is sooner, the Company shall pay an additional $5,000,000 to Ligand, which
payment shall be made within forty-five (45) days thereof by wire transfer of immediately available funds to Ligand Account.
SECTION 2.04. Consent to Sale Transaction; No Assumed Obligations.
Ligand hereby consents to the Sale Transaction on the terms and conditions set forth in the Asset Purchase Agreement. Notwithstanding any provision in this Agreement or any other writing to the contrary, Ligand acknowledges and agrees that (i) Ligand does not have any right, title or interest in or to any of the Products or any other assets acquired the Company in the Sales Transaction, except for its interest in and to the Royalty Interests (and the security interests granted to Ligand hereunder) during the Term, all as set forth herein, and (ii) neither the Company nor any of its Affiliates have assumed or agreed to pay any liabilities or other obligations of the Seller or any of its Affiliates to Ligand or its Affiliates of whatever nature, whether presently in existence or arising or asserted hereafter, including without limitation, any obligations or liabilities of the Seller or its Affiliates under the Ligand Purchase Agreement. All such liabilities and obligations shall be retained by and remain obligations and liabilities of the Seller and its Affiliates.
ARTICLE III - Representations and Warranties of the Company
SECTION 3.01. Organization.
The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all limited liability company power and all licenses, authorizations, consents and approvals required to carry on its business as proposed to be conducted in connection with this Agreement. The Company has no Subsidiaries.
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SECTION 3.02. Authorization.
The Company has all necessary power and authority to enter into, execute and deliver this Agreement and to perform all of the obligations to be performed by it hereunder and to consummate the transactions contemplated hereunder. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or general equitable principles.
SECTION 3.03. Governmental Authorization.
The execution and delivery by the Company of this Agreement, and the performance by the Company of its obligations hereunder, does not require any notice to, action or consent by, or in respect of, or filing with, any Governmental Authority.
SECTION 3.04. Ownership.
(a) As of the date hereof, the Company owns or holds a valid license under all of the Intellectual Property and the Regulatory Approvals which it currently purports to own related to any of the Products, free and clear of all liens, except Permitted Liens. As of the date hereof, the Company has not granted, nor does there exist, any lien on the Products except Permitted Liens.
(b) There is no filed and served on the Company or, to the Knowledge of the Company, threatened against the Company in writing any action, suit, proceeding, investigation or claim by any Person to which the Company is a party that claims that the Intellectual Property or the manufacture, use, marketing, sale, offer for sale, importation or distribution of any Product infringes on any Person’s trade secrets or other intellectual property. The Company has not received any written communication containing an offer to license to the Company, or a request that the Company consider whether it wishes to obtain a license, under any intellectual property owned by a third party, in each case, to make, use or sell a Product. To the Knowledge of the Company, without any independent investigation or inquiry, there are no pending unlicensed patent applications owned by any other Person that if a patent were to issue thereon without modification or amendment, would limit or prohibit, in any material respect, the manufacture, use or sale of any Product.
SECTION 3.05. Litigation.
As of the date hereof, there is no (a) action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened against the Company or (b) any governmental inquiry pending or, to the Knowledge of the Company, threatened against the Company, in each case with respect to clause (a) or (b) above, which, if adversely determined, would question the validity of, or could reasonably be expected to have a material adverse effect on the transactions contemplated by this Agreement or could reasonably be expected to have a Material Adverse Effect. As of the date hereof, there is no action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened in writing against the Company relating to any of the Products, the Intellectual Property related to any of the Products or the Regulatory Approvals.
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SECTION 3.06. Compliance with Laws.
To the Knowledge of the Company, the Company (a) is not in violation of, has not violated and is not under investigation with respect to, and (b) has not been threatened to be charged with or been given written notice of any violation of, any law, rule, ordinance or regulation of, or any judgment, order, writ, decree, permit or license entered by any Governmental Authority applicable to the Company which would reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. Conflicts.
Neither the execution and delivery of this Agreement nor the performance or consummation of the transactions contemplated hereby by the Company will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provision of (i) any law, rule, ordinance or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which the Company or any of its assets or properties are subject or bound or (ii) any contract, agreement, commitment or instrument to which the Company is a party or by which the Company, or any of its assets or property’s is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the certificate of formation or limited liability company agreement (or other organizational or constitutional documents) of the Company; (c) require any notification to, filing with, or consent of, any Person or Governmental Authority, except such consents that have been obtained at or prior to the date hereof; or (d) give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to a loss of any right of the Company to distribute, market and/or sell any of the Products, except, in the case of clause (a), (c) or (d) above, for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.08. Current Indebtedness. Other
than
as
set forth on Schedule 3.08As
of the closing date of the CIED Sale Transaction and after giving effect to the Use of CIED Sale Proceeds (as such term is defined in
the Third Amendment) in connection therewith, there is no indebtedness (other than trade indebtedness in the ordinary course of
business) for borrowed money of the Company.
SECTION 3.09. Financial Statements.
All financial statements for the Company and Guarantor delivered to Ligand fairly present, in conformity with generally accepted accounting principles, in all material respects, the consolidated financial condition and consolidated results of operations of the Company and Guarantor.
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ARTICLE IV - Representations and Warranties of Ligand
SECTION 4.01. Organization.
Ligand is a corporation duly incorporated and validly existing under the laws of the State of Delaware.
SECTION 4.02. No Assignment; Authorization.
Ligand has not assigned, transferred, pledged, granted a security interest in or otherwise disposed of any of its obligations or rights under the Ligand Purchase Agreement, or any right, title or interest in or to the Products, any Intellectual Property related to the Products or any revenues related to the Products, except as provided herein, and has all necessary power and authority to enter into, execute and deliver this Agreement and to perform all of the obligations to be performed by it hereunder and to consummate the transactions contemplated hereunder. This Agreement has been duly authorized, executed and delivered by Ligand and constitutes the valid and binding obligation of Ligand, enforceable against Ligand in accordance with its respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or general equitable principles.
SECTION 4.03. Conflicts.
Neither the execution and delivery of this Agreement nor the performance or consummation of the transactions contemplated hereby by Ligand will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provision of (i) any law, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which Ligand or any of its assets or properties may be subject or bound or (ii) any contract, agreement, commitment or instrument to which Ligand is a party or by which Ligand or any of its assets or properties is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the certificate of incorporation or bylaws (or other organizational or constitutional documents) of Ligand; or (c) require any notification to, filing with, or consent of, any Person or Governmental Authority, except, in the case of the foregoing clause (a) or (c), for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a material adverse effect on the ability of Ligand to perform any of its obligations under this Agreement.
ARTICLE V - Covenants
SECTION 5.01. Access; Information.
(a) Maintenance of Books and Records. During the Term, the Company shall keep and maintain, or cause to be kept and maintained, at all times books of account and records consistent with good business practices and customary industry standards adequate to correctly reflect all payments paid and/or payable to Ligand with respect to the Products.
(b) Inspection
Rights. During the Term, Ligand shall have the right to designate a Third Party independent public accounting firm (the “Ligand
Representative”) to visit the Company’s and its Subsidiaries’ offices and properties where the Company and its
Subsidiaries keep and maintain their books and records relating or pertaining to the Products for the purpose of conducting an audit of
such books and records with respect the payments due and payable to Ligand under Section 2.02 or
Section 2.03, and to inspect and audit such books and records for such purpose, during normal business hours, and,
upon at least ten (10) Business Days’ written notice given by Ligand to the Company, the Company will provide such Ligand Representative
reasonable access to such books and records; provided, however, such inspection and audit rights may only be exercised by Ligand once
in each calendar year.
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(c) Audit Costs. In the event any audit of the books and records of the Company and its Subsidiaries relating to the gross revenues of the Products or Net Sales Proceeds conducted by Ligand and/or any of Ligand’s representatives reveals that the amounts paid to Ligand hereunder for the period of such audit have been understated by more than ten percent (10%) of the undisputed amounts due for the period subject to such audit, then the Audit Costs in respect of such audit shall be borne by the Company; and in all other cases, such Audit Costs shall be borne by Ligand.
(d) Monthly
Reports. During the Term, the Company shall, promptly after the end of each Payment Month of the Company (but in
no event later than thirty (30) days following the end of such Payment Month), produce and deliver to Ligand a Monthly Report for such
Payment Month.[Intentionally Omitted].
(e) Periodic Reports. The Company shall deliver to Ligand the following financial statements:
(i) Within forty-five (45) days after the end of each Fiscal Quarter after the Effective Date, copies of the unaudited financial statements of the Company for such Fiscal Quarter; and
(ii) Within
one hundred twenty (120) days after the end of each Fiscal Year after the Effective Date, copies of the audited consolidated financial
statements of the Guarantor and the Company for such Fiscal Year. ;
(f) Notice
of Deposits Following a Sweep Event. Following a Sweep Event, on the first Business Day of each week, the Company
shall provide Ligand with notice of the amount and the source of all deposits made during the preceding week into the Main Account.
provided that, in either case, the Parties acknowledge and agree that any annual, regular, periodic or special reports and registration statements which the Company files5.06 with the SEC or any other Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, shall satisfy the financial statement delivery requirements set forth in this Section 5.01(e).
SECTION 5.02. Confidentiality; Press Release.
(a) All Confidential Information furnished by the Company or Seller to Ligand or by Ligand to the Company in connection with this Agreement and the transactions contemplated hereby, as well as the terms, conditions and provisions of this Agreement, shall be kept confidential by Ligand and the Company. Notwithstanding the foregoing, (i) the Company and Ligand may disclose such Confidential Information to their partners, directors, employees, managers, officers, investors, bankers, advisors, trustees and representatives, (ii) the Company may disclose the terms, conditions and provisions of this Agreement to any Third Party in connection with (and only in connection with) a transaction with such Third Party that could reasonably be expected to result in (X) a Company Change of Control, (Y) a Product Change of Control or (Z) a sale by the Company of a Subsidiary, division, product line, or other significant portion of its business, and (iii) the Company and Ligand may disclose such Confidential Information as may otherwise be required by applicable law, including filing this Agreement with the SEC; provided, in the case of the foregoing clauses (i) and (ii) that such Persons and such Third Parties shall be informed of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section 5.02(a); provided, further, that in the case of the foregoing clause (iii) Ligand shall provide at least five (5) Business Days’ notice to the Company of any filing with the SEC and consider in good faith a request for confidential treatment of any portion of this Agreement prior to filing with the SEC.
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(b) Notwithstanding the foregoing clause (a), Ligand may make a press release or other announcement or public disclosure concerning this Agreement, provided that such press release shall be (x) subject to prior review by the Company and (y) in form and substance reasonably satisfactory to the Company taking into account any commercial sensitivities of the Company.
SECTION 5.03. Efforts; Further Assurance.
Subject to the terms and conditions of this Agreement, each of Ligand and the Company will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Ligand and the Company agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary in order to consummate or implement expeditiously the transactions contemplated by this Agreement.
SECTION 5.04. Remedies Event.
During the Term, if a Remedies Event shall have occurred and be continuing, subject to the Intercreditor Agreement (if any), the Company shall not, without the consent of Ligand, make a distribution to its member or members, or retire any indebtedness for borrowed money, other than in connection with a Permitted Transaction, or engage in any transaction that would result in a Company Change of Control.
SECTION 5.05. Indebtedness;
Sale of Revenue Interests. Prior to the time that the Buydown Payment is paid in full, unless Ligand shall
otherwise consent in writing, the Company shall not, other than in connection with any Permitted Transaction, (x) incur, create,
assume or permit to exist any indebtedness for borrowed money of the Company other than indebtedness of the Company as of the Effective
Date or (y) sell, assign, transfer or convey any interests in the revenues generated by the Products to any Third Party other than
by the terms of this Agreement.[Intentionally Omitted].
17
SECTION 5.06. Remittance
of Funds to Accounts[Intentionally Omitted].
(a) Weekly
Sweep to Special Account. The Company shall instruct the Depository Bank to sweep any funds arising from the Royalty
Interests contained in the Main Account, no less frequently than once every week, into the Special Account, in accordance with further
instructions to be provided by the Company on a weekly basis, it being understood that, in respect of the sweep contemplated under this
Section 5.06(a), at the end of each Payment Month, the Company may retain from disbursement from the Special Account to Ligand any
Excluded Costs deriving from any week covered by such Payment Month so long as such Excluded Costs are reflected in the Monthly Report
in respect of such Payment Month.
(b) Special
Account. The funds in the Special Account shall be held in trust solely for the benefit of Ligand. The Company shall
not take any action with respect to the Special Account other than making (i) the instructions to the Depository Bank necessary to
effectuate the sweep contemplated in clause (a) of this Section 5.06,
(y) any adjustment (and corresponding withdrawal of excess funds) for Excluded Costs as necessary to reconcile the balance of the
Special Account with the amount to which Ligand is entitled pursuant to Section 2.02(a), provided that
such adjustment shall occur only in accordance with and upon delivery of a Monthly Report calculating such Excluded Costs and (z) any
disbursement of funds from the Special Account to the Ligand Account in accordance with Section 2.02(c)(i).
ARTICLE VI - Term and Termination
SECTION 6.01. Term.
This Agreement shall commence on the Effective Date and shall continue through and including the tenth anniversary of the Effective Date (the “Term”).
SECTION 6.02. Extension of the Term.
If any payments are accrued hereunder on or prior to the end of the Term and are required to be made by one of the Parties hereunder, this Agreement shall remain in full force and effect until any and all such payments have been made in full. Upon expiration or termination of this Agreement in accordance with its terms, all right, title and interest in and to the Royalty Interests shall automatically revert to the Company (and the security interests granted to Ligand hereunder shall automatically terminate), and Ligand will have no further rights in or with respect to the Royalty Interests or other Collateral and all other rights and interests of Ligand hereunder shall terminate (other than any contingent indemnification obligations with respect to which no claim has been made).
SECTION 6.03. Effect of Termination.
In the event of the termination of this Agreement pursuant to Section 6.02, this Agreement shall forthwith become void, impose no liability on the part of any Party hereto or its Affiliates, directors, officers, stockholders, partners, managers or members and have no effect other than the provisions of this Section 6.03, and Section 5.02, Section 6.02 and Article VII hereof, which shall survive any such termination.
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ARTICLE VII Miscellaneous
SECTION 7.01. Survival.
All representations and warranties made herein or in any other writing delivered pursuant hereto shall survive the execution and delivery of this Agreement and shall continue to survive until the expiration or termination of this Agreement in accordance with Article VI.
SECTION 7.02. Notices.
All notices, consents, waivers and communications hereunder given by any Party to the other shall be in writing (including facsimile transmission) and delivered personally, by telegraph, telecopy, telex or facsimile, by a recognized overnight courier, or by dispatching the same by certified or registered mail, return receipt requested, with postage prepaid, in each case addressed (with a copy by email):
If to Ligand to:
Ligand Pharmaceuticals Incorporated
11119
North Torrey Pines Road555 Heritage Drive, Suite 200,
Jupiter, FL 33458
La Jolla, CA 92037
Attention: [XXX]
Email: [XXX]
With a copy to:
Ligand Pharmaceuticals Incorporated
Latham & Watkins LLP
12670 High Bluff Drive
3911
Sorrento Valley Blvd., #110, San Diego, CA 9213092121
Attention: [XXX]
Email: [XXX]
If to the Company to:
AziyoElutia
Med, LLC
20 Firstfield Road
Gaithersburg, MD 20878
Attention: [XXX]
Email: [XXX]
19
With a copy to:
Shipman &
GoodwinKilpatrick Townsend & Stockton LLP
1100 Peachtree Street NE, Suite 2800
Atlanta, Georgia 30309
Attn: Michael J. Cochran
One Constitution Plaza
Hartford, CT 06103
Attention: [XXX]
Email: [XXX]
[email protected]
or to such other address or addresses as Ligand or the Company may from time to time designate by notice as provided herein, except that notices of changes of address shall be effective only upon receipt. All such notices, consents, waivers and communications shall: (a) when posted by certified or registered mail, postage prepaid, return receipt requested, be effective three (3) Business Days after dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective upon receipt by the transmitting party of confirmation of complete transmission, or (c) when delivered by a recognized overnight courier or in person, be effective upon receipt when hand delivered.
SECTION 7.03. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
(b) Upon the consent of Ligand (which consent may not be unreasonably withheld, delayed or conditioned for any proposed assignment to any reasonably creditworthy proposed assignee), the Company may assign all or any applicable part of its rights and obligations under this Agreement in respect of any Product Change of Control, subject to the assumption by such proposed assignee of the obligations set forth in Section 2.01 and Section 2.02 with respect to such Product. Notwithstanding the foregoing, in the event that LeMaitre Vascular, Inc. (“LeMaitre”) exercises its rights to acquire certain products from the Company (including ProxiCor products, Tyke products and VasCure for vascular repair products) pursuant to that certain Distribution Agreement, dated April 20, 2023, as amended or modified from time to time, by and between Aziyo Biologics, Inc. and LeMaitre (the “Distribution Agreement”), Ligand hereby acknowledges, agrees, and consents to such purchase by LeMaitre. For the avoidance of doubt, Ligand further acknowledges and agrees that (i) the execution of the Distribution Agreement by Aziyo Biologics, Inc., or (ii) the grant of the Option (as defined in the Distribution Agreement) in favor of LeMaitre pursuant to the Distribution Agreement, shall not constitute a breach, default or violation of this Agreement, and any right of action arising from the foregoing is hereby waived.
(c) Solely upon the consent of the Company (which consent may not be unreasonably withheld, delayed or conditioned, other than in respect of any proposed assignment to any direct competitor of the Company, in respect of which such consent may be granted or withheld by the Company in its sole discretion), Ligand may assign any of its obligations or rights under this Agreement without restriction; provided that, notwithstanding the foregoing, Ligand may assign its rights and/or delegate its obligations under this Agreement to an Affiliate, to any Person in a transaction in which Ligand also assigns all of its right, title and interest in all or substantially all of its assets to the same party contemporaneous with the assignment of this Agreement, or to a successor, whether by way of merger, sale of stock or otherwise, without the Company's prior written consent. In advance of any proposed assignment by Ligand to any proposed assignee, Ligand shall provide to the Company any information concerning such proposed assignment and such proposed assignee as may be reasonably requested by the Company.
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SECTION 7.04. Indemnification.
(a) The Company hereby indemnifies and holds Ligand and its Affiliates and any of their respective partners, directors, managers, members, officers, employees and agents (each, a “Ligand Indemnified Party”) harmless from and against any and all Losses incurred or suffered by any Ligand Indemnified Party arising out of any breach of any representation or warranty made by the Company in this Agreement.
(b) Ligand hereby indemnifies and holds the Company, its Affiliates and any of their respective partners, directors, managers, officers, employees and agents (each, a “Company Indemnified Party”) harmless from and against any and all Losses incurred or suffered by a Company Indemnified Party arising out of any breach of any representation or warranty made by Ligand in this Agreement.
(c) If any claim, demand, action or proceeding (including any investigation by any Governmental Authority) shall be brought or alleged against an indemnified party in respect of which indemnity is to be sought against an indemnifying party pursuant to the preceding paragraphs, the indemnified party shall, promptly after receipt of notice of the commencement of any such claim, demand, action or proceeding, notify the indemnifying party in writing of the commencement of such claim, demand, action or proceeding, enclosing a copy of all papers served, if any; provided, that the omission to so notify such indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 7.04 unless, and only to the extent that, such omission results in the forfeiture of, or has a material adverse effect on the exercise or prosecution of, substantive rights or defenses by the indemnifying party. In case any such action is brought by a third party against an indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7.04 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding by a third party, an indemnified party shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel. It is agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to local counsel where necessary) for all such indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
21
(d) Ligand's sole remedy shall be to recover any monetary damages associated with a breach of a representation or warranty made by the Company in this Agreement, subject to the other terms and provisions contained in this Agreement.
SECTION 7.05. No Implied Representations and Warranties.
Each Party acknowledges and agrees that, other than the representations and warranties specifically contained in this Agreement, there are no representations or warranties of either Party or any other Person either expressed or implied with respect to the Products or the Sale Transaction or the other transactions contemplated hereby. Without limiting the foregoing, Ligand acknowledges and agrees that (a) Ligand and its Affiliates, together with its and its Affiliates’ representatives, have made their own investigation of the Products, the Intellectual Property related to the Products and the Regulatory Approvals and are not relying on any implied warranties or upon any other representation or warranty whatsoever, including any representation or warranty as to the future amount or potential value of the Products or Net Sales Proceeds, the amount of any payments by the Company hereunder or as to the creditworthiness of the Company and (b) except as expressly set forth in any representation or warranty in this Agreement, Ligand shall have no claim or right to indemnification by the Company pursuant to Section 7.04 (or otherwise) with respect to any information, documents or materials furnished by the Company or Seller or any of their respective representatives to Ligand, any of its Affiliates, or any of its or its Affiliates’ representatives, including any information, documents or material made available to Ligand, its Affiliates or any of its and its Affiliates’ representatives in any data room, presentation, management presentation, interview or any other form relating to the transactions contemplated hereby.
SECTION 7.06. Independent Nature of Relationship.
(a) The relationship between the Company and Ligand is solely that of obligor and obligee, and neither Ligand nor the Company has any fiduciary or other special relationship with the other or any of their respective Affiliates. Nothing contained herein shall be deemed to constitute the Company and Ligand as a partnership, an association, a joint venture or other kind of entity or legal form for any purposes, including any tax purposes.
(b) No officer or employee or agent of Ligand will be located at the premises of the Company or any of its Affiliates, except in connection with an audit performed pursuant to Section 5.01. No officer, manager or employee of Ligand shall engage in any commercial activity with the Company or any of its Affiliates other than as contemplated herein or as otherwise separately agreed in writing.
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(c) Ligand and/or any of its Affiliates shall not at any time obligate the Company, or impose on the Company any obligation, in any manner or respect to any Person not a party hereto. The Company and/or any of its Affiliates shall not at any time obligate Ligand, or impose on Ligand any obligation, in any manner or respect to any Person not a party hereto.
SECTION 7.07. Entire Agreement.
This Agreement, together with the Exhibits and Schedules hereto (which are incorporated herein by reference), constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements (including any term sheet), understandings and negotiations, both written and oral, between the Parties with respect to the subject matter of this Agreement. Notwithstanding any other provision set forth herein, neither Seller nor Guarantor is assuming any obligation or liability under the Ligand Purchase Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either Party hereto. Neither this Agreement, nor any provision hereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder or in respect hereof.
SECTION 7.08. Amendments; No Waivers.
(a) Neither this Agreement nor any term or provision hereof may be amended, changed or modified except with the written consent of all Parties. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the Party against whom such waiver is sought to be enforced.
(b) No failure or delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 7.09. Interpretation.
When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article, Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” Neither Party shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one Party or the other.
23
SECTION 7.10. Headings and Captions.
The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
SECTION 7.11. Counterparts; Effectiveness.
This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.
SECTION 7.12. Severability.
If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.
SECTION 7.13. Expenses.
Each of Ligand and the Company will pay all of its own fees and expenses in connection with entering into and consummating the transactions contemplated by this Agreement.
SECTION 7.14. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.
(b) Any legal action or proceeding with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York, County of New York. By execution and delivery of this Agreement, each Party hereby irrevocably consents to and accepts, for itself and in respect of its property, generally and unconditionally the exclusive jurisdiction of such courts. Each Party hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement.
(c) Each Party hereby irrevocably consents to the service of process out of any of the courts referred to in clause (b) of this Section 7.14 in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Agreement. Each Party hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a party to serve process on the other Party in any other manner permitted by law.
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ARTICLE VIII - Intercreditor Matters and Guarantee
SECTION 8.01. Ligand Interests; Recharacterization.
(a) Notwithstanding anything herein to the contrary, it is the intention of the Parties that the Royalty Interests are owned by Ligand, and such Royalty Interests shall be treated as the property of Ligand for all purposes, other than federal and state income tax purposes. The provisions of this Agreement shall be construed to further these intentions of the Parties.
(b) The
Royalty Interests and any amounts received by the Company in respect of the Royalty Interests and, without
limiting the foregoing, any cash deposited into the Special Account in accordance
with the terms hereof and any cash deposited into the Main Account in respect of or consisting
of the Royalty Interests (subject to any adjustments for Excluded Costs) is not, and is not intended to be, the property of the Company
(or, in the event of a Bankruptcy Event, any estate created thereby by operation of applicable law or otherwise) but is possessed by the
Company in trust solely on behalf of Ligand pending disbursement to Ligand or as otherwise provided in Section 5.06, in each
case, as contemplated hereby.
(c) If,
notwithstanding subparagraph (b), the Royalty Interests are subject to a Recharacterization, the Parties intend that the Company shall
be deemed hereunder to have granted, and the Company does hereby grant, toand
for avoidance of doubt, as of the First Amendment Effective Date regrants, to Ligand a first priority security interest in favor
of Ligand, to secure the obligations to make the payments under Section 2.01, and
Section 2.02, and Section 2.03, including
in respect of any acceleration thereof pursuant to Section 9.02, in the Royalty Interests and all proceeds and products thereof,
and the Special Account and any cash or other funds, amounts or financial assets held
therein or credited thereto. Without limiting the generality of the foregoing,
the Company shall cause each lender under a Senior Credit Facility to acknowledge and agree that it does not have any liens on the Royalty
Interests and none of the Royalty Interests or any proceeds or products thereof shall constitute Collateral or any other assets of the
Company subject to the provisions of the Intercreditor Agreement.
(d) No
other liens or security interests (including any liens or security interests in favor of the MidCap Credit Facility Agent) shall exist
on the Special Account or the cash or other funds, amounts or financial assets held therein or credited thereto other than any customary
liens of the Depository Bank.[Intentionally omitted].
(e) lf,
notwithstanding clause (b), the conveyance of the Royalty Interests is subject to a Recharacterization, the Parties intend that the Company
shall be deemed hereunder to have granted, and the Company does hereby grant,
and for the avoidance of doubt, as of the First Amendment Effective Date regrants (subject to the priorities specified in the Intercreditor
Agreement (if any)) a security interest in favor of Ligand, to secure
the obligations to make payments under Section 2.01, Section 2.02, and Section 2.03,
including for the avoidance of doubt any acceleration of any payments pursuant to Section 9.02, in the Pari
Passu Collateral.
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SECTION 8.02. Other Ligand Security.
(a) In
addition to the special rights and security interests provided in Section 8.01, as security for the Company’s payment
obligations in respect of any Minimum Quarterly Royalties payable hereunder (including in respect of any acceleration thereof pursuant
to Section 9.02), the Company hereby grants, and for the avoidance
of doubt, as of the First Amendment Effective Date regrants (subject to the priorities specified in the Intercreditor Agreement
(if any) a security interest in all of the following assets of the
Company that, which may
from time to time constitute “Collateral” under the MidCapSenior
Credit Facility (the “General Collateral”):
(i) All
goods, Accounts (including health-care insurance receivables), Equipment, Inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts, investment accounts, commodity accounts and other Collateral
Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired,
wherever located (each capitalized term in this clause (i) not otherwise defined in this Agreement or the MidCapSenior
Credit Facility, as defined in the UCC); and
(ii) all the Company's Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
(b) Notwithstanding the foregoing, no security interest is or will be granted pursuant to this Agreement in any right, title or interest of the Company under or in, and “Collateral” shall not include, any Excluded Assets.
SECTION 8.03. Priority.
(a) As of the closing date of the CIED Sale Transaction and after giving effect to the Use of CIED Sale Proceeds (as such term is defined in the Third Amendment) in connection therewith and until such time as the Company shall enter into a new Senior Credit Facility, the security interest granted in Sections 8.01(c), 8.01(e), and 8.02 shall be senior, first priority liens.
(b) After the Company enters into any new Senior Credit Facility and subject in all respects to the terms of the applicable Intercreditor Agreement:
(ai) Pursuant and subject to the Intercreditor Agreement, the The
security interest granted in Section 8.01(c) shall be for all purposes senior in right to any other lien other than
any customary liens of the Depository Bank.;
(bii) Pursuant
and subject to the Intercreditor Agreement, the The
security interest granted in Section 8.01(e) shall be pari passu with the Existing Liens.;
and
26
(c) Pursuant
and subject to the Intercreditor Agreement, the The
security interest granted in Section 8.02 shall be for all purposes junior and subordinate (on a "silent second"
basis) to the Existing Liens.
SECTION 8.04. Other
Intercreditor Matters. Ligand acknowledges that, the MidCap Credit Facility Agent will not file any partial
UCC-3 termination statement in respect of the liens held by the MidCap Credit Facility Agent or otherwise release any of its Collateral
(as such term is defined under the MidCap Credit
Facility) under the MidCap Credit Facility. However, the Intercreditor Agreement shall contain an express acknowledgement by the MidCap
Credit Facility Agent that it has no security interest in or other rights in respect of the Special Account or any cash held therein.[Intentionally
Omitted].
SECTION 8.05. Control
Agreements[Intentionally Omitted].
(a) The
Company agrees, with respect to the Special Account (upon request of Ligand), to use commercially reasonable efforts to cause the Depository
Bank to agree to comply at any time with instructions from Ligand to the Depository Bank directing the disposition of funds from time
to time credited to the Special Account, without further consent of the Company, pursuant to a customary deposit account control agreement
in form and substance satisfactory to Ligand. However, Ligand shall not give any such instructions or withhold any withdrawal rights from
the Company, unless a Remedies Event has occurred and is continuing.
(b) Nothing
herein is intended to affect or shall be construed as affecting the rights of the MidCap Credit Facility Agent under any deposit account
control agreement in favor of it in respect of the Main Account.
SECTION 8.06. Termination or Release.
(a) Upon
receipt by Ligand of an aggregate amount of $15,027,342 on or after the Closing Date pursuant to this Agreement, all right, title and
interest in and to the Royalty Interest and the Collateral shall automatically revert to the Company, and Ligand will have no further
rights in or with respect to the Royalty Interest or the Collateral and all security interests granted hereunder shall terminate and be
released; provided, however, the other terms and conditions of this Agreement shall remain in full force and effect,
including without limitation, the Company’s obligation to make the payments described in Article II during
the remainder of the Term.
(a) [Intentionally omitted].
(b) Upon
the withdrawal of any Excluded Costs or other amounts from the Special Account in accordance with the terms hereof, Ligand's security
interest in such amounts granted pursuant to Section 8.01(c) shall be automatically
terminated and released.[Intentionally omitted].
(c) Subject
to the Intercreditor Agreement (if any), upon the sale, lease, transfer,
assignment or other disposition (a “Transfer”) of any assets of the Company (other than the Royalty Interests
and the Royalty Related Collateral) permitted under the MidCapSenior
Credit Facility, all of Ligand's security interests in such assets shall be automatically terminated and released.
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(d) Subject to the Intercreditor Agreement (if any), at the Company's request, Ligand shall subordinate its liens and other rights with respect to any such assets or property or terminate and release its liens with respect to any such assets or property (in each case other than the Royalty Interests and the Royalty Related Collateral) in connection with any Permitted Transaction.
(e) Upon
the termination of the MidCap Credit Facility (or, if the MidCap Credit Facility is refinanced by another debt facility secured by all
Collateral (other than the Royalty Interests and the Royalty Related Collateral), upon the termination of such refinancing debt facility),
Ligand's security interest in all Collateral (other than the Royalty Interests and the Royalty Related Collateral) shall automatically
be terminated and released.
(e) [Intentionally omitted].
(f) In
connection with any termination or release pursuant to this Section 8.06, Ligand shall execute and deliver to the Company
all documents that the Company shall reasonably request to evidence such termination or release. Ligand further agrees that with respect
to any deposit account (other than the Special Account) over which it has control, it
shall not give any instruction to the applicable bank until a Remedies Event has occurred and is continuing.
ARTICLE IX - Remedies
SECTION 9.01. Remedies.
If any Remedies Event shall
occur and be continuing, subject to the terms of the Intercreditor Agreement (if
any), Ligand may exercise all rights and remedies of a secured party under the UCC or under any other applicable law and in equity, provided that
Ligand shall exercise any such remedy against the Special Account prior to the exercise of any such remedy against any other Collateral.
SECTION 9.02. Acceleration.
If any Remedies Event shall occur and be continuing, subject to the terms of the Intercreditor Agreement (if any), upon notice to the Company, Ligand may declare all Minimum Quarterly Royalties required to be paid by the Company from the date of such Remedies Event until the expiration of the Term to be due and payable forthwith, whereupon the same shall immediately become due and payable.
[Remainder of this page intentionally left blank]
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IN WITNESS
WHEREOF, the parties hereto have caused this Royalty Agreement to be duly executed by their respective authorized officers as of the day
and year first above written to become effective on the Effective Date.
[Signature Page to
the Royalty Agreement]
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year
first above written to become effective on the Effective Date.
[Signature Page to
the Royalty Agreement]
Exhibit A
to the Royalty Agreement
GUARANTY AGREEMENT
Schedule A
to the Royalty Agreement
PRODUCTS
Schedule B
to the Royalty Agreement
ROYALTY RELATED COLLATERAL
US Patents and Patent Applications
Non-US Patents and Patent Applications
Schedule 3.08
to the Royalty Agreement
MidCap Credit
Facility:
Credit and Security Agreement (Revolving Loan)
providing for a revolving loan in the maximum principal amount of $8,000,000.
Credit and Security Agreement (Term Loan) providing
for a term loan in the maximum principal amount of $12,000,000.
Exhibit 99.1
Elutia Announces Closing of BioEnvelope Business Sale to Boston Scientific Corporation for $88 Million
- Strengthened balance sheet to fully fund development and launch of NXT-41 platform -
- Biologics for breast reconstruction represents $1.5 billion U.S. total addressable market -
GAITHERSBURG, Md., October 1, 2025 — Elutia Inc. (Nasdaq: ELUT) (“Elutia” or the “Company”), a pioneer in drug-eluting biomatrix technologies, today announced the closing of the sale of its BioEnvelope business, including the EluPro™ and CanGaroo® bioenvelopes, to Boston Scientific Corporation (NYSE: BSX) for $88 million in cash.
With this closing, Elutia will leverage its proven drug-eluting biologics platform with a more concentrated focus on advancing NXT-41x, a biomatrix that directly addresses the root causes of reconstruction infections following mastectomy. NXT-41x combines excellent handling, optimal biologics, and powerful, extended antibiotic release to provide protection while supporting tissue regeneration.
“With our significantly strengthened financial position, we plan to bring NXT-41x to market in the first half of 2027,” said Dr. Randy Mills, CEO of Elutia. “We are confident we have the people, technology, and resources to reshape the breast reconstruction treatment paradigm and accelerate our path to positive cash flow. I want to thank the entire Elutia CRU for their relentless work to enable patients everywhere to thrive without compromise.”
Each year, more than 150,000 breast reconstruction procedures are performed in the U.S., and approximately one in three patients suffer serious complications. These complications often result in multiple surgeries, delays in treatment and additional health risks. With biologics accounting for 65% of implant-based costs, an improved treatment option has the potential to capture a significant share of the estimated $1.5 billion U.S. market opportunity.
About Elutia
Elutia develops and commercializes drug-eluting biomatrix products to improve compatibility between medical devices and the patients who need them. With a growing population in need of implantable technologies, Elutia’s mission is humanizing medicine so patients can thrive without compromise. For more information, visit www.Elutia.com.
1
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as “projects,” “may,” “will,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential,” “promise” or similar references to future periods. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including any statements and information regarding the future success of new products in Elutia’s breast reconstruction business and whether the proceeds of the BioEnvelope business sale will be sufficient to develop and commercialize Elutia’s pipeline. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in the forward-looking statements, including, but not limited to the following: risks associated with shifting focus to our drug-eluting biomatrix solutions in the breast reconstruction area and away from our BioEnvelope business; our ability to successfully execute or achieve expected benefits from the divestiture of our BioEnvelope business; our ability to continue as a going concern; our ability to achieve or sustain profitability; risk of product liability claims and our ability to obtain or maintain adequate product liability insurance; our ability to defend against the various lawsuits related to our former FiberCel and VBM products and avoid a material adverse financial consequence; our ability to raise funds in the future in the amounts and at the times needed; our ability to manage our significant indebtedness and other obligations, such as our Revenue Interest Obligation to Ligand Pharmaceuticals Incorporated, including our ability to negotiate waivers and similar accommodations as needed; the continued and future acceptance of our products by the medical community; our ability to enhance our products, expand our product indications and develop, acquire and commercialize additional product offerings; our dependence on our commercial partners and independent sales agents to generate a substantial portion of our net sales; our dependence on a limited number of third-party suppliers and manufacturers, which, in certain cases are exclusive suppliers for products essential to our business; our ability to successfully realize the anticipated benefits of the previous sale of our Orthobiologics business; physician awareness of the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products; our ability to compete against other companies, most of which have longer operating histories, more established products and/or greater resources than we do; pricing pressure as a result of cost-containment efforts of our customers, purchasing groups, third-party payors and governmental organizations could adversely affect our sales and profitability; our ability to obtain regulatory approval or other marketing authorizations by the U.S. Food and Drug Administration and comparable foreign authorities for our products and product candidates; and our ability to obtain, maintain and adequately protect our intellectual property rights; and other important factors which can be found in the “Risk Factors” section of Elutia’s public filings with the Securities and Exchange Commission (“SEC”), including Elutia’s Annual Report on Form 10-K for the year ended December 31, 2024, as such factors may be updated from time to time in Elutia’s other filings with the SEC, including Elutia’s Quarterly Reports on Form 10-Q, accessible on the SEC’s website at www.sec.gov and the Investor Relations page of Elutia’s website at https://investors.elutia.com. Because forward-looking statements are inherently subject to risks and uncertainties, you should not rely on these forward-looking statements as predictions of future events. Any forward-looking statement made by Elutia in this press release is based only on information currently available and speaks only as of the date on which it is made. Except as required by applicable law, Elutia expressly disclaims any obligations to publicly update any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Investors:
Matt Steinberg
FINN Partners
[email protected]
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Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On October 1, 2025, Elutia Inc. (the “Company”) completed the previously announced sale of its Device Protection segment (the “Device Protection Business”) to Boston Scientific Corporation (“BSC”) and Cardiac Pacemakers Inc. ("CPI", and together with BSC, the “Buyers”). The sale was structured as an asset sale, which occurred by divestiture of substantially all of the assets of the Company's cardiac implantable electronic device ("CIED") products. After the divestiture, the Company will recognize the Device Protection Business within discontinued operations in its financial results (the entire transaction is being referred to as the “Device Protection Sale”). The Company received net cash proceeds of approximately $80.3 million from the Device Protection Sale, subject to post-closing adjustments, as well as future consideration of $8.0 million held in escrow with a bank for twelve months, which is subject to potential reduction in the event of certain post-closing breaches of representations and warranties within the acquisition agreement by the Company. Concurrently, but separately from the Device Protection Sale, the Company was contractually required to repay its entire outstanding balance of its term loan facility, and as such, used a portion of the Device Protection Sale proceeds to do so (the “SWK Term Loan Repayment”) as of the close date.
The Company determined that the Device Protection Sale has met the criteria under Accounting Standards Codification 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20") to be classified as a discontinued operation, as the Device Protection Sale represents a strategic shift that will have a significant effect on the Company's operations and financial results. Accordingly, the Company will account for the Device Protection Sale as a discontinued operation beginning in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2025. The Company's estimates as presented in the unaudited pro forma condensed consolidated financial information are preliminary and actual results could differ from these estimates as the Company finalizes the discontinued operations accounting to be reported.
The unaudited pro forma condensed consolidated financial information is based on historical financial statements of the Company as adjusted for the unaudited pro forma effects of the Device Protection Sale. The unaudited pro forma condensed consolidated financial information should be read in conjunction with:
| · | the historical consolidated financial statements and accompanying notes of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 11, 2025; |
| · | the unaudited historical condensed consolidated financial statements and accompanying notes of the Company included in its Quarterly Report on Form 10-Q for the six months ended June 30, 2025 filed with the SEC on August 14, 2025; |
The unaudited pro forma condensed consolidated financial information has been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information (“Article 11”).
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2025 presents the financial position of the Company as if the Device Protection Sale had occurred on June 30, 2025. The following Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2025 and for each of the years ended December 31, 2024 and 2023 reflect the Company’s results as if the Device Protection Sale had occurred as of January 1, 2023 in that they reflect the reclassification of the Device Protection Business as discontinued operations for all periods presented. The adjustments in the “Transaction Accounting Adjustments” column in the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2025 and the Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2024 give effect to both the Device Protection Sale and related transaction fees and the SWK Term Loan Repayment as if they had occurred as of June 30, 2025 and January 1, 2024, respectively.
In connection with the Device Protection Sale, the Company and the Buyers entered into a Transition Services Agreement (“TSA”), effective October 1, 2025, whereby the Company will provide certain post-closing services to the Buyers on a transitional basis. The unaudited pro forma condensed consolidated financial information does not include any fees that may be earned under the TSA as the fees cannot be reasonably estimated.
The unaudited pro forma adjustments and related assumptions are described in the accompanying notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information has been prepared based upon currently available information and assumptions that are deemed appropriate by the Company’s management. The unaudited pro forma condensed consolidated financial information is for informational and illustrative purposes only and is not intended to be indicative of what actual results would have been had the Device Protection Sale occurred on the dates assumed, nor does such data purport to represent the consolidated financial results of the Company for future periods. The pro forma adjustments are based on currently available information, estimates and assumptions that the Company believes are reasonable in order to reflect, on a pro forma basis, the impact of this disposition on our historical financial information. The actual financial position and results of operations may differ significantly from the unaudited pro forma amounts reflected herein due to a variety of factors.
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ELUTIA INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2025
(In Thousands, Except for Share and Per Share Data)
(UNAUDITED)
| Historical (as reported) | Device Protection Discontinued Operations (Note a) | Adjusted for Discontinued Operations | Transaction Accounting Adjustments |
Pro Forma | |||||||||||||||||
| Assets | |||||||||||||||||||||
| Current assets: | |||||||||||||||||||||
| Cash and cash equivalents | $ | 8,500 | $ | - | $ | 8,500 | $ | 48,854 | (b) | $ | 57,354 | ||||||||||
| Accounts receivable, net | 3,150 | - | 3,150 | - | 3,150 | ||||||||||||||||
| Inventory | 5,243 | (2,999 | ) | 2,244 | - | 2,244 | |||||||||||||||
| Insurance receivables of litigation costs | 4,297 | - | 4,297 | - | 4,297 | ||||||||||||||||
| Prepaid expenses and other current assets | 1,090 | - | 1,090 | 8,000 | (b) | 9,090 | |||||||||||||||
| Total current assets | 22,280 | (2,999 | ) | 19,281 | 56,854 | 76,135 | |||||||||||||||
| Property and equipment, net | 2,071 | (119 | ) | 1,952 | - | 1,952 | |||||||||||||||
| Intangible assets, net | 6,575 | (4,512 | ) | 2,063 | - | 2,063 | |||||||||||||||
| Operating lease right-of-use assets and other | 2,923 | (537 | ) | 2,386 | - | 2,386 | |||||||||||||||
| Total assets | $ | 33,849 | $ | (8,167 | ) | $ | 25,682 | $ | 56,854 | $ | 82,536 | ||||||||||
| Liabilities and Stockholders' Deficit | |||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||
| Accounts payable | $ | 6,074 | $ | - | $ | 6,074 | $ | - | $ | 6,074 | |||||||||||
| Accrued expenses | 6,304 | - | 6,304 | 1,998 | (c,d,e) | 8,302 | |||||||||||||||
| Current portion of long-term debt | 3,750 | - | 3,750 | (3,750 | ) | (d) | - | ||||||||||||||
| Current portion of revenue interest obligation | 4,400 | - | 4,400 | - | 4,400 | ||||||||||||||||
| Contingent liability for legal proceedings | 17,015 | - | 17,015 | - | 17,015 | ||||||||||||||||
| Current operating lease liabilities | 405 | (343 | ) | 62 | - | 62 | |||||||||||||||
| Total current liabilities | 37,948 | (343 | ) | 37,605 | (1,752 | ) | 35,853 | ||||||||||||||
| Long-term debt | 21,370 | - | 21,370 | (21,370 | ) | (d) | - | ||||||||||||||
| Long-term revenue interest obligation | 4,692 | - | 4,692 | - | 4,692 | ||||||||||||||||
| Warrant liability | 8,966 | - | 8,966 | - | 8,966 | ||||||||||||||||
| Long-term operating lease liabilities | 2,716 | (229 | ) | 2,487 | - | 2,487 | |||||||||||||||
| Total liabilities | 75,692 | (572 | ) | 75,120 | (23,122 | ) | 51,998 | ||||||||||||||
| Stockholders’ equity (deficit): | |||||||||||||||||||||
| Class A Common stock | 38 | - | 38 | - | 38 | ||||||||||||||||
| Class B Common stock | 4 | - | 4 | - | 4 | ||||||||||||||||
| Additional paid-in capital | 201,251 | - | 201,251 | - | 201,251 | ||||||||||||||||
| Accumulated deficit | (243,136 | ) | (7,595 | ) | (250,731 | ) | 79,976 | (d,f) | (170,755 | ) | |||||||||||
| Total stockholders’ deficit | (41,843 | ) | (7,595 | ) | (49,438 | ) | 79,976 | 30,538 | |||||||||||||
| Total liabilities and stockholders' deficit | $ | 33,849 | $ | (8,167 | ) | $ | 25,682 | $ | 56,854 | $ | 82,536 | ||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
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ELUTIA INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2025
(In Thousands, Except Share and Per Share Data)
(UNAUDITED)
Historical | Device Protection Discontinued Operations (Note a) | Adjusted for Discontinued Operations | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Net sales | $ | 12,293 | $ | (6,595 | ) | $ | 5,698 | $ | - | $ | 5,698 | |||||||||
| Cost of goods sold | 6,778 | (3,919 | ) | 2,859 | - | 2,859 | ||||||||||||||
| Gross profit | 5,515 | (2,676 | ) | 2,839 | - | 2,839 | ||||||||||||||
| Sales and marketing | 6,809 | (4,547 | ) | 2,262 | - | 2,262 | ||||||||||||||
| General and administrative | 7,566 | (293 | ) | 7,273 | - | 7,273 | ||||||||||||||
| Research and development | 2,361 | (501 | ) | 1,860 | - | 1,860 | ||||||||||||||
| Litigation costs, net | 6,576 | - | 6,576 | - | 6,576 | |||||||||||||||
| Total operating expenses | 23,312 | (5,341 | ) | 17,971 | - | 17,971 | ||||||||||||||
| Loss from operations | (17,797 | ) | 2,665 | (15,132 | ) | - | (15,132 | ) | ||||||||||||
| Interest expense, net | 1,603 | (1,910 | ) | (307 | ) | - | (307 | ) | ||||||||||||
| (Gain) revaluation of warrant liability | (7,420 | ) | - | (7,420 | ) | - | (7,420 | ) | ||||||||||||
| Other expense, net | 1,547 | - | 1,547 | - | 1,547 | |||||||||||||||
| Loss before provision for income taxes | (13,527 | ) | 4,575 | (8,952 | ) | - | (8,952 | ) | ||||||||||||
| Income tax expense | 16 | - | 16 | - | 16 | |||||||||||||||
| Net loss from continuing operations | (13,543 | ) | 4,575 | (8,968 | ) | - | (8,968 | ) | ||||||||||||
| Less: dilutive gain on revaluation of warrant liability | (7,419 | ) | - | (7,419 | ) | - | (7,419 | ) | ||||||||||||
| Net loss from continuing operations for diluted earnings per share | $ | (20,962 | ) | $ | 4,575 | $ | (16,387 | ) | $ | - | $ | (16,387 | ) | |||||||
| Net loss from continuing operations per share - basic | $ | (0.34 | ) | $ | (0.22 | ) | ||||||||||||||
| Net loss from continuing operations per share - diluted | $ | (0.47 | ) | $ | (0.37 | ) | ||||||||||||||
| Weighted average common shares outstanding - basic | 40,239,372 | 40,239,372 | ||||||||||||||||||
| Weighted average common shares outstanding - diluted | 44,765,897 | 44,765,897 | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
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ELUTIA INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 2024
(In Thousands, Except Share and Per Share Data)
(UNAUDITED)
Historical (as reported) | Device Protection Discontinued Operations (Note a) | Adjusted for Discontinued Operations | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Net sales | $ | 24,375 | $ | (9,907 | ) | $ | 14,468 | $ | - | $ | 14,468 | |||||||||
| Cost of goods sold | 13,668 | (5,916 | ) | 7,752 | - | 7,752 | ||||||||||||||
| Gross profit | 10,707 | (3,991 | ) | 6,716 | - | 6,716 | ||||||||||||||
| Sales and marketing | 12,546 | (7,910 | ) | 4,636 | - | 4,636 | ||||||||||||||
| General and administrative | 18,659 | (581 | ) | 18,078 | - | 18,078 | ||||||||||||||
| Research and development | 3,785 | (788 | ) | 2,997 | - | 2,997 | ||||||||||||||
| Litigation costs, net | 11,368 | - | 11,368 | - | 11,368 | |||||||||||||||
| Total operating expenses | 46,358 | (9,279 | ) | 37,079 | - | 37,079 | ||||||||||||||
| Loss from continuing operations | (35,651 | ) | 5,288 | (30,363 | ) | - | (30,363 | ) | ||||||||||||
| Interest expense, net | 4,779 | (3,846 | ) | 933 | - | 933 | ||||||||||||||
| Loss revaluation of warrant liability | 14,878 | - | 14,878 | - | 14,878 | |||||||||||||||
| Other (income) expense, net | (1,186 | ) | - | (1,186 | ) | 2,274 | (d) | 1,088 | ||||||||||||
| Loss before provision for income taxes | (54,122 | ) | 9,134 | (44,988 | ) | (2,274 | ) | (47,262 | ) | |||||||||||
| Income tax expense | 7 | - | 7 | - | 7 | |||||||||||||||
| Net loss from continuing operations | $ | (54,129 | ) | $ | 9,134 | $ | (44,995 | ) | $ | (2,274 | ) | $ | (47,269 | ) | ||||||
| Net loss per share from continuing operations attributable to common stockholders - basic and diluted | $ | (1.86 | ) | $ | (1.63 | ) | ||||||||||||||
| Weighted average common shares outstanding - basic and diluted | 29,071,113 | 29,071,113 | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
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ELUTIA INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 2023
(In Thousands, Except Share and Per Share Data)
(UNAUDITED)
| Historical (as reported) | Device Protection Discontinued Operations (Note a) | Adjusted for Discontinued Operations | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Net sales | $ | 24,745 | $ | (9,401 | ) | $ | 15,344 | $ | - | $ | 15,344 | |||||||||
| Cost of goods sold | 13,692 | (5,157 | ) | 8,535 | - | 8,535 | ||||||||||||||
| Gross profit | 11,053 | (4,244 | ) | 6,809 | - | 6,809 | ||||||||||||||
| Sales and marketing | 13,087 | (7,157 | ) | 5,930 | - | 5,930 | ||||||||||||||
| General and administrative | 14,104 | (475 | ) | 13,629 | - | 13,629 | ||||||||||||||
| Research and development | 4,399 | (2,610 | ) | 1,789 | - | 1,789 | ||||||||||||||
| Litigation costs, net | 9,989 | - | 9,989 | - | 9,989 | |||||||||||||||
| Total operating expenses | 41,579 | (10,242 | ) | 31,337 | - | 31,337 | ||||||||||||||
| Loss from continuing operations | (30,526 | ) | 5,998 | (24,528 | ) | - | (24,528 | ) | ||||||||||||
| Interest expense, net | 5,796 | (3,768 | ) | 2,028 | - | 2,028 | ||||||||||||||
| Loss revaluation of warrant liability | 4,140 | - | 4,140 | - | 4,140 | |||||||||||||||
| Other expense, net | 759 | - | 759 | - | 759 | |||||||||||||||
| Loss before provision for income taxes | (41,221 | ) | 9,766 | (31,455 | ) | - | (31,455 | ) | ||||||||||||
| Income tax expense | 28 | - | 28 | - | 28 | |||||||||||||||
| Net loss from continuing operations | $ | (41,249 | ) | $ | 9,766 | $ | (31,483 | ) | $ | - | $ | (31,483 | ) | |||||||
| Net loss per share from continuing operations attributable to common stockholders - basic and diluted | $ | (2.27 | ) | $ | (1.73 | ) | ||||||||||||||
| Weighted average common shares outstanding - basic and diluted | 18,160,822 | 18,160,822 | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
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ELUTIA INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Device Protection Discontinued Operations:
| (a) | Reflects the discontinued operations, including associated assets and liabilities and results attributable to the Device Protection Business, which were previously included in the Company’s historical financial statements. The Device Protection Sale is accounted for retrospectively in accordance with ASC 205-20, “Discontinued Operations” for all periods presented. All interest expense related to the SWK term loan facility is included within Discontinued Operations as a result of the contractually required repayment. |
Transaction Accounting Adjustments:
| (b) | Adjustments to cash. Cash received at closing presented below excludes $8.0 million held in escrow by an escrow agent related to the Device Protection Sale that is to be paid to the Company in 12 months from the close date (subject to possible reduction in the event of certain indemnifiable breaches of the acquisition agreement by the Company). The $8.0 million pro forma adjustment is reflected as an escrow receivable in other current assets. |
(In Thousands)
| Cash received from Device Protection Sale at closing | $ | 80,250 | ||
| Cash paid for transaction fees at closing (c) | (3,600 | ) | ||
| Cash paid for SWK Term Loan Repayment at closing (d) | (27,796 | ) | ||
| Total Pro Forma Adjustment to Cash | $ | 48,854 |
| (c) | Costs to complete the Device Protection Sale. Reflects an estimate of $5.0 million total transaction fees related to investment banker fees, legal fees, and other accounting fees incurred to complete the Device Protection Sale that have not yet been reflected in the historical statements. Of this amount, $3.6 million has been recorded as a reduction in cash because it was paid at closing, and the remaining $1.4 million is recorded in current liabilities. |
| (d) | SWK Term Loan Repayment. Reflects the repayment of the SWK debt facility, including the principal balance of $24.5 million, unamortized discount and deferred financing fees of $0.5 million, accrued interest of $0.4 million, and the portion of the exit fee accrued of $1.1 million, as a result of the repayment as if it occurred as of June 30, 2025. These amounts are reflected within the historical balances as of June 30, 2025. |
Additionally, as a result of the SWK Term Loan Repayment, the Company will recognize a loss on extinguishment of debt with such loss as of June 30, 2025 totaling $2.3 million related to the difference between the write-off of the debt balances as of that date and the cash of $27.8 million paid to extinguish the debt as of close.
| (e) | Income tax payable. Reflects approximately $1.0 million of estimated current income tax payable associated with the estimated taxable gain from the Device Protection Sale. The tax effect of the pro forma adjustments was calculated using the historical statutory rates in effect for the period presented adjusted for the estimated utilization of historical deferred tax assets. The other proforma adjustments reflected have not been tax-affected based on the Company’s full valuation allowance in the prior periods presented. |
| (f) | Effect on stockholders’ equity. Reflects an estimated gain of $74.7 million related to the Device Protection Sale based on the estimate of $88.3 million of consideration less transaction costs of $5.0 million, net income tax liabilities of $1.0 million and the Device Protection Business net assets as of June 30, 2025 of $7.6 million. The actual gain, and related tax impact, recorded upon close may be subject to change and will be based on amounts as of the close date and the finalization of the Company’s analysis. Since the Unaudited Pro Forma Condensed Consolidated Statements of Operations only include continuing operations, the estimated gain resulting from the Device Protection Sale is not included in any period presented. Stockholders’ equity is also inclusive of the $2.3 million loss on extinguishment as described in (d) above. |
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