<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 1-9898
------
ORGANOGENESIS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2871690
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
150 DAN ROAD, CANTON, MA 02021
------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 575-0775
______________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ( X ) NO ( )
The number of shares outstanding of registrant's Common Stock, par value $.01
per share, at November 3, 1997 was 18,444,366 shares.
1
<PAGE>
ORGANOGENESIS INC.
INDEX
-----
PAGE
PART I - FINANCIAL INFORMATION NUMBER
- - ------------------------------ ------
Item 1 - Financial Statements
Consolidated Balance Sheets
at September 30, 1997 and December 31, 1996...................... 3
Consolidated Statements of Operations
for the three and nine months ended September 30, 1997 and 1996.. 4
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996............ 5
Notes to Consolidated Financial Statements........................ 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 8
PART II - OTHER INFORMATION
- - ---------------------------
Item 1 - Legal Proceedings................................................. *
Item 2 - Changes in Securities............................................. *
Item 3 - Defaults upon Senior Securities................................... *
Item 4 - Submission of Matters to a Vote of Security Holders............... *
Item 5 - Other Information................................................. *
Item 6 - Exhibits and Reports on Form 8-K.................................. 11
Signatures................................................................. 12
* No information provided due to inapplicability of item
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
ORGANOGENESIS INC.
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 142 $ 399
Investments 8,841 14,041
Other current assets 1,171 703
-------- --------
10,154 15,143
Property and equipment, net 6,815 7,204
Other assets 92 89
-------- --------
$ 17,061 $ 22,436
======== ========
Liabilities
Current liabilities:
Accounts payable $ 357 $ 1,220
Accrued expenses 1,217 2,667
-------- --------
1,574 3,887
Deferred rent payable 39 71
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00; authorized 1,000,000 shares:
Series A Convertible Preferred;
designated 250,000 shares;
all have been issued and converted - -
Series B Junior Participating;
designated 50,000 shares;
no shares issued and outstanding - -
Common stock, par value $.01; authorized 40,000,000 shares:
issued and outstanding 18,425,599 and 17,865,431
shares as of September 30, 1997 and
December 31, 1996, respectively 184 179
Additional paid-in capital 97,556 85,478
Accumulated deficit (82,292) (67,179)
-------- --------
Total stockholders' equity 15,448 18,478
-------- --------
$ 17,061 $ 22,436
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ORGANOGENESIS INC.
Consolidated Statements of Operations
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
For the For the
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Research and development support
from related party $ - $ 2,500 $ 2,500 $ 6,500
Product sales to related party, royalties
and other income 144 20 444 42
Interest income 125 264 394 754
----------- ----------- ----------- -----------
Total revenues 269 2,784 3,338 7,296
----------- ----------- ----------- -----------
Costs and expenses:
Research and development 3,856 2,639 10,189 7,976
General and administrative 866 1,002 2,707 3,028
Noncash charge for stock option extension - - 5,555 -
----------- ----------- ----------- -----------
Total costs and expenses 4,722 3,641 18,451 11,004
----------- ----------- ----------- -----------
Net loss $ (4,453) $ (857) $ (15,113) $ (3,708)
=========== =========== =========== ===========
Net loss per common share $(.24) $(.05) $(.84) $(.21)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 18,203,641 17,656,108 18,039,721 17,529,761
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ORGANOGENESIS INC.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
For the
Nine Months
Ended September 30,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(15,113) $ (3,708)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 1,215 766
Issuance of stock options 50 -
Noncash charge for stock option extension 5,555 -
Changes in assets and liabilities:
Other current assets (468) (65)
Other assets (3) (1)
Accounts payable (863) 284
Accrued expenses (1,450) (132)
Deferred rent payable (32) (32)
-------- --------
Cash used in operating activities (11,109) (2,888)
-------- --------
Cash flows from investing activities:
Capital expenditures (826) (695)
Purchases of investments (5,000) (13,870)
Sales/maturities of investments 10,200 8,303
-------- --------
Cash provided by (used in) investing activities 4,374 (6,262)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock - 5,000
Proceeds from exercise of warrants 4,571 2,190
Proceeds from exercise of stock options 1,907 567
-------- --------
Cash provided by financing activities 6,478 7,757
-------- --------
Decrease in cash and cash equivalents (257) (1,393)
Cash and cash equivalents, beginning of period 399 2,569
-------- --------
Cash and cash equivalents, end of period $ 142 $ 1,176
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ORGANOGENESIS INC.
Notes to Consolidated Financial Statements
(Unaudited)
This Form 10-Q and other public filings or statements made by the Company from
time to time which concern the Company's business outlook; future financial
performance; anticipated profitability, revenues, expenses or capital
expenditures; future funding under collaborative agreement; and statements
concerning expectations as to any future events, as well as other statements
which are not historical fact, are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed under the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section in this report and included in publicly available filings
with the Securities and Exchange Commission, such as the Company's Annual Report
on Form 10-K for the year ended December 31,1996.
1. Basis of Presentation:
----------------------
The accompanying unaudited consolidated financial statements of Organogenesis
Inc. (the "Company"), have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the accompanying consolidated financial statements
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial position, results of operations and
changes in cash flows for the periods presented. The results of operations for
the three and nine months ended September 30, 1997 are not necessarily
indicative of the results to be expected for the year ending December 31, 1997.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 as filed with
the Securities and Exchange Commission.
Certain reclassifications have been made to the prior period financial
statements to conform to the current presentation.
2. New Accounting Pronouncements:
------------------------------
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or potential
common stock. SFAS 128 is effective for fiscal years ending after December 15,
1997, including interim periods. Earlier application is not permitted. When
adopted, SFAS 128 will require restatement of prior years' earnings per share
data. The Company plans to adopt SFAS 128 for its fiscal year ended December
31, 1997 and does not expect the effect of its adoption to be materially
different from the amounts presented in the accompanying statements of
operations.
6
<PAGE>
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 requires that changes in comprehensive income be shown
in a financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. The Company does not expect the adoption of SFAS 130 to
materially effect the financial statement presentation.
3. Collaborative Agreement:
------------------------
In January 1996, the Company and Novartis Pharma AG ("Novartis" or "related
party"), entered into an agreement granting Novartis exclusive global marketing
rights to the Company's lead product, Apligraf/TM/. Under the agreement,
Novartis is responsible for Apligraf/TM/ sales and marketing costs worldwide, as
well as all clinical trials, registrations and patent costs outside the U.S. The
Company will supply Novartis' global requirements for Apligraf/TM/ and will
receive both a per unit manufacturing payment and royalty revenues on product
sales. Novartis has agreed to provide the Company up to $37,500,000 in equity
investment, research support and milestone payments, of which $2,500,000 has
been received in 1997 and $11,500,000 was received in 1996. The remaining
payments will be received based upon achievement of specified events.
4. Stockholders' Equity:
---------------------
On April 14, 1997, the Board of Directors declared a 25% stock dividend for
stockholders of record on April 25, 1997. The stock dividend was payable on May
2, 1997 and resulted in the issuance of 3,596,150 additional shares of Common
Stock. All related data in the consolidated financial statements and notes
reflect the stock dividend for all periods presented.
On July 21, 1997, the Company gave notice of redemption with respect to all of
its outstanding Common Stock Purchase Warrants issued during the July 1995
public offering. All Common Stock Purchase Warrants were exercised during 1997,
resulting in the Company receiving proceeds of $4,571,167.
5. Stock Option:
-------------
On May 5, 1997, the Board of Directors voted to extend the term of an option to
purchase 468,750 shares of Common Stock at an exercise price of $4.80 granted to
an officer of the Company in 1987. The extension of this option requires a new
measurement date for valuing the option, resulting in a non-cash compensation
charge of $5,555,000 recorded in the second quarter of 1997. The option is
fully exercisable and the shares have been reserved for issuance.
6. Revenue Recognition:
--------------------
Research and development support revenue under the collaborative agreement with
Novartis is recognized as related expenses are incurred or contractual
obligations are met. Revenue from Apligraf/TM/ sales is recognized upon shipment
or, in certain cases, upon receipt of firm purchase orders from Novartis. The
related royalty revenue is recognized when net sales are reported to the Company
by Novartis, which generally occurs in the quarter after shipment of product.
Other product revenues are recognized upon shipment. Other royalty revenue is
recorded as earned. Deferred revenue arises from the difference between cash
received and revenue recognized in accordance with these policies.
7
<PAGE>
ORGANOGENESIS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview:
- - ---------
Organogenesis Inc. (the "Company") designs, develops and manufactures medical
therapeutics containing living cells and/or natural connective tissue
components. The Company's products are designed to promote the establishment
and growth of new tissues to restore, maintain or improve biological function.
The Premarket Approval Application for the Company's lead product, Apligraf/TM/
manufactured Human Skin Equivalent, is currently pending at the U.S. Food and
Drug Administration ("FDA") for the treatment of venous ulcers. Novartis has
global Apligraf/TM/ marketing rights, and is pursuing international marketing
authorizations for the product. In April 1997, Apligraf/TM/ was approved for the
treatment of venous ulcers in Canada, and in August 1997 Apligraf/TM/ was
commercially launched by Novartis Pharmaceuticals Canada Inc., an affiliate of
Novartis Pharma AG. A pivotal clinical trial to assess the efficacy and safety
of Apligraf/TM/ for the treatment of diabetic ulcers is underway. Clinical
trials have been completed in skin surgery wounds (dermatological surgery and
donor site wounds) and in burn wounds.
The first commercial sales of Apligraf/TM/ began during the middle of the third
quarter and are included in the third quarter results. Commercial revenue from
Apligraf/TM/ is currently limited to sales in Canada. In the Canadian launch,
Novartis has implemented an education and training program building physician
awareness and experience as the first steps in creating a long term business
base. We expect that this same educational marketing approach will be employed
in other territories. The Company expects production costs to exceed product
sales for the near term due to the start-up expense and high costs associated
with low volume production.
The Company is dependent on its collaborative partner, Novartis, for the
successful sale and marketing of Apligraf/TM/ worldwide. There can be no
assurance that Novartis will succeed with registrations and marketing of
Apligraf/TM/ worldwide or that the Company will be able to meet the production
demand of worldwide product commercialization after marketing clearance has been
received.
In August, 1997, the Company's surgical repair product, GRAFTPATCH/TM/ was
cleared for marketing in the U.S. under the FDA's Section 510(k) notification
process. Marketing clearance has been granted for use in general surgical
procedures for reinforcement of soft tissue, such as hernia repair. The Company
is currently researching the potential for this product in various indications;
it is also evaluating alternative commercialization options, including marketing
the product on its own and/or seeking a collaboration with a third-party. In the
event the Company markets GRAFTPATCH/TM/ directly, additional funds would be
required for manufacturing, distribution and selling efforts.
8
<PAGE>
The Company is subject to risks common to entities in the biotechnology
industry, including, but not limited to, development by the Company's
competitors of new technologies or products that are more effective than the
Company's, risks of failure of clinical trials, dependence on and retention of
key personnel, protection of proprietary technology, compliance with U.S. FDA
regulations and similar foreign regulatory bodies, continued availability of raw
material for the Company's products, availability of product liability insurance
upon commercialization of the Company's products, ability to transition from
pilot-scale manufacturing to full-scale commercial production of products,
ability to recover the investment in property and equipment, uncertainty as to
the availability of additional capital on acceptable terms, if at all, and the
demand for the Company's products, if and when approved.
Results of Operations may vary significantly from quarter to quarter depending
on, among other factors, the progress of the Company's research and development
efforts, the receipt of milestone and research and development support payments,
if any, from Novartis, product revenues, manufacturing costs, the timing of
certain expenses and the establishment of additional collaborative agreements,
if any.
Results of Operations:
- - ----------------------
Revenues
Total revenues were $269,000 and $3,338,000 for the three and nine months ended
September 30, 1997, compared to $2,784,000 and $7,296,000, for the same periods
in 1996. Research and development support revenues from Novartis was $2,500,000
for the nine months ended September 30, 1997, compared to $2,500,000 and
$6,500,000, for the three and nine months ended September 30, 1996. Other
revenues increased to $144,000 and $444,000 for the three and nine months ended
September 30, 1997, compared to $20,000 and $42,000, for the same periods in
1996, primarily due to Apligraf/TM/ sales to Novartis under the Collaborative
Agreement, as well as other product sales. (See "Notes to Consolidated Financial
Statements").
Interest income decreased to $125,000 and $394,000 for the three and nine months
ended September 30, 1997, compared to $264,000 and $754,000, for the same
periods in 1996, primarily due to less cash being available for investment.
Costs and Expenses
Research and development expenses increased to $3,856,000 and $10,189,000 for
the three and nine months ended September 30, 1997, compared to $2,639,000 and
$7,976,000, for the same periods in 1996, primarily due to personnel additions,
expansion of facilities, and other activities supporting Apligraf/TM/, the
Company's lead product, and other research and development programs, including
the Apligraf/TM/ diabetic ulcer pivotal trial and the tissue filler and liver
assist device research programs. These increased costs in 1997 include higher
noncash depreciation charges related to new leasehold improvements and equipment
put into service during the second quarter of 1997.
General and administrative expenses decreased to $866,000 and $2,707,000 for the
three and nine months ended September 30, 1997, compared to $1,002,000 and
$3,028,000, for the same periods in 1996. The decrease was primarily due to a
reduction in the use of outside services and cost containment, including legal,
corporate insurance and other corporate costs. This decrease was partially
offset by an increase in personnel costs, mostly due to new employees to support
the Company's programs.
Additionally, in May 1997, the Company incurred a one time, non-cash
compensation charge of $5,555,000 relating to the extension of the term of a
stock option held by an officer of the Company.
9
<PAGE>
As a result of the net effect described above, the Company incurred a net loss
of $4,453,000, or $.24 per share, and $15,113,000, or $.84 per share, for the
three and nine months ended September 30, 1997, respectively, compared to a net
loss of $857,000, or $.05 per share, and $3,708,000, or $.21 per share, for the
comparable 1996 periods. The Company expects to incur additional losses as its
costs continue to increase due to factors described above.
Liquidity and Capital Resources:
- - --------------------------------
At September 30, 1997, the Company had cash, cash equivalents and investments in
the aggregate amount of $8,983,000 and working capital of $8,580,000, compared
to $14,440,000 and $11,256,000, respectively, at December 31, 1996. The primary
use of cash during the nine months ended September 30, 1997 related to financing
the Company's operating activities of $11,109,000 and investing in plant
expansion. Capital expenditures increased to $826,000 for the nine months ended
September 30, 1997, from $695,000 for the same period in 1996, primarily due to
the build-out of the current facilities to support Apligraf/TM/ manufacturing
and the acquisition of laboratory equipment for expanded research and
development programs. The Company expects to continue to utilize funds at an
increasing rate during 1997 related to the continued expansion of Apligraf/TM/
operations and to the advancement of the Company's product pipeline. The Company
is also exploring adding manufacturing capacity in the United States and Europe
to support the production of the Company's current and future products.
From inception, the Company has financed its operations substantially through
private and public placements of equity securities, as well as receipt of
research support and contract revenues, interest income from investments and, to
a lesser extent, sale of products and receipt of royalties. For the nine months
ended September 30, 1997, financing activities provided cash of approximately
$6,478,000, primarily from the exercise of all outstanding Common Stock Purchase
Warrants issued during the July 1995 public offering and the exercise of stock
options. Financing activities provided cash of $7,757,000 for the nine months
ended September 30, 1996, primarily from a $5,000,000 equity investment received
under the collaborative agreement with Novartis (See "Collaborative Agreement"
under the Notes to Consolidated Financial Statements) and the exercise of
warrants and stock options.
Novartis has agreed to provide the Company up to $37,500,000 in equity
investments, research support and milestone payments (See "Collaborative
Agreement" under the Notes to Consolidated Financial Statements), of which
$2,500,000 has been received in 1997 and $11,500,000 was received in 1996. The
remaining payments will be received based upon achievement of specified events.
The Company's operations and programs will require additional financial
resources before the Company can expect to realize a net profit from product
sales. Based on the Company's current operating plan, it will require additional
funding in the near term and expects additional funding through issuance of
equity securities and under its collaboration with Novartis. If necessary, the
Company believes that it has the ability to reduce operating expenses to extend
its cash flow. There can be no assurances that additional funds will be
available when required on terms acceptable to the Company. If adequate funds
are not available, there would be a material adverse effect on the Company's
financial condition and results of operations. Additionally, the Company's
funding requirements may change depending upon numerous factors, including
progress of the Company's research and development programs; time required to
obtain regulatory approvals in different countries; resources the Company
devotes to self-funded projects, proprietary manufacturing methods and advanced
technologies; and marketing approval in different countries of the Company's
products and, if approved, whether the products will be commercially successful.
10
<PAGE>
ORGANOGENESIS INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3 (ii) By-laws of the Company, as amended on August 15, 1997 by the Board of Directors to
include section 2.2(b) which provides for the nomination for the election of directors
to the Board.
27 Financial Data Schedule
</TABLE>
(b) No current reports on Form 8-K were filed during the quarter ended September
30, 1997.
11
<PAGE>
ORGANOGENESIS INC.
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 thereunto duly authorized.
Organogenesis Inc.
(Registrant)
Date: November 14, 1997 /s/ Herbert M. Stein
----------------- -------------------------------------------
Herbert M. Stein, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1997 /s/ Donna L. Abelli
----------------- -------------------------------------------
Donna L. Abelli, Vice President Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer
12
<PAGE>
ORGANOGENESIS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- - ------------- -----------------------------------------------------------------
<S> <C>
3 (ii) By-laws of the Company, as amended on August 15, 1997 by the Board of Directors to
include section 2.2(b) which provides for the nomination for the election of directors
to the Board.
27 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 3 (ii)
BY-LAWS
OF
ORGANOGENESIS INC.
(A Delaware Corporation)
<PAGE>
BY-LAWS
OF
ORGANOGENESIS INC.
(A Delaware Corporation)
<TABLE>
<S> <C> <C>
Article 1. Articles of Incorporation 1
Section 1.1 Contents 1
Section 1.2 Certificate in Effect 1
Article 2. Meetings of Stockholders 1
Section 2.1 Place 1
Section 2.2(a)Annual Meeting 2
Section 2.2(b)Nominations 2
Section 2.3 Special Meetings 3
Section 2.4 Notice of Meetings 4
Section 2.5 Affidavit of Notice 4
Section 2.6 Quorum 5
Section 2.7 Voting Requirements 5
Section 2.8 Proxies and Voting 5
Section 2.9 Action Without Meeting 6
Section 2.10 Stockholder List 6
Section 2.11 Record Date 7
Article 3. Directors 9
Section 3.1 Number; Election and Term of Office 9
Section 3.2 Duties 9
Section 3.3 Compensation 9
Section 3.4 Reliance on Books 10
Article 4. Meetings of the Board of Directors 11
Section 4.1 Place 11
Section 4.2 Annual Meeting 11
Section 4.3 Regular Meetings 11
Section 4.4 Special Meetings 11
Section 4.5 Quorum 11
Section 4.6 Action Without Meeting 12
Section 4.7 Telephone Meetings 12
Article 5. Committees of Directors 13
Section 5.1 Designation 13
Section 5.2 Records of Meetings 14
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Article 6. Notices 15
Section 6.1 Method of Giving Notice 15
Section 6.2 Waiver 15
Article 7. Officers 16
Section 7.1 In General 16
Section 7.2 Election of President, 16
Secretary and Treasurer
Section 7.3 Election of Other Officers 16
Section 7.4 Salaries 16
Section 7.5 Term of Office 16
Section 7.6 Duties of President and Chairman
of the Board 16
Section 7.7 Duties of Vice President 17
Section 7.8 Duties of Secretary 18
Section 7.9 Duties of Assistant Secretary 18
Section 7.10 Duties of Treasurer 18
Section 7.11 Duties of Assistant Treasurer 19
Article 8. Resignations, Removals and Vacancies 20
Section 8.1 Directors 20
Section 8.2 officers 21
Article 9. Certificate of Stock 22
Section 9.1 Issuance of Stock 22
Section 9.2 Right to Certificate; Form 22
Section 9.3 Facsimile Signature 22
Section 9.4 Lost Certificates 23
Section 9.5 Transfer of Stock 23
Section 9.6 Registered Stockholders 24
Article 10. Indemnification 25
Section 10.1 Third Party Actions 25
Section 10.2 Derivative Actions 25
Section 10.3 Expenses 26
Section 10.4 Authorization 27
Section 10.5 Advance Payment of Expenses 27
Section 10.6 Non-Exclusiveness 27
Section 10.7 Insurance 28
Section 10.8 Constituent Corporations 28
Section 10.9 Additional Indemnification 29
Article 11. Execution of Papers 30
Article 12. Fiscal Year 30
Article 13. Seal 30
Article 14. Offices 30
Article 15. Amendments 31
</TABLE>
iii
<PAGE>
ORGANOGENESIS INC.
BY-LAWS
-------
ARTICLE 1
---------
CERTIFICATE OF INCORPORATION
----------------------------
Section 1.1 Contents. The name, location of principal office and purposes of
----------- --------
the Corporation shall be as set forth in its Certificate of Incorporation.
These By-Laws, the powers of the Corporation and of its Directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation shall be subject to such provisions in regard
thereto, if any, as are set forth in said Certificate of Incorporation. The
Certificate of Incorporation is hereby made a part of these By-Laws.
Section 1.2 Certificate in Effect. All references in these By-Laws to the
----------- ---------------------
Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.
ARTICLE 2
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1 Place. All meetings of the stockholders may be held at such place
----------- -----
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors, the Chairman of the Board of Directors or the
President and stated in the notice of the meeting or in any duly executed waiver
of notice thereof.
<PAGE>
Section 2.2(a) Annual Meeting. Annual meetings of stockholders, shall be
-------------- --------------
held on the third Tuesday of April in each year, if not a legal holiday, and,
if a legal holiday, then on the next secular day following, at 10:00 A.M., or
at such other date and time as shall be designated from time to time by the
Board of Directors, the Chairman of the Board of Directors or the President and
stated in the notice of the meeting. If such annual meeting has not been held
on the day herein provided therefor, a special meeting of the stockholders in
lieu of the annual meeting may be held, and any business transacted or
elections held at such special meeting shall have the same effect as if
transacted or held at the annual meeting, and in such case all references in
these By-Laws, except in this Section 2.2, to the annual meeting of the
stockholders shall be deemed to refer to such special meeting.
Section 2.2(b) Nominations. Nomination for the election of directors may be
-------------- ------------
made by (a) the board of directors or (b) any stockholder entitled to vote in
the election of directors generally. However, any stockholder entitled to vote
in the election of directors generally may nominate one or more persons for
election as directors at a meeting as provided for in (b) above only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by mail, to the secretary of the
corporation not later than, (x) with respect to an election to be held at an
annual meeting of stockholders, sixty (60) days prior to the anniversary date
of the immediately preceding annual meeting, and, (y) with respect to an
election to be held
2
<PAGE>
at a special meeting of stockholders for the election of directors, the close
of business on the tenth (10th) day following the date on which notice of such
meeting is first given to stockholders. Each such notice shall set forth: (a)
the name and address of the stockholder who intends to make the nomination or
nominations and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (e)
the consent of each nominee to serve as a director of the corporation, if so
elected. The person presiding over the meeting may refuse to acknowledge the
nomination of a person not made in compliance with the foregoing procedure, and
any attempt to nominate a person otherwise that in accordance with the
provisions of this Section shall be invalid and shall be of no force of effect.
Section 2.3 Special Meetings. Special meetings of the stockholders, for any
----------- ----------------
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation,
3
<PAGE>
may be called by the President, the Chairman of the Board, or by the Board of
Directors and shall be called by the President or Secretary at the request in
writing of a majority of the Directors then in office, or at the request in
writing of stockholders owning a majority in amount of the entire stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting, which need not be the
exclusive purposes for which the meeting is called.
Section 2.4 Notice of Meetings. A written notice of all meetings of
----------- ------------------
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 2.5 Affidavit of Notice. An affidavit of the Secretary or an
----------- -------------------
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
Section 2.6 Quorum. The holders of a majority of the stock issued and
----------- ------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a
4
<PAGE>
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Certificate of Incorporation.
If, however, such quorum shall not be present or represented by proxy at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by Proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, except as
hereinafter provided, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.7 Voting Requirements. When a quorum is present at any meeting, the
----------- -------------------
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of any
applicable statute or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 2.8 Proxies and Voting. Unless otherwise provided in the Certificate
----------- ------------------
of Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting
5
<PAGE>
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period. Persons holding
stock in a fiduciary capacity shall be entitled to vote the shares so held, and
persons whose stock is pledged shall be entitled to vote the pledged shares,
unless in the transfer by the pledgor on the books of the Corporation he shall
have expressly empowered the pledgee to vote said shares, in which case only the
pledgee, or his proxy, may represent and vote such shares. Shares of the capital
stock of the Corporation owned by the Corporation shall not be voted, directly
or indirectly.
Section 2.9 Action Without Meeting. Unless otherwise provided in the
----------- -------------- -------
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 2.10 Stockholder List. The officer who has charge of the stock ledger
------------ ----------------
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete
6
<PAGE>
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The original or duplicate
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine such list, the stock ledger or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
Section 2.11 Record Date. In order that the Corporation may determine the
------------ -----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to
7
<PAGE>
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed.
(c) The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
8
<PAGE>
ARTICLE 3
---------
DIRECTORS
---------
Section 3.1 Number; Election and Term of Office. There shall be a Board of
----------- -----------------------------------
Directors of the Corporation consisting of not less than one member, the number
of members to be determined by resolution of the Board of Directors or by the
stockholders at the annual or any special meeting, unless the Certificate of
Incorporation fixed the number of Directors, in which case a change in the
number of Directors shall be made only by amendment of the Certificate. Subject
to any limitation which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any time
by vote of a majority of the Directors then in office. The Directors shall be
elected at the annual meeting of the stockholders, except as provided in
paragraph (c) of Section 8.1, and each Director elected shall hold office until
his successor is elected and qualified or until his earlier resignation or
removal. Directors need not be stockholders.
Section 3.2 Duties. The business of the Corporation shall be managed by or
----------- ------
under the direction of its Board of Directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these By-Laws directed or required
to be exercised or done by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the Certificate of
----------- ------------
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of Directors. The Directors may be paid their expenses,
if any, of
9
<PAGE>
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
Directors. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a member
----------- -----------------
of any committee designated by the Board of Directors shall, in the performance
of his duties, be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its officers, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee, or in relying in
good faith upon other records of the Corporation.
10
<PAGE>
ARTICLE 4
---------
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4.1 Place. The Board of Directors of the Corporation may hold
------------ -----
meetings, both regular and special, either within or without the State of
Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected Board of
----------- --------------
Directors shall be held immediately following the annual meeting of stockholders
or any special meeting held in lieu thereof, and no notice of such meeting shall
be necessary to the newly elected Directors in order legally to constitute the
meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of Directors may
----------- ----------------
be held without notice at such time and at such place as shall from time to time
be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be called by
----------- ----------------
the President on two days' notice to each Director either personally or by mail
or by telegram; special meetings shall be called by the President or Secretary
in like manner and on like notice on the written request of two Directors unless
the Board consists of only one Director, in which case special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of the sole Director.
Section 4.5 Quorum. At all meetings of the Board a majority of the Directors
----------- ------
then in office shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be
11
<PAGE>
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 4.6 Action Without Meeting. Unless otherwise restricted by the
----------- ----------------------
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 4.7 Telephone meetings. Unless otherwise restricted by the
----------- ------------------
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
12
<PAGE>
ARTICLE 5
---------
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation.
-----------------------
(a) The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution of the
Board of Directors designating the committee, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the
13
<PAGE>
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular minutes of
-------------------------------
its meetings and report the same to the Board of Directors when required.
14
<PAGE>
ARTICLE 6
---------
NOTICES
-------
Section 6.1 Method of Giving Notice. Whenever, under any provision of the law
--------------------- -------------
or of the Certificate of Incorporation or of these By-Laws, notice is required
to be given to any Director or stockholder, such notice shall be given in
writing by the Secretary or the person or persons calling the meeting by leaving
such notice with such Director or stockholder at his residence or usual place of
business or by mailing it addressed to such Director or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to Directors may also be
given by telegram.
Section 6.2 Waiver. Whenever any notice is required to be given under any
----------- ------
provision of law or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
15
<PAGE>
ARTICLE 7
--------
OFFICERS
--------
Section 7.1 In General. The officers of the Corporation shall be chosen by
----------- ----------
the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board of
----------- ----------------------------------------------
Directors at its first meeting after each annual meeting of stockholders shall
choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may appoint
----------- --------------------------
such other officers and agents as it shall deem appropriate who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the
----------- --------
Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold office
----------- --------------
until their successors are chosen and qualify or until their earlier resignation
or removal. Any officer elected or appointed by the Board of Directors may be
removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of President and Chairman of the Board. The President
----------- ---------------------------------------------
shall be the chief executive officer of the
16
<PAGE>
Corporation, shall preside at all meetings of the stockholders and, if he is a
Director, at all meetings of the Board of Directors if there shall be no
Chairman of the Board or in the absence of the Chairman of the Board, shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The President shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The Chairman of the
Board, if any, shall make his counsel available to the other officers of the
Corporation, shall be authorized to sign stock certificates on behalf of the
Corporation, shall preside at all meetings of the Directors at which he is
present, and, in the absence of the President at all meetings of the
stockholders, and shall have such other duties and powers as may from time to
time be conferred upon him by the Directors.
Section 7.7 Duties of Vice President. In the absence of the President or in
----------- ------------------------
the event of his inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President not otherwise
conferred upon the Chairman of the Board, if any, and when so acting, shall have
all the powers of and be subject
17
<PAGE>
to all the restrictions upon the President. The Vice-Presidents shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 7.8 Duties of Secretary. The Secretary shall attend all meetings of
----------- -------------------
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.
Section 7.9 Duties of Assistant Secretary. The Assistant Secretary, or if
----------- -----------------------------
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 7.10 Duties of Treasurer. The Treasurer shall have the custody of the
------------ -------------------
corporate funds and securities and
18
<PAGE>
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all of his transactions as Treasurer and of the
financial condition of the Corporation. If required by the-Board of Directors,
he shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of this office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 7.11 Duties of Assistant Treasurer. The Assistant Treasurer, or if
------------ -----------------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
19
<PAGE>
ARTICLE 8
---------
RESIGNATIONS, REMOVALS AND VACANCIES
------------------------------------
Section 8.1 Directors.
- - ---------------------
(a) Resignations. Any Director may resign at any time by giving written
------------
notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of
--------
Incorporation, the holders of stock entitled to vote for the election of
Directors may, at any meeting called for the purpose, by vote of a majority of
the shares of such stock outstanding, remove any Director or the entire Board of
Directors with or without cause and fill any vacancies thereby created. This
Section 8.1(b) may not be altered, amended or repealed except by the holders of
a majority of the shares of stock issued and outstanding and entitled to vote
for the election of the Directors.
(c) Vacancies. Vacancies occurring in the office of Director and newly
---------
created Directorships resulting from any increase in the authorized number of
Directors shall be filled by a majority of the Directors then in office, though
less than a quorum, unless previously filled by the stockholders entitled to
vote for the election of Directors, and the Directors so chosen shall hold
office subject to the By-Laws until the next annual election and until their
successors are duly elected and qualify or until their earlier resignation or
removal. If there are no
20
<PAGE>
Directors in office, then an election of Directors may be held in the manner
provided by statute.
Section 8.2 Officers.
----------- --------
Any officer may resign at any time by giving written notice to the Board of
Directors or the President or the Secretary. Such resignation shall take effect
at the time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. The
Board of Directors may, at any meeting called for the purpose, by vote of a
majority of their entire number, remove from office any officer of the
Corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of President, Secretary or Treasurer shall be filled by
the Board of Directors and the officers so chosen shall hold office subject to
the By-Laws for the unexpired term in respect of which the vacancy occurred and
until their successors shall be elected and qualify or until their earlier
resignation or removal.
21
<PAGE>
ARTICLE 9
---------
CERTIFICATE OF STOCK
--------------------
Section 9.1 Issuance of Stock. The Directors may, at any time and from time
----------- -----------------
to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the
----------- --------------------------
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a Vice-
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation; provided that the Directors may provide by one or more
resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.
Section 9.3 Facsimile Signature. Any of or all the signatures on the
----------- -------------------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile
22
<PAGE>
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 9.4 Lost Certificates. The Board of Directors may direct a new
----------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the
----------- -----------------
transfer agent of the Corporation of a for shares duly endorsed or accompanied
by proper succession, assignation or authority to transfer, the duty of the
Corporation to issue a new to the person entitled thereto, cancel the old and
record the transaction upon its books.
23
<PAGE>
9.6 Registered Stockholders. The Corporation shall be entitled to recognize
--- -----------------------
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
24
<PAGE>
ARTICLE 10
----------
INDEMNIFICATION
---------------
Section 10.1 Third Party Actions. The Corporation shall indemnify any person
------------ -------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contenders or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 10.2 Derivative Actions. The Corporation shall indemnify any person
------------ ------------------
who was or is a party or is threatened to
25
<PAGE>
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
------------ --------
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
26
<PAGE>
Section 10.4 Authorization. Any indemnification under Sections 10.1 and
------------ -------------
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer or
------------ ---------------------------
Director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this Article
------------ -----------------
10 shall not be deemed exclusive of any other
27
<PAGE>
rights to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
------------ ---------
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
------------ ------------------------
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this Corpora-
tion or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, in the same manner as hereinabove provided
for any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the
28
<PAGE>
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
------------ --------------------------
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
29
<PAGE>
ARTICLE 11
----------
EXECUTION OF PAPERS
-------------------
Except as otherwise provided in these By-Laws or as the Board of Directors
may generally or in particular cases otherwise determine, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
President or the Treasurer.
ARTICLE 12
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the Board
of Directors.
ARTICLE 13
----------
SEAL
----
The Corporate seal shall have inscribed thereon the name of the Corporation,
the year of its organization and the word "Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE 14
----------
OFFICES
-------
In addition to its principal office, the Corporation may have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
30
<PAGE>
ARTICLE 15
----------
AMENDMENTS
----------
Except as otherwise provided herein, these By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors, or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws is contained in the notice of such special meeting, or by the
written consent of a majority in interest of the outstanding voting stock of the
Corporation or by the unanimous written consent of the Directors. If the power
to adopt, amend or repeal by-laws is conferred upon the Board of Directors by
the Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 142
<SECURITIES> 8,841
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,154
<PP&E> 14,238
<DEPRECIATION> 7,423
<TOTAL-ASSETS> 17,061
<CURRENT-LIABILITIES> 1,574
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 15,264
<TOTAL-LIABILITY-AND-EQUITY> 17,061
<SALES> 0
<TOTAL-REVENUES> 3,338
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,113)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,113)
<EPS-PRIMARY> (.84)
<EPS-DILUTED> (.84)
</TABLE>
