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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ORGANOGENESIS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-22871690
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATED OR ORGANIZATION)
HERBERT M. STEIN, CHIEF EXECUTIVE OFFICER
ORGANOGENESIS INC.
150 DAN ROAD
CANTON, MASSACHUSETTS 02021
(781) 575-0775
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPY TO:
NEIL H. ARONSON, ESQUIRE
BEVERLY A. ARMSTRONG, ESQUIRE
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER
BOSTON MASSACHUSETTS 02111
(617) 542-6000
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Approximate date of commencement of proposed sale to public: as soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earliest
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 1,440,000(2) $33.97(1) $48,915,000(1) $14,430
</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee. Pursuant to Rule 457(c) of the Securities Act, as amended,
the proposed maximum offering price has been calculated based upon the
average of the high and low sale prices of the Company's Common Stock as
reported by the American Stock Exchange on April 16, 1998.
(2) Includes shares of Common Stock which may become issuable by reason of
changes in the conversion price of the Series C Preferred Stock in
accordance with the terms of the Series C Preferred Stock. In accordance
with Rule 416, there also is being registered hereunder such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of shares of the Series C Preferred Stock to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), SHALL DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD PURSUANT +
+TO THIS PROSPECTUS NOR MAY OFFERS TO BUY BE ACCEPTED PURSUANT TO THIS +
+PROSPECTUS PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. +
+THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF +
+AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE +
+IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PROSPECTUS
ORGANOGENESIS INC.
1,440,000 SHARES OF COMMON STOCK,
$.01 PAR VALUE PER SHARE
The 1,440,000 shares of Common Stock of Organogenesis Inc., a Delaware
corporation (the "Company"), offered hereby are being sold by the selling
stockholders identified herein (the "Selling Stockholders"). Such offers and
sales may be made on one or more exchanges, in the over-the-counter market, or
otherwise, at prices and on terms then prevailing, or at prices related to the
then-current market price, or in negotiated transactions, or by underwriters
pursuant to underwriting agreements in customary form, or in a combination of
any such methods of sale. The Selling Stockholders may also sell such shares in
accordance with Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Selling Stockholders are identified and certain
information with respect to them is provided under the caption "Selling
Stockholders" herein, to which reference is made. The expenses of the
registration of the securities offered hereby, including fees of counsel for
the Company, will be paid by the Company. The following expenses will be borne
by the Selling Stockholders: underwriting discounts and selling commissions, if
any, and the fees of legal counsel, if any, for the Selling Stockholders. The
filing by the Company of this Prospectus in accordance with the requirements of
Form S-3 is not an admission that any person whose shares are included herein
is an "affiliate" of the Company.
The Selling Stockholders have advised the Company that they have not engaged
any person as an underwriter or selling agent for any of such shares, but they
may in the future elect to do so, and they will be responsible for paying such
a person or persons customary compensation for so acting. The Selling
Stockholders and any broker executing sell orders on behalf of any Selling
Stockholder may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event commissions received by any such broker may be
deemed to be underwriting commissions under the Securities Act. The Company
will not receive any of the proceeds from the sale of the securities offered
hereby. The Common Stock is listed on the American Stock Exchange ("AMEX")
under the symbol "ORG". ON APRIL 21, 1998, THE CLOSING SALE PRICE OF THE COMMON
STOCK, AS REPORTED BY AMEX, WAS $38.125 PER SHARE.
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5 OF THIS PROSPECTUS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
No person is authorized in connection with any offering made hereby to give
any information or to make any representations other than as contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus is not
an offer to sell, or a solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
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THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 1-09898).
(b) The description of the Company's capital stock contained in the
Company's registration statement on Form 8-A under the 1934 Act (File No.
1-09898), including amendments or reports filed for the purpose of updating
such description.
All reports and other documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act,
prior to the filing of a post-effective amendment which indicates that all
securities covered by this Prospectus have been sold or which deregisters all
such securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
the Registration Statement or this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents which have been incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Donna L. Abelli, Chief Financial Officer, at Organogenesis Inc., 150 Dan Road,
Canton, Massachusetts 02021, or by telephone at (781) 575-0775.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). These reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at its
regional offices located at 7 World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such reports, proxy statements and other information
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov.
Additional updating information with respect to the securities covered herein
may be provided in the future to purchasers by means of appendices to this
Prospectus.
The Company's Common Stock is listed for trading on AMEX. Reports and other
information concerning the Company can be inspected at the offices of AMEX
located at 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission in Washington, D.C. a registration
statement (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act, as amended, with
respect to the securities offered or to be offered hereby. This Prospectus
does not contain all of
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<PAGE>
the information included in the Registration Statement, certain items of which
are omitted in accordance with the rules and regulations of the Commission.
For further information about the Company and the securities offered hereby,
reference is made to the Registration Statement and the exhibits thereto.
Although statements contained herein concerning the provisions of any
documents are true and correct in all material respects, any such statements
are not necessarily complete, and, in each instance, such statements are
qualified in their entirety by reference to such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to Organogenesis Inc., 150 Dan Road, Canton, Massachusetts
02021, or by telephone at (781) 575-0775 and directed to Donna L. Abelli,
Chief Financial Officer.
An investment in the Common Stock being offered by this Prospectus involves
a high degree of risk. The following factors, in addition to those discussed
elsewhere in the Prospectus or incorporated herein by reference, should be
carefully considered in evaluating the Company and its business prospects
before purchasing shares offered by this Prospectus. This Prospectus contains
and incorporates by reference forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology such as
"may," "will," "would," "could," "intend," "plan," "expect," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon
or comparable terminology. Reference is made in particular to the discussion
set forth under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "Form 10-K"), and under "Business" in
the Form 10-K, incorporated in this Prospectus by reference. Such statements
are based on current expectations that involve a number of uncertainties
including those set forth in the risk factors below. Actual results could
differ materially from those projected in the forward-looking statements.
3
<PAGE>
THE COMPANY
Organogenesis Inc. (the "Company" or "Organogenesis") designs, develops and
manufactures medical therapeutics containing living cells and/or natural
connective tissue components. The Company was formed to advance and apply the
emerging field of tissue engineering to major medical needs. It was organized
as a Delaware corporation in 1985, with principal executive offices located at
150 Dan Road, Canton, Massachusetts 02021 and the telephone number is 781-575-
0775.
Tissue engineered products typically include living cells and/or natural
connective material such as collagen. Living cells can produce or remove
substances in response to their environment; connective tissue can provide
physical function while being converted to living tissue through ingrowth of
patient's cells and blood vessels.
In establishing its product and research pipeline, Organogenesis considers
both scientific and commercial factors, including the magnitude of the
potential market, whether tissue engineering has the potential to provide
significant benefit over traditional approaches and ability to achieve the
necessary economies of scale for cost-effectiveness. The Company has
established expertise with both mammalian (e.g., human) cells and natural
connective tissue and selects its approach based on medical application. The
Organogenesis pipeline thus includes both products which include living cells,
and purely acellular, connective tissue-based products. The lead product in
both Organogenesis' cellular and acellular line has each been cleared for
marketing in at least one country.
Organogenesis has established expertise in procuring, culturing and
optimizing human cells to provide cell function in tissue-engineered products.
The Company's lead product, Apligraf* (Graftskin) is the first manufactured
organ comprised of living human cells to be approved for marketing by a major
regulatory agency (Canadian Health Protection Branch in April 1997).
Additionally, it was recommended for approval without conditions by the
General and Plastic Surgery Restorative Devices Panel to the United States
Food and Drug Administration ("FDA") on January 29, 1998.
Organogenesis is also developing collagen-based products utilizing its
connective tissue expertise. Collagen is the primary structural protein of the
body and serves a number of functions, providing mechanical stability and the
potential for incorporation into host tissue by fostering the ingrowth of cell
and blood vessels from surrounding tissue. The first of products, GRAFTPATCH,
has been cleared for marketing by the FDA through the 501(k) process. The
acellular products are being designed to provide the necessary physical
function for medical benefit while being converted to living tissue by the
recipient's body.
Organogenesis' product development focus includes living tissue
replacements, cell-based organ assist devices and other tissue-engineered
products. The Company is also exploring additional opportunities relating to
cell and gene therapy applications and to its cryopreservation technology.
- --------
* Trademark of Novartis Pharma AG.
4
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RISK FACTORS
UNCERTAINTY OF MARKET ACCEPTANCE AND SUCCESSFUL COMMERCIALIZATION
The Company has only recently begun to market its Apligraf product in Canada
through Novartis Pharmaceuticals Canada, Inc. and has not generally begun to
generate revenues from the commercialization of this product. Products under
development by the Company will require significant additional research and
development efforts, including extensive clinical testing and regulatory
approval, prior to commercial use. The Company's potential products are
subject to the risks of failure inherent in the development of medical
products based on new technologies. These risks include the possibilities that
the Company's therapeutic approach will not be successful; that any or all of
the Company's potential products will be found to be unsafe, ineffective,
toxic or otherwise fail to meet applicable regulatory standards or receive
necessary regulatory clearances; that the potential products, if safe and
effective, will be difficult to develop into commercially viable products, to
manufacture on a large scale, be uneconomical to market, or fail to obtain
acceptance by the medical community; that proprietary rights of third parties
will preclude the Company from marketing such products; or that third parties
will market superior or equivalent products. There can be no assurance that
the Company will be able to demonstrate to the medical community the efficacy,
relative safety and cost effectiveness of treating patients with its products
or that the Company's products will be accepted as alternatives to other
existing or new therapies. Lack of clinical and market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The ultimate success of the Company is dependent upon its ability to raise
capital through equity placement, royalty and manufacturing payments, receipt
of contract revenue, sale of products, research and development funding under
licensing agreements and interest income on invested capital. 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 upon its
current plans, the Company believes that the convertible preferred stock
financing completed subsequent to December 31, 1997 and future funds,
including product revenues, from its commercialization partner, Novartis
Pharma AG. ("Novartis"), together with existing working capital, will be
sufficient to finance its operations into 1999. However, no assurance can be
given that there will be no change that would significantly decrease available
cash before such time. Factors that may change the Company's cash requirements
include: delays in final FDA approval and the subsequent timing of product
launch, if approval is received at all; changes in the progress of the
Company's research and development programs; changes in the time required to
obtain regulatory approvals in different countries; changes in the resources
that the Company devotes, or is able to devote, to self-funded projects; the
ability to develop, or compete against, proprietary manufacturing methods and
advanced technologies; changes in the resources the Company devotes to outside
research collaborations or projects; and marketing approval in different
countries of the Company's products and, if approved, whether the products
will be commercially successful. 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, the Company may need to delay, scale-back or
eliminate certain of its research and development programs or license to third
parties certain products or technologies that the Company would otherwise
undertake itself. If adequate funds are not available, there could be a
material adverse effect on the Company's financial condition and results of
operations.
HISTORY OF LOSSES AND ACCUMULATED DEFICIT
The Company experienced net losses of $19.8 million, $7.5 million and $12.7
million for the years ended December 31, 1997, 1996 and 1995, respectively
(which losses are continuing through the date of this Prospectus). The
Company's accumulated deficit at December 31, 1997 was $87.0 million. The
Company expects to incur additional losses as its research, development,
clinical trial, manufacturing and marketing programs expand. The Company's
ability to achieve a profitable level of operations is dependent in part on
successfully completing the development of its products, obtaining required
regulatory approvals, successfully
5
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manufacturing its products and the acceptance of its products by the market.
Accordingly, the extent of future losses and the time required to achieve
profitability is highly uncertain. There can be no assurance that the Company
will ever achieve a profitable level of operations or that profitability, if
achieved, can be sustained on an ongoing basis.
GOVERNMENT REGULATION AND NO ASSURANCE OF REGULATORY APPROVAL
The Company's present and proposed activities are subject to extensive and
rigorous regulation by various governmental authorities in the United States
and in other countries. In order to clinically test, produce and market
medical devices for human use, the Company must satisfy mandatory procedures
and safety and efficacy requirements established by the FDA and comparable
state and foreign regulatory agencies. Typically, such rules require that
products be approved by the government agency as safe and effective for their
intended use prior to being marketed. Although Apligraf (TM) has been
recommended for approval by an advisory panel of the FDA, there can be no
assurance that the product will receive final FDA approval or that labeling
for such product, if approved, will not significantly limit the number of
potential patients in the approved use of Apligraf (TM). The approval process
is expensive, time-consuming and subject to unanticipated delays, and no
assurance can be given that approval by any agency will be granted. In
addition, product approvals could be withdrawn for failure to comply with
regulatory standards or the occurrence of unforeseen problems following
initial marketing.
Testing is necessary to determine safety and efficacy before a submission
may be filed with the FDA to obtain authorization to market regulated
products. In addition, the FDA imposes various requirements on manufacturers
and sellers of products under its jurisdiction, such as labeling, good
manufacturing practices, record keeping and reporting requirements. The FDA
also may require post-marketing testing and surveillance programs to monitor a
product's effects. Furthermore, changes in existing regulations or adoption of
new regulations could prevent the Company from obtaining, or affect the timing
of, future regulatory approvals and could adversely affect the continued
marketing of the Company's existing products. There can be no assurance that
the regulatory agencies will find the Company's testing protocols to be
adequate, that appropriate authorizations will be granted on a timely basis,
or at all, that the process to obtain such authorizations will not be
excessively expensive or lengthy or that the Company will have sufficient
funds to pursue such approvals. Moreover, the failure to receive requisite
authorization for the Company's products or processes, when and if developed,
significant delays in obtaining such authorizations, the loss of previously
received authorizations or the failure to comply with regulatory requirements
would prevent the Company from commercializing its products as anticipated and
would have a material adverse effect on the Company's business, financial
condition and results of operations.
RETENTION OF KEY PERSONNEL
Because of the specialized nature of the Company's business, the Company's
success will depend, in large part, on its ability to attract and retain
highly qualified scientific and business personnel and on its ability to
develop and maintain relationships with leading research institutions. The
competition for those relationships and for experienced scientists and
management personnel that exists among the numerous biotechnology,
pharmaceutical and healthcare companies, universities and nonprofit research
institutions is intense, and there can be no assurance that the Company will
be able to attract and retain such personnel or relationships.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company has a proprietary portfolio of patent rights and applications
and exclusive licenses to patents and patent applications relating to living
tissue products, organ assist treatments and other aspects of tissue
engineering. These patent applications include patents relating to tissue
sourcing, methods of preparation, cell culture technologies, sterilization
technologies, manufacturing methods and living tissue cryopreservation. The
Company has twenty issued or allowed patents in the U.S. The Company also
attempts to achieve comparable patents in the major international markets for
its products such as Europe and Japan. Currently, the Company has eight pan-
European patents issued, plus one which has achieved intent-to-grant status.
The Company has
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five issued patents in Japan. Certain of the Company's technologies are
licensed under an exclusive patent license agreement with the Massachusetts
Institute of Technology ("MIT"). The agreement with MIT (as amended, the "MIT
Agreement") covers certain U.S. patents and corresponding patents in European
and Far East countries. Pursuant to the MIT Agreement, the Company has been
granted an exclusive, worldwide license to make, use and sell the products
covered by the patents and to practice the procedures covered by the patents.
The MIT Agreement requires the Company to pay to MIT a royalty on the
cumulative net sales of licensed products ranging from 3% to 4.5% of annual
Company sales.
The Company's U.S. issued patents relate to: the Company's test system
incorporating skin tissue equivalents and other organ equivalents; its
proprietary collagen extraction process; the invention and methods of making
of dense fibrillar collagen (DFC) constructs; the production of an organ
equivalent for the cornea and its method of production using tissue culturing
systems; a method of making collagen thread; a method of cold chemical
sterilization which maintains the cell-compatibility of the Company's
collagen; methods for manufacturing living skin equivalents, including
Apligraf (TM); and a method of cryopreservation of cultured living tissue
equivalents. As part of the continuing interest in protecting its intellectual
property rights, the Company has filed over eight other patent applications in
the United States, and contemplates seeking patent protection in non-U.S.
markets.
The Company expects to aggressively patent and protect its technologies.
However, there can be no assurance that any patents will be issued as a result
of the Company's domestic or foreign patent applications or that issued
patents will provide the Company with significant protection against
competitors. Furthermore, there can be no assurance that the existing patents
will be held valid if subsequently challenged. Moreover, there can be no
assurance that any patents issued to or licensed by the Company will not be
infringed or that third parties will not independently develop either the same
or similar technology. Similarly, no assurance can be given that other parties
will not be issued patents which will prevent, limit or interfere with one or
more of the Company's products, or will require licensing and the payment of
significant fees or royalties by the Company to such third parties in order to
enable the Company to conduct its business. Any of these occurrences could
have a material adverse effect on the Company's business, financial condition
and results of operations. No assurance can be given that any patents will
provide competitive advantages for the Company's products.
The validity and breadth of claims covered in the Company's patents involve
complex legal and factual issues and therefore are highly uncertain.
Litigation, which could result in substantial cost to and diversion of effort
by the Company, may be necessary to enforce patents issued to the Company, to
protect trade secrets or know-how owned by the Company, to defend the Company
against claimed infringement of the rights of others and to determine the
scope and validity of the proprietary rights of others. Adverse determinations
in litigation could subject the Company to significant liabilities to third
parties, could require the Company to seek licenses from third parties and
could prevent the Company from manufacturing, selling or using its products,
any of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company also relies upon unpatented proprietary technology, know-how and
trade secrets. The Company seeks to protect its trade secrets and proprietary
know-how, in part, through confidentiality agreements with its employees,
consultants and advisors, and the Company seeks to require any corporate
sponsor with which the Company enters into a collaborative research and
development agreement to do so as well. No assurance can be given that these
confidentiality agreements will not be violated, that the Company will have
adequate remedies for any breach, that others will not independently develop
or otherwise acquire substantially equivalent proprietary technology and trade
secrets or disclose such technology or that the Company can meaningfully
protect its rights in trade secrets, know-how or other proprietary information
in the event of any unauthorized use or disclosure. Any disclosure of such
information could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, others may hold or
receive patents which contain claims that may cover products developed by the
Company.
The Company has relationships with a number of academic consultants who are
employed by organizations other than the Company. Accordingly, the Company has
limited control over their activities and can expect only
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limited amounts of their time to be dedicated to the Company's activities.
These persons may have consulting, employment or advisory arrangements with
other entities that may conflict with or compete with their obligations to the
Company. Consultants generally sign agreements which provide for
confidentiality of the Company's proprietary information and results of
studies. However, there can be no assurance that the Company will, in
connection with every relationship, be able to maintain the confidentiality of
the Company's technology, dissemination of which could have a materially
adverse effect on the Company's business. To the extent that the Company's
scientific consultants develop inventions or processes independently that may
be applicable to the Company's proposed products, disputes may arise as to the
ownership of the proprietary rights to such information. Protracted and costly
litigation may be necessary to enforce and determine the scope and validity of
the Company's proprietary rights. There can be no assurance that the Company
will prevail in such litigation. Such inventions or processes will not
necessarily become the property of the Company, but may remain the property of
such consultants or their full-time employers, and the Company could be
required to make payments to the owners of such inventions or processes,
either in the form of cash, equity or a combination thereof.
COMPETITION
The Company is engaged in the rapidly evolving and highly competitive field
of tissue engineering. A number of pharmaceutical, biotechnology and medical
product companies in the United States and abroad are seeking to develop
competitive products for the treatment of skin wounds and other medical needs
targeted by the Company. Competition from these companies and others is
intense and is expected to increase. Many of these companies have
substantially greater capital resources, research and development staffs and
facilities, experience in conducting clinical trials and obtaining regulatory
approvals, and experience in the manufacturing, marketing and distribution of
products than the Company. In addition, competitive companies are working on
alternate approaches to many of the medical needs targeted by the Company.
Such companies may succeed in developing products that are more effective or
less costly than the Company's product and may be more successful than the
Company in manufacturing and marketing their products.
The Company is aware of other companies which have or are planning to
commercialize products intended to serve as skin replacements, in addition to
several companies that concentrate on skin repair products. The Company's
principal competitors in the wound care products market include Advanced
Tissue Sciences, Bristol-Myers Squibb, Genzyme Tissue Repair, Integra Life
Sciences, Johnson & Johnson, Kendall, LifeCell and Smith & Nephew. The Company
believes that its competitive position will be based on its ability to create
and maintain scientifically advanced technology and proprietary products and
processes, attract and retain qualified scientific personnel, obtain patent or
other protection for its products and processes, obtain required government
approvals on a timely basis, manufacture its products on a cost effective
basis and successfully market its products. There can be no assurance that the
Company will accomplish any of these goals. Similarly, there can be no
assurance that the Company's present or future competitors or others will not
succeed in developing technologies, products or procedures that are more
effective than any being developed by the Company or that would render the
Company's technology and products obsolete, noncompetitive or uneconomical.
The advent of new technologies or procedures could hinder the Company's
ability to compete effectively and have a material adverse effect on its
business, financial condition and results of operations.
MANUFACTURING LIMITATIONS
The Company has limited experience in the commercial manufacturing of
medical device products. The process of manufacturing the Company's products
is complex, requiring strict adherence to manufacturing protocols. The Company
is producing its lead product, Apligraf (TM), on a limited commercial scale in
adherence to these manufacturing protocols in quantities sufficient to meet
clinical testing and early commercial requirements. However, the Company will
need to transition from small-scale manufacturing to full-scale production of
the Company's products, which expansion will require additional current
expenditures for personnel and will likely require future additional
expenditures for capital equipment and facilities, all of which will increase
the Company's operating costs. There can be no assurance that the Company will
be able to make this transition successfully.
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As the Company undertakes the manufacture of products on a commercial basis,
it is required to maintain a manufacturing facility in compliance with Good
Manufacturing Practices. Manufacturing facilities and processes must pass an
inspection before the FDA will issue any product licenses necessary to market
medical therapeutics and are subject to continual review and periodic
inspection. There can be no assurance that the Company will be able to
maintain the necessary regulatory approvals for its manufacturing operations.
There can be no assurance that the Company will be able to manufacture any
products successfully and in a cost effective manner. If the Company is unable
to manufacture its potential products independently or obtain or retain third-
party manufacturing on commercially acceptable terms, the submission of
products for final regulatory approval and initiation of marketing would be
delayed. This, in turn, may cause the Company to be unable to commercialize
its product candidates as planned, on a timely basis or on a profitable basis,
which may have a material adverse effect on the Company's ability to conduct
its business.
SOURCES OF SUPPLY
The Company manufactures Apligraf (TM) for commercial sale, as well as for
use in clinical trials, at its Canton, Massachusetts facility. Among the
fundamental raw materials needed to manufacture Apligraf (TM) are
keratinocytes and fibroblasts. These cells are derived from donated infant
foreskin. The Company does extensive testing of the cells for pathogens,
including for the HIV or "AIDS" virus. However, there can be no assurance that
additional cells of adequate purity can be obtained, or once obtained, that
the cells derived from it will in fact be pathogen free.
Another major material required to produce the Company's products is
collagen, a protein obtained from animal source tissue. The Company has
developed a proprietary method of procuring its own collagen. This process
yields collagen which the Company believes is superior in quality and strength
to collagen available from commercial sources. The Company currently obtains
its animal source tissue from U.S. suppliers only. There can be no assurance
that the Company will be able to obtain adequate supplies of animal source
tissue to meet its future needs or that the Company will be able to obtain
such supplies on a cost effective basis.
The thermo-formed tray assembly that is used in the manufacturing process of
Apligraf (TM) is available under a supply arrangement with only one
manufacturing source. Because the FDA approval process requires manufacturers
to specify their proposed materials of certain component parts in their
applications, FDA approval of a new material would be required if a currently
approved material became unavailable from a supplier. There can be no
assurance that the Company will be able to obtain adequate supplies of thermo-
formed tray assemblies to meet its future Apligraf (TM) manufacturing needs or
that the Company will be able to obtain such assemblies on a cost effective
basis.
There can be no assurance that interruptions in supplies will not occur in
the future or that the Company will not have to obtain substitute vendors for
these materials. Any significant supply interruption would adversely affect
the Company's production of Apligraf (TM). In addition, an uncorrected
impurity or suppliers variation in a raw material, either unknown to the
Company or incompatible with the Company's manufacturing process, could have a
material adverse effect on the Company's ability to manufacture its products.
PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE
The Company's business exposes it to potential liability risks that are
inherent in the testing, manufacturing, marketing and sale of medical
products. The use of the Company's product candidates, whether for clinical
trials or for commercial sale by the Company or its collaborators, may expose
the Company to product liability claims or product recalls and possible
adverse publicity. These risks also exist with respect to the Company's future
product candidates, if any, that receive regulatory approval for commercial
sale. The Company currently has product liability coverage for the clinical
research use and commercial sale of its product candidates. However, there can
be no assurance that the Company will be able to maintain any insurance
coverage, or obtain additional insurance coverage at acceptable cost, if at
all. There can be no assurance that the level or breadth of any insurance
coverage maintained by the Company will be adequate to fully cover potential
liability claims. A
9
<PAGE>
successful claim or series of claims brought against the Company in excess of
its insurance coverage, and the effect of any product liability litigation may
have upon the reputation and marketability of the Company's technology and
products, together with diversion of the attention of the Company's key
personnel, could have a material adverse effect on the Company's business,
financial condition and results of operations.
HAZARDOUS MATERIALS
Medical and biopharmaceutical research and development involves the
controlled use of hazardous materials, such as radioactive compounds and
chemical solvents. The Company is subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such materials and certain waste products. In addition, the Company's business
involves the handling and disposal of human tissue. Although the Company
believes that its safety procedures for handling these materials are adequate,
the risk of accidental contamination or injury from all of those materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company. There can be no assurance that the
Company will not be required to incur significant costs to comply with
environmental laws and regulations, or any assurance that the operations,
business or assets of the Company will not be materially adversely affected by
current or future environmental laws or regulations.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT
In both domestic and foreign markets, the ability of the Company to
commercialize its product candidates will depend, in part, on the availability
of reimbursement from third-party payors, such as government health
administration authorities, private health insurers and other organizations.
Third-party payors are increasingly challenging the price and cost-
effectiveness of medical products. There can be no assurance that Company's
products will be considered cost effective. Significant uncertainty exists as
to the reimbursement status of newly-approved healthcare products. There can
be no assurance that adequate third-party insurance coverage will be available
for the Company or the Company's marketing partners to establish and maintain
price levels sufficient for realization of an appropriate return on its
investment in developing new therapies. Government and other third-party
payors are increasingly attempting to contain healthcare costs by limiting
both coverage and the level of reimbursement for new therapeutic products,
such as those being developed by the Company, approved for marketing by the
FDA and by refusing, in some cases, to provide any coverage for uses of
approved products for disease indications for which the FDA has not granted
marketing approval. If adequate coverage and reimbursement levels are not
provided by government and third-party payors for uses of the Company's
therapeutic products, the market acceptance of these products would be
adversely affected.
UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES
There have been a number of federal and state proposals during the last few
years to subject the pricing of pharmaceuticals to government control and to
make other changes to the health care system of the United States. It is
uncertain what legislative proposals will be adopted or what actions federal,
state or private payors for health care goods and services may take in
response to any health care reform proposals or legislation. The Company
cannot predict the effect health care reforms may have on its business, and no
assurance can be given that any such reforms will not have a material adverse
effect on the Company.
DEPENDENCE ON STRATEGIC RELATIONSHIPS
The Company has limited experience in sales, marketing and distribution. The
Company will need to develop long-term strategic relationships with partners,
such as Novartis that have marketing and sales forces with technical expertise
and distribution capability. To the extent that the Company enters into such
relationships, any revenues received by the Company will depend upon the
efforts of third parties and there can be no assurance that such efforts will
be successful. There can be no assurance that the Company will be able to
establish or maintain such long-term relationships or that it or its
collaborators will be successful in gaining market
10
<PAGE>
acceptance for any products that may be developed by the Company. To the
extent that the Company chooses not to or is unable to negotiate or maintain
collaborations, it would experience increased capital requirements to
undertake a commercialization program at its own expense. In addition, the
Company may encounter significant delays in introducing its products into
certain markets or find that the commercialization of its products in such
markets may be adversely affected by the absence of collaborative agreements.
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.
OUTSTANDING AND FUTURE ISSUANCES OF PREFERRED STOCK
The Company closed a $20 million Convertible Preferred Stock and warrant
financing in March 1998 (the "1998 Private Placement") with two institutional
investors. The Series C Convertible Preferred Stock ("Series C Preferred
Stock") pays no dividends and is convertible into Common Stock on a scheduled
basis over the next two years based on market price at time of conversion (up
to $36 per share). The Company may call for conversion under certain
conditions based on continued improvement in the price of the Company's Common
Stock. Conversions by the investors are subject to certain limits; no limits
exist for conversions on redemption or upon a major transaction. Mandatory
conversion is March 26, 2000, at which time the Company has the option to
redeem any outstanding Series C Preferred Stock in cash or by issuing Common
Stock. In addition, the investors received 160,000 three year warrants to
purchase Common Stock at $39 per share. The warrants may be exercised at any
time prior to March 26, 2001. The investors also have the right to receive,
under certain conditions based on the Common Stock market price declining
below certain levels, additional warrants to purchase an aggregate of up to
160,000 shares of Common Stock.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of the Series C Preferred Stock
and any Preferred Stock that may be issued in the future. Issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions, and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The issuance of Preferred Stock could also adversely affect the
Company's ability to obtain future financing.
STOCK PRICE VOLATILITY
The market prices of securities of biotechnology companies have been
volatile. Factors such as announcements of technological innovations, new
commercial products by the Company or its competitors, governmental
regulations, patent or proprietary rights developments, public concern as to
safety or other implications of biotechnology products, quarterly variations
in operating results and market conditions in general may have a significant
impact on the market price of the Company's Common Stock. Over the past
several years, the market price for the Company's common stock has fluctuated
dramatically. There can be no assurance that this high level of volatility
will not persist in the future, that the Company's Common Stock will trade in
the future at market prices in excess of its current market price and that
investors will not be adversely affected by changes in the market price of the
Common Stock.
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
the development of its business and does not anticipate paying cash dividends
in the foreseeable future.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Common
Stock by the Selling Stockholders.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue up to 40,000,000 shares of Common Stock, $.01 par value per
share ("Common Stock"). The Company is authorized to issue up to 1,000,000
shares of Preferred Stock, $1.00 par value per share ("Preferred Stock").
As of March 31, 1998, there were issued and outstanding 23,284,853 shares of
Common Stock. In addition, as of March 31, 1998, the Company had reserved an
aggregate of 3,906,250 shares of Common Stock for issuance under its 1986
Stock Option Plan (1,990,942 of which are subject to outstanding option
grants, 1,752,860 of which have been issued pursuant to the exercise of
previously outstanding options and 162,448 of which are no longer available
for future issuance), 2,343,750 shares of Common Stock for issuance under its
1995 Stock Option Plan (1,860,245 of which are subject to outstanding option
grants, 108,250 of which have been issued pursuant to the exercise of
previously outstanding options and 375,255 of which are available for future
issuance), 292,969 shares of Common Stock for issuance under its 1991 Employee
Stock Purchase Plan (14,758 of which have been issued and 278,211 of which are
available for future issuance), 195,313 shares of Common Stock for issuance
under the 1991 Directors' Stock Option Plan (58,596 of which are subject to
outstanding option grants, 29,298 of which have been issued pursuant to the
exercise of previously outstanding options and 107,419 of which are no longer
available for future issuance), 390,625 shares of Common Stock for issuance
under its 1994 Directors' Stock Option Plan (214,380 of which are subject to
outstanding option grants, 27,344 of which have been issued pursuant to the
exercise of previously outstanding options and 148,901 of which are available
for future issuance), and 585,938 shares of Common Stock for issuance pursuant
to a stock option agreement with an officer of the Company. In addition,
1,400,000 shares have been reserved for issuance upon conversion of the Series
C Preferred Stock and exercise of the Warrants issued in the 1998 Private
Placement and 40,000 shares have been reserved for issuance upon the exercise
of warrants issued to Reedland Capital Partners (the "Placement Agent").
COMMON STOCK
The holders of Common Stock are entitled to one vote per share for each
share held of record on all matters submitted to a vote of stockholders and
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
have the right to a ratable portion of assets remaining after payment of
liabilities and the liquidation preferences of any outstanding Preferred
Stock. The holders of Common Stock have no preemptive rights or rights to
convert their Common Stock into any other securities and are not subject to
future calls or assessments by the Company. All outstanding shares of Common
Stock are fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors may, without further action of the stockholders of
the Company, issue Preferred Stock in one or more series and fix the rights
and preferences thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption (including sinking fund
provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or the designation of such series.
The Company has authorized 1,000,000 shares of Preferred Stock at December
31, 1997, of which 250,000 and 50,000 shares are designated as Series A
Convertible Preferred Stock and Series B Junior Participating Preferred Stock,
respectively. The 250,000 shares of Series A Convertible Preferred Stock that
were previously issued were subsequently converted into 312,500 shares of
Common Stock in October 1995. There were no shares of Series A Convertible
Preferred Stock or Series B Junior Participating Preferred Stock issued and
outstanding as of December 31, 1997 and 1996, respectively.
The Company closed a $20 million Convertible Preferred Stock and warrant
financing in March 1998 with two institutional investors. The Company sold and
issued 200 shares of Series C Convertible Preferred Stock ("Series C Preferred
Stock") which pay no dividends. The number of shares of Common Stock issuable
upon
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<PAGE>
conversion of the shares of Series C Preferred Stock (the "Conversion Shares")
will be determined by dividing the stated value by the conversion price then
in effect. The conversion price per share is to be the lower of (i) $36.00 and
(ii) the average of the Closing Bid Prices of the Common Stock for any three
trading days selected by the investors during the 20 consecutive trading days
immediately preceding the date of conversion, in each case, subject to
adjustment for subsequent dilutive financings or if the Company declares a
dividend or makes a distribution in shares of Common Stock, subdivides or
reclassifies the outstanding shares of Common Stock into a greater number of
shares, or combines or reclassifies the outstanding Common Stock into a
smaller number of shares. The investors, in the aggregate, may not convert
Preferred Stock into Common Stock in excess of 909,091 shares. However, no
limits exist for conversions or redemption or upon a major transaction, such
as a consolidation or merger, the sale or transfer of substantially all of the
Company's assets, or a purchase, tender or exchange offer for more than 50% of
the outstanding shares of Common Stock that is accepted by the holders
thereof. Additionally, the investors are not entitled to convert Series C
Preferred Stock in excess of that number of Series C Preferred Stock Shares
which, upon giving effect to such conversion, would cause the aggregate number
of shares of Common Stock beneficially owned by such investor and its
affiliates to exceed 4.9% of the outstanding shares of the Common Stock
following such conversion. Each investor is entitled to convert 25% of the
Series C Preferred Stock owned by that investor at any time on or after the
earlier of the date of effectiveness of a registration statement covering the
resales of the Conversion Shares and a date that is 60 days from the date of
issuance of the Preferred Stock (the "Initial Conversion Date"). An additional
25% of the Series C Preferred Stock owned by each investor will become
convertible on each of the dates 60, 120 and 180 days, respectively, following
the Initial Conversion Date. The Company may call for conversion under certain
conditions based on continued improvement in the price of the Company's Common
Stock. Upon the Mandatory Conversion Date of March 26, 2000, the Company has
the option of redeeming any outstanding Preferred Stock by paying the
investors cash or by converting such Series C Preferred Stock to Common Stock
at the then applicable conversion price. In addition, the investors received
160,000 three year warrants to purchase Common Stock at $39 per share. The
warrants may be exercised at any time prior to March 26, 2001. The investors
also have the right to receive, under certain conditions based on the Common
Stock market price declining below certain levels, additional warrants to
purchase an aggregate of up to 160,000 shares of Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of the Series C Preferred Stock will be entitled to receive an
amount per Series C Preferred Stock share equal to the stated value, before
any amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Series C Preferred Shares. As long
as the initially issued shares of Series C Preferred Stock remain outstanding,
then without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Series C Preferred Stock, the Company
may not authorize or issue additional or other capital stock that is of senior
rank to the Series C Preferred Stock in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of
the Company. Until all of the Series C Preferred Stock has been converted or
redeemed, the Company may not redeem or declare or pay any cash dividend or
distribution on its Common Stock or any other series of preferred stock of the
Company without the prior express written consent of the holders of not less
than two-thirds (2/3) of the then outstanding Series C Preferred Stock.
Additional shares of authorized Preferred Stock may be issued without
stockholder approval, subject to the rights of any holders of outstanding
Series C Preferred Stock. The Board of Directors is authorized to issue such
shares in one or more series and to fix the rights, preferences, privileges,
qualifications, limitations and restrictions thereof, including dividend
rights and rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without any vote or
action by the holders of Common Stock. Any Preferred Stock to be issued could
rank prior to the Common Stock with respect to dividend rights and rights on
liquidation. The Board of Directors, without approval of the holders of Common
Stock, may issue Preferred Stock with voting and conversion rights that could
adversely affect the voting power of holders of Common Stock or create
impediments to persons seeking to gain control of the Company.
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The rights of the holders of Common Stock as described above will be subject
to, and may be adversely affected by, the rights of holders of the Series C
Preferred Stock and any Preferred Stock that may be issued in the future.
Issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions, and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or
of discouraging a third party from acquiring, a majority of the outstanding
voting stock of the Company. See "Description of Capital Stock--Shareholder
Rights."
SHAREHOLDER RIGHTS
On August 24, 1995, the Board declared a dividend distribution of one right
(the "Rights") for each then outstanding share of Common Stock. Each Right
entitles the registered holder to purchase from the Company one-one thousandth
of a share of Series B Stock at a purchase price of $85.00 in cash, subject to
adjustment. Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding and no separate Rights
Certificates will be distributed. The Rights will separate from the Common
Stock and a "Distribution Date" will occur upon the earlier of (i) ten days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired or obtained the right
to obtain beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date"), or (ii) ten business days
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 30% or more of the Company's
outstanding shares of Common Stock. The rights are not exercisable until the
Distribution Date and will expire at the close of business on September 1,
2005, unless earlier redeemed or exchanged by the Company. At any time until
ten days following the Stock Acquisition Date, the Company may redeem the
Rights, in whole but not in part, at a price of $.01 per Right (payable in
cash or stock).
If any person becomes the beneficial owner of 15% or more of the shares of
Common Stock of the Company, except pursuant to a tender or exchange offer for
all shares at a fair price as determined by the non-employee members of the
Board of Directors, each Right not owned by the 15% or more shareholder will
enable its holder to purchase that number of shares of the Company's Common
Stock which equals the exercise price of the Right divided by one-half of the
current market price of such Common Stock at the date of the occurrence of the
event. In addition, if the Company is involved in a merger or other business
combination transaction with another person or group in which it is not the
surviving corporation or in connection with which its Common Stock is changed
or converted, or it sells or transfers 50% or more of its assets or earning
power to another person, each Right that has not previously been exercised
would entitle its holder to purchase that number of shares of Common Stock of
such other person which equals the exercise price of the Right divided by one-
half of the current market price of such Common Stock at the date of the
occurrence of the event.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.
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SELLING STOCKHOLDERS
The shares of Common Stock offered hereby by the Selling Stockholders are
issuable upon (a) the conversion of convertible preferred stock in the
aggregate amount of $20,000,000 (the "Convertible Stock") issued by the
Company in the 1998 Private Placement to Stark International and Shepherd
Investments International, Ltd. (collectively, the "Investors") initially
convertible prior to March 26, 2000 into up to a maximum of 909,091 shares of
the Company's Common Stock, (b) the exercise of warrants to purchase an
aggregate of up to 160,000 shares of Common Stock (the "Initial Warrants")
issued by the Company to the Investors in connection with the 1998 Private
Placement; (c) the exercise of warrants to purchase an aggregate of up to an
additional 160,000 shares of Common Stock issued by the Company to the
Investors in connection with the 1998 Private Placement in the event that the
Company's stock price drops below certain trading prices (the "Contingent
Warrants"); and (d) the exercise of warrants to purchase an aggregate of
40,000 shares of Common Stock to the Placement Agent. The Initial Warrants and
the Contingent Warrants are hereinafter referred to collectively as the
"Warrants".
The number of shares registered on the registration statement of which this
Prospectus is a part and the number of shares offered hereby have been
determined by agreement between the Company, the Investors and the Placement
Agent. The number of shares of Common Stock that will ultimately be issued to
the Investors upon conversion of the Series C Preferred Stock is dependent
upon a conversion formula which relies in part on the closing bid price of the
Common Stock for any three trading days during the twenty (20) days
immediately preceding the date of conversion and, therefore, cannot be
determined at this time.
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock by the Selling Stockholders as of
April 6, 1998:
<TABLE>
<CAPTION>
MAXIMUM NUMBER
OF SHARES
BENEFICIALLY NUMBER OF
OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER OFFERING (1)(2) OFFERED
------------------- --------------- ------------
<S> <C> <C>
Stark International (3)............................ 700,000 700,000
Shepherd Investments............................... 700,000 700,000
International, Ltd. (4)
Reedland Capital Partners (5)...................... 40,000 40,000
</TABLE>
- --------
(1) Assumes the sale of all shares offered hereby to unaffiliated third
parties.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Shares of Common Stock subject to options, warrants and
convertible securities currently exercisable or convertible, or exercisable
or convertible within 60 days, are deemed outstanding, including for
purposes of computing the percentage ownership of the persons holding such
option, warrant or convertible security, but not for purposes of computing
the percentage of any other holder. Includes up to 700,000 shares of Common
Stock issuable upon conversion of the Series C Preferred Stock and the
exercise of the Initial Warrants and the Contingent Warrants owned by each
of the Investors. The Certificate of Designation of the Series C Preferred
Stock limits the conversion rights of the Investors such that the maximum
number of shares of the Company's Common Stock issued upon conversion or
exercise of the Convertible Stock to each of the Investors may not exceed
4.9% of the then issued and outstanding shares of the Company's Common Stock
following such conversion.
(3) Includes (a) up to 454,545 shares of Common Stock, being the maximum
number of shares initially issuable upon conversion of the Series C
Preferred Stock held by Stark International (b) up to 80,000 shares issuable
upon exercise of the Initial Warrants held by Stark International and (c) up
to 80,000 shares issuable upon the exercise of the Contingent Warrants held
by Stark International. An additional 85,455 shares of Common Stock are
being registered hereunder for possible issuance upon the mandatory
conversion date of March 26, 2000 (provided that the Series C Preferred
Stock is not converted prior to the redemption date of the Series C
Preferred Stock) or upon a sale of all or substantially all of the stock or
assets of the Company under certain events.
(4) Includes (a) up to 454,545 shares of Common Stock, being the maximum
number of shares initially issuable upon conversion of the Series C
Preferred Stock held by Shepherd Investments International, Ltd. (b) up to
80,000 shares issuable upon exercise of the Initial Warrants held by
Shepherd Investments International, Ltd. and (c) up to 80,000 shares
issuable upon the exercise of the Contingent Warrants held by Shepherd
Investments International, Ltd. An additional 85,455 shares of Common Stock
are being registered hereunder for possible issuance upon the mandatory
conversion date of March 26, 2000 (provided that the Series C Preferred
Stock is not converted prior to the redemption date of the Series C
Preferred Stock) or upon a sale of all or substantially all of the stock or
assets of the Company under certain events.
(5) Includes up to 40,000 shares of Common Stock issuable upon the exercise of
the Warrants owned by the Placement Agent to purchase up to 40,000 shares of
Common Stock.
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<PAGE>
PLAN OF DISTRIBUTION
The 1,440,000 shares of Common Stock of the Company offered hereby may be
offered and sold from time to time by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest. Such offers and
sales may be made from time to time on one or more exchanges or in the over-
the-counter market, or otherwise, at prices and on terms then prevailing or at
prices related to the then-current market price, or in negotiated
transactions. The methods by which the shares may be sold may include, but not
be limited to, the following: (a) a block trade in which the broker or dealer
so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account; (c) an exchange distribution in accordance with the
rules of such exchange; (d) ordinary brokerage transactions and transactions
in which the broker solicits purchasers; (e) privately negotiated
transactions; (f) short sales; and (g) a combination of any such methods of
sale. In effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Brokers
or dealers may receive commissions or discounts from the Selling Stockholders
or from the purchasers in amounts to be negotiated immediately prior to the
sale. The Selling Stockholders may also sell such shares in accordance with
Rule 144 under the Securities Act.
From time to time the Selling Stockholders may engage in short sales, short
sales against the box, puts and calls and other transactions in securities of
the Company in derivatives thereof, and may sell and deliver the shares in
connection therewith. From time to time Selling Stockholders may pledge their
shares pursuant to the margin provisions of their respective customer
agreements with their respective brokers. Upon a default by a Selling
Stockholder, the broker may offer and sell the pledge shares of Common Stock
from time to time.
The Company has agreed to use its best efforts to maintain the effectiveness
of the registration of the shares being offered hereunder until March 26, 2003
or such earlier date when all of the shares being offered hereunder have been
sold or may be sold without volume or other restrictions pursuant to Rule 144
or Rule 144A under the Securities Act, as determined by counsel to the Company
pursuant to a written opinion letter.
The Selling Stockholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the Securities Act. There can
be no assurance that the Selling Stockholders will sell any or all of the
shares of Common Stock offered hereunder.
All proceeds from any such sales will be the property of the Selling
Stockholder who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees.
LEGALITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997 have been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Kenneth J. Novack, a member of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., has served on the Board of Directors of the Company since March
1998 and owns 781 shares of Common Stock of the Company and options to
purchase up to 15,000 shares of Common Stock of the Company.
16
<PAGE>
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of
the corporation in related capacities against amounts paid and expenses
incurred in connection with an action or proceeding to which he is or is
threatened to be made a party by reason of such position, if such person shall
have 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, in any criminal
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful, provided that, in the case of actions brought by or in the right of
the corporation, no indemnification shall be made with respect to any matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the adjudicating court
determines that such indemnification is proper under the circumstances.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to provide in its certificate of incorporation that a
director of the corporation shall not be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company's Restated Certificate of Incorporation provides for
indemnification to the fullest extent permitted by law and that the Company
may advance litigation expenses to an officer or director prior to the final
disposition of an action.
The Company's Restated Certificate of Incorporation also provides, as
permitted by Delaware law, that directors shall not be personally liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of a director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing
violations of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
The Company has a Directors and Officers liability insurance policy that
insures the Company's officers and directors against certain liabilities.
COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company,
the Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE
COMPANY OR THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information by Reference.......................... 2
Available Information...................................................... 2
The Company................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 11
Description of the Capital Stock........................................... 12
Transfer Agent and Registrar............................................... 14
Selling Stockholders....................................................... 15
Plan of Distribution....................................................... 16
Legality of Common Stock................................................... 16
Experts.................................................................... 16
Interests of Named Experts and Counsel..................................... 16
Indemnification............................................................ 17
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORGANOGENESIS INC.
1,440,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
-----------------
PROSPECTUS
-----------------
APRIL , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
SEC registration fee and AMEX filing fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $14,430
AMEX Filing Fee.................................................. 17,500
Legal Fees and Expenses.......................................... 10,000
Accounting Fees and Expenses..................................... 5,000
Miscellaneous.................................................... 3,070
TOTAL.......................................................... $50,000
</TABLE>
The Selling Stockholders will bear the expense of their own legal counsel
and miscellaneous fees and expenses, if any.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
See "Indemnification" contained in Part I hereof, which is incorporated
herein by reference.
The corporation shall indemnify and hold harmless persons who serve at its
express written request as directors or officers of another organization in
which the corporation owns shares or of which it is a creditor.
In addition, the Registration Rights Agreement, filed as Exhibit 99d hereto,
contains provisions for indemnification by the Investors of the Registrant and
its officers, directors, and controlling persons against certain liabilities
under the Securities Act.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 The Certificate of Incorporation of the Registrant (previously filed
as Exhibit 3a to the Registrant's Registration Statement on Form S-1,
File No. 33-48340, and incorporated herein by reference).
4.2 Form of Common Stock Certificate (previously filed as Exhibit No. 4c
to the Registrant's Registration Statement on Form S-1, File No. 33-
48340, and incorporated herein by reference).
4.3 Certificate of Designation of Series C Convertible Preferred Stock as
filed with the Delaware Secretary of State on March 26, 1998.
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5)
24 Power of Attorney (filed in Part II of this Registration Statement).
99a. Securities Purchase Agreement among the Company and the Investors
dated as of March 26, 1998.
99b. Form of Common Stock Purchase Warrant dated as of March 26, 1998.
99c. Form of Contingent Common Stock Purchase Warrant dated as of March 26,
1998.
99d. Form of Registration Rights Agreement between the Company and the
Investors dated as of March 26, 1998.
99e. Form of Common Stock Purchase Warrant between the Company and the
Placement Agent dated as of March 26, 1998.
</TABLE>
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
A. RULE 415 OFFERING
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b)(sec.230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (A)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the 1934 Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
1934 Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the 1934 Act) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. REQUEST FOR ACCELERATION OF EFFECTIVE DATE OR FILING OF REGISTRATION
STATEMENT ON FORM S-8
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on April 22,
1998.
Organogenesis Inc.
By:
-----------------------------------
HERBERT M. STEIN, CHIEF EXECUTIVE
OFFICER
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Herbert M. Stein and Donna L. Abelli, or any of
them, his attorney-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this registration statement, (or any other
registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act) and to file the same,
with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as full to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitutes may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE DATE
/s/ Herbert M. Stein Chief Executive April 22, 1998
- ------------------------------------- Officer and
HERBERT M. STEIN Chairman of the
Board (principal
executive officer)
/s/ David T. Rovee President, Chief April 22, 1998
- ------------------------------------- Operating Officer
DAVID T. ROVEE and Director
/s/ Donna L. Abelli Vice President, April 22, 1998
- ------------------------------------- Chief Financial
DONNA L. ABELLI Officer, Treasurer
and Secretary
(principal
financial officer
and principal
accounting officer)
/s/ Richard S. Cresse Director April 22, 1998
- -------------------------------------
RICHARD S. CRESSE
Director April , 1998
- -------------------------------------
WILLIAM J. HOPKE
/s/ Kenneth J. Novack Director April 22, 1998
- -------------------------------------
KENNETH J. NOVACK
/s/ Bjorn R. Olsen Director April 22, 1998
- -------------------------------------
BJORN R. OLSEN
/s/ Marguerite A. Piret Director April 22, 1998
- -------------------------------------
MARGUERITE A. PIRET
/s/ Anton E. Schrafl Director April 22, 1998
- -------------------------------------
ANTON E. SCHRAFL
II-4
<PAGE>
ORGANOGENESIS INC.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
4.1 The Certificate of Incorporation of the Registrant (previously filed
as Exhibit 3a to the Registrant's Registration Statement on Form S-1,
File No. 33-48340, and incorporated herein by reference).
4.2 Form of Common Stock Certificate (previously filed as Exhibit No. 4c
to the Registrant's Registration Statement on Form S-1, File No. 33-
48340, and incorporated herein by reference).
4.3 Certificate of Designation of Series C Convertible Preferred Stock as
filed with the Delaware Secretary of State on March 26, 1998.
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5)
24 Power of Attorney (filed in Part II of this Registration Statement).
99a. Securities Purchase Agreement among the Company and the Investors
dated as of March 26, 1998.
99b. Form of Common Stock Purchase Warrant dated as of March 26, 1998.
99c. Form of Contingent Common Stock Purchase Warrant dated as of March 26,
1998.
99d. Form of Registration Rights Agreement between the Company and the
Investors dated as of March 26, 1998.
99e. Form of Common Stock Purchase Warrant between the Company and the
Placement Agent dated as of March 26, 1998.
</TABLE>
<PAGE>
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES C CONVERTIBLE PREFERRED STOCK
OF
ORGANOGENESIS INC.
Organogenesis Inc. (the "COMPANY"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Restated Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions (i) authorizing a new series of the Company's previously authorized
preferred stock, $1.00 par value per share, and (ii) providing for the
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of 200 shares of
Series C Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 200 shares of Series
C Convertible Preferred Stock (the "SERIES C PREFERRED SHARES"), $1.00 par
value per share, and the stated value shall be $100,000 per share (the
"STATED VALUE") which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The holders of the outstanding Series C Preferred
---------
Shares (collectively, the "HOLDERS" and each a "HOLDER") shall not be
entitled to receive any dividends in respect of Series C Preferred Shares.
(2) Holder's Conversion of Series C Preferred Shares. Each Holder
------------------------------------------------
shall have the right, at such Holder's option, to convert the Series C
Preferred Shares into shares of the Company's common stock, $.01 par value
per share (the "COMMON STOCK"), on the following terms and conditions:
(a) Conversion Right. Subject to the provisions of Section 2(f)
----------------
below, any Holder shall be entitled to convert, at any time or times on or
after the date (the "INITIAL CONVERSION DATE") that is the earlier of (I)
the Effective Date (as defined in Section 2(b)(vii)) and (II) the date that
is 60 days after the initial date of issuance of the Series C Preferred
Shares (the "INITIAL ISSUANCE DATE"), the Series C Preferred Shares owned
by such Holder into fully paid and
<PAGE>
nonassessable shares (rounded to the nearest whole share in accordance with
Section 2(g) below) of Common Stock, at the Conversion Rate (as defined
below); provided, however, that no Holder shall be entitled to convert any
Series C Preferred Shares in excess of the applicable Conversion Limit or
with respect to the Holders in the aggregate, the Common Share Limit
(except for a conversion pursuant to Sections 2(i) or 3(a) hereof),
provided further, that in no event shall any Holder be entitled to convert
Series C Preferred Shares in excess of that number of Series C Preferred
Shares which, upon giving effect to such conversion, would cause the
aggregate number of shares of Common Stock beneficially owned by the Holder
and its affiliates to exceed 4.9% of the outstanding shares of the Common
Stock following such conversion. For purposes of this paragraph beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended.
(b) Conversion Rate. The number of shares of Common Stock
---------------
issuable upon conversion of each of the Series C Preferred Shares pursuant
to Sections (2)(a) and 2(f) shall be determined according to the following
formula (the "CONVERSION RATE"):
Stated Value
------------
Conversion Price
For purposes of this Certificate of Designations, the following terms shall
have the following meanings:
(i) "APPLICABLE PENALTY PERCENTAGE" means 1% for the initial thirty
day period of the Penalty Period (effective as of the first day thereof) and an
additional 1.5% for each thirty day period (effective as of the first day of
each such period) thereafter.
(ii) "AVERAGE MARKET PRICE" means the average of the Closing Bid
Prices of the Common Stock for the five trading days immediately preceding the
applicable date.
(iii) "CLOSING BID PRICES" means, for any security as of any date,
the closing bid price on the American Stock Exchange ("AMEX") as reported by the
AMEX, or, if the AMEX is not the principal securities exchange for such
security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, L.P. ("BLOOMBERG"), or if the foregoing do not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, or, if no closing trade price
is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
(iv) "COMMON SHARE LIMIT" means 909,091 shares of Common Stock.
-2-
<PAGE>
(v) The "CONVERSION LIMIT" shall be equal to (i) for the
period commencing on the Initial Conversion Date and ending 60 days after the
Initial Conversion Date, 25% of the Series C Preferred Shares held by such
Holder on the Initial Issuance Date, (ii) for the period commencing 61 days
after the Initial Conversion Date and ending 120 days after the Initial
Conversion Date, 50% of the Series C Preferred Shares held by such Holder on the
Initial Conversion Date; and (iii) for the period commencing 121 days after the
Initial Issuance Date and ending 180 days after the Initial Conversion Date, 75%
of the Series C Preferred Shares held by such Holder on the Initial Issuance
Date. There shall be no Conversion Limit (i) if the bid price of the Common
Stock at the time of submission of a Conversion Notice (as hereinafter defined)
by a Holder exceeds $36.00 or (ii) commencing 181 days after the Initial
Conversion Date. Any transferee of Series C Preferred Shares shall participate
pro rata with the initial transferring Holder's Conversion Limit.
(vi) "CONVERSION PRICE" means (A) for any Conversion Date or
other date of determination other than during the Penalty Period (as defined in
Section 2(b)(viii) (the "STANDARD CONVERSION PRICE"), the lower of (I) $36.00
and (II) the average of the Closing Bid Prices of the Common Stock for any three
trading days selected by the Holder during the 20 consecutive trading days
immediately preceding the Conversion Date, in each case, subject to adjustment
as provided herein; and (B) for any Conversion Date or other date of
determination during the Penalty Period, the Standard Conversion Price less the
Applicable Penalty Percentage, subject to adjustment as provided herein;
provided, however, that if the Penalty Period extends beyond 180 days after the
Initial Issuance Date, any Holder shall have the option of exercising its rights
pursuant to Section 3(d)(iv) in lieu of converting its Series C Preferred
Shares.
(vii) "EFFECTIVE DATE" means the date that the registration
statement (the "REGISTRATION STATEMENT") covering the resale of the shares of
Common Stock issuable upon conversion of the Series C Preferred Shares and the
exercise of the warrants issuable to the Holders and required to be filed by the
Company pursuant to the Registration Rights Agreement between the Company and
the initial Holders (the "REGISTRATION RIGHTS AGREEMENT"), is declared effective
by the United States Securities and Exchange Commission (the "SEC").
(viii) "PENALTY PERIOD" means in the event that the Registration
Statement is not declared effective by the SEC within 90 days of the Initial
Issuance Date, the period beginning on the 91st day following the Initial
Issuance Date and ending on the Effective Date, provided, however, that in the
event that any time after the Initial Issuance Date the SEC is closed for
business for ten (10) or more consecutive days, the time periods referred to in
this definition shall be extended by such number of days the SEC is actually
closed.
(c) [Intentionally Omitted]
(d) Adjustment to Conversion Price -- Dilution and Other Events. In
-------------------------------------------------------------
order to prevent dilution of the rights granted under this Certificate of
Designations, (x) the Closing Bid Prices for any days during any measuring
period prior to any of the events set forth below (the "ADJUSTING CLOSING BID
PRICES"), (y) the Closing Price and (z) the Common Share Limit will each be
subject to adjustment from time to time as provided in this Section 2(d).
-3-
<PAGE>
(i) Adjustment upon Declaration of Dividends and Other Events.
---------------------------------------------------------
If the Company shall (I) declare a dividend or make a distribution in shares of
Common Stock, (II) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (III) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the Adjusting Closing
Bid Prices, the Closing Price and the Common Share Limit in effect on the record
date of such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted.
(ii) Adjustment upon Issuance of Certain Securities. If at any
----------------------------------------------
time, on or before the first anniversary of the Initial Issuance Date, the
Company in any manner issues or sells (a "SUBSEQUENT FINANCING") pursuant to
Section 4(2) of the Securities Act of 1933, as amended, (the "1933 ACT"),
Regulation D or Regulation S of the 1933 Act or any other private placement of
any Common Stock or any security convertible, into, exchangeable for or
exercisable for Common Stock or any other right to acquire Common Stock
("CONVERTIBLE SECURITIES") and the price per share of the Common Stock or for
which Common Stock is issuable upon the conversion, exchange or exercise of such
convertible security is less than the Closing Price (the "NEW COMMON STOCK
ISSUANCE PRICE") or is subject to a conversion ceiling (the "NEW CONVERTIBLE
SECURITIES CEILING") which is less than the Conversion Price on any Conversion
Date or the number of shares of Common Stock issuable upon conversion, exchange
or exercise of such convertible security is derived using a price per share of
Common Stock that is less than $22.00 (as adjusted pursuant to Section 2(d)(i)
above), then each Holder shall have the right to exchange such Holder's Series C
Preferred Shares and the warrants issued to the Holder in connection with the
purchase of such Holder's Series C Preferred Shares for an equivalent value (the
"EXCHANGE AMOUNT") of the securities issued in such Subsequent Financing. The
Exchange Amount shall be determined based on upon the Stated Value of the Series
C Preferred Shares and the equivalent valuation concept used in the Subsequent
Financing.
(iii) Notices.
-------
(A) Immediately upon any adjustment or proposed Subsequent
Financing as contemplated by this Section (2)(d), the Company will give
written notice thereof to each Holder, setting forth in reasonable detail
and certifying the calculation of such adjustment or the terms of such
Subsequent Financing, as applicable.
(B) The Company will give written notice to each Holder at
least twenty (20) days prior to the date on which the Company closes its
books or takes a record (I) with respect to any dividend or distribution
upon the Common Stock, or (II) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation; provided that in no
event shall such notice be provided to such holder prior to such
information being made known to the public. "ORGANIC CHANGE" shall mean any
recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person
or other transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock. "PERSON" shall mean an individual, a limited liability
-4-
<PAGE>
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(C) The Company will also give written notice to each
Holder at least twenty (20) days prior to the date on which any Organic
Change, dissolution or liquidation will take place.
(iv) Successive adjustments in the Adjusting Closing Bid Prices,
the Closing Price and the Common Share Limit shall be made whenever any
event specified above shall occur. All calculations under this Section
2(d) shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. No adjustment in the Conversion Price or
Closing Price shall be made if the amount of such adjustment would be less
than $0.01, but any such amount shall be carried forward and an adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate $0.01 or more.
(e) Mechanics of Conversion. Subject to the Company's inability to
-----------------------
fully satisfy its obligations under a Conversion Notice (as defined below) as
provided for in Section 5 below:
(i) Holder's Delivery Requirements. To convert Series C
------------------------------
Preferred Shares into full shares of Common Stock on any date (the
"CONVERSION DATE"), the Holder thereof shall (A) deliver or transmit by
facsimile, for receipt on or prior to 11:59 p.m., Eastern Time on such
date, a copy of a fully executed notice of conversion in the form attached
hereto as Exhibit I (the "CONVERSION NOTICE"), to the Company or its
designated transfer agent (the "TRANSFER AGENT"), and (B) surrender to a
common carrier for overnight delivery to the Company or the Transfer Agent
as soon as practicable following such date, the original certificates
representing the Series C Preferred Shares being converted (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) (the "PREFERRED STOCK CERTIFICATES") and
the originally executed Conversion Notice.
(ii) Company's Response. Upon receipt by the Company of a
------------------
facsimile copy of a Conversion Notice, the Company shall immediately send,
via facsimile, a confirmation of receipt of such Conversion Notice to such
Holder. Upon receipt by the Company or the Transfer Agent of the Preferred
Stock Certificates to be converted pursuant to a Conversion Notice,
together with the originally executed Conversion Notice, the Company or the
Transfer Agent (as applicable) shall, on the next business day following
the date of receipt (or the second business day following the date of
receipt if received after 11:00 a.m. local time of the Company or Transfer
Agent, as applicable), (I) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled, or
(II) credit such aggregate number of shares of Common Stock to which the
Holder shall be entitled to the Holder's or its designee's balance account
with The
-5-
<PAGE>
Depository Trust Company, or (III) if the Holder requests, issue shares in
electronic format (e.g. via DWAC).
(iii) Dispute Resolution. In the case of a dispute as to
------------------
the determination of the Conversion Price, the Company shall promptly issue
to the Holder the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one (1) business day of receipt of such
Holder's Conversion Notice. If such Holder and the Company are unable to
agree upon the determination of the Conversion Price within one business
day of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall within one business day
submit via facsimile the disputed determination of the Conversion Price to
an independent, reputable accounting firm of national standing acceptable
to the Company and such Holder of Series C Preferred Shares. The Company
shall cause such accounting firm to perform the determinations or
calculations and notify the Company and the holder of the results no later
than 48 hours from the time it receives the disputed determinations or
calculations. Such accounting firm's determination, shall be binding upon
all parties absent manifest error.
(iv) Record Holder. The person or persons entitled to
-------------
receive the shares of Common Stock issuable upon a conversion of Series C
Preferred Shares shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If the Company
-----------------------------------
shall fail (other than as a result of the situations described in Section
4(a) with respect to which the Holder has elected, and the Company has
satisfied its obligations under, one of the options set forth in
subparagraphs (i) through (iv) of Section 4(a)) to issue to a Holder on a
timely basis as described in this Section 2(e), the number of shares of
Common Stock to which such Holder is entitled upon such Holder's conversion
of Series C Preferred Shares, the Company shall pay damages to such Holder
equal to the greater of (A) actual damages incurred by such holder as a
result of such Holder's having needed to "buy in" shares of Common Stock to
satisfy its securities delivery requirements ("BUY IN ACTUAL DAMAGES") and
(B) after the effective date of the Registration Statement if the Company
fails to deliver such certificates within three days after the last
possible date which the Company could have issued such Common Stock to such
Holder without violating this Section 2(e), on each date such conversion is
not timely effected, an amount equal to 1% of the product of (A) the number
of shares of Common Stock not issued to the Holder on a timely basis and to
which such holder is entitled and (B) the Closing Bid Price of the Common
Stock on the last possible date on which the Company could have issued such
Common Stock to such holder without violating this Section 2(e).
(f) Mandatory Conversion or Redemption. If any Series C
----------------------------------
Preferred Shares remain outstanding on the Mandatory Conversion Date (as
defined below), then the Company shall have the option of redeeming all
such Series C Preferred Shares (the "MANDATORY CONVERSION SHARES") (I) by
paying such Holder an amount, in cash, equal to the product of the number
of Mandatory Conversion Shares held by such Holder
-6-
<PAGE>
multiplied by the Stated Value (the "MANDATORY REDEMPTION PRICE"), (II) by
issuing to such Holder the number of shares of Common Stock that may be
immediately sold pursuant to an effective Registration Statement that such
Holder would be entitled to receive as if such Holder had given the
Conversion Notice on the Mandatory Conversion Date, the Conversion Date had
been fixed as of the Mandatory Conversion Date, and for the purposes of
this Section 2(f), as applicable, the Conversion Price were equal to the
average of the Closing Bid Prices for the twenty (20) consecutive trading
days immediately preceding the Mandatory Conversion Date and the Stated
Value were multiplied by 1.15, or (III) by any combination of the methods
set forth in clauses (I) and (II) above; provided, however, that the Common
Share Limit shall not apply with respect to issuances of Common Stock
contemplated by clauses (II) and (III) above. All Holders of Series C
Preferred Shares shall thereupon and within two (2) business days
thereafter surrender all Preferred Stock Certificates, duly endorsed for
cancellation, to the Company or the Transfer Agent. No person shall
thereafter have any rights in respect of Series C Preferred Shares, except
the right to receive shares of Common Stock on conversion thereof or the
Mandatory Redemption Price, as provided in this Section 2. "MANDATORY
CONVERSION DATE" means March 26, 2000.
(g) Fractional Shares. The Company shall not issue any fraction
-----------------
of a share of Common Stock upon any conversion. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one
Series C Preferred Share by a Holder shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share.
(h) Transfer Taxes. The Company shall pay any and all taxes
--------------
which may be imposed upon it with respect to the issuance and delivery of
Common Stock upon the conversion of the Series C Preferred Shares.
(i) Mandatory Conversion Based Upon Closing Price.
---------------------------------------------
Notwithstanding the Conversion Limit and the Common Share Limit, the
Holders shall be required on any Mandatory Series C Share Conversion Date
to convert pro rata such number of Series C Preferred Shares, in accordance
with Section 2(e), so that the number of Series C Preferred Shares
converted by any applicable Holder on any such date, if any, when
aggregated with all prior conversions of Series C Preferred Shares by such
Holder equals the relevant Mandatory Series C Share Conversion Amount.
"MANDATORY SERIES C SHARE CONVERSION DATE" shall mean any date on which any
of the following occurs: (i) the closing price of the Common Stock as
reported by the AMEX for the previous five (5) consecutive trading days was
equal to or greater than $42.00 (the "FIRST MANDATORY CONVERSION DATE");
(ii) the closing price of the Common Stock as reported by the AMEX for the
previous five (5) consecutive trading days was equal to or greater than
$48.00 (the "SECOND MANDATORY CONVERSION DATE"); (iii) the closing price of
the Common Stock as reported by the AMEX for the previous five (5)
consecutive trading days was equal to or greater than $54.00 (the "THIRD
MANDATORY CONVERSION DATE");
-7-
<PAGE>
and (iv) the closing price of the Common Stock as reported by the AMEX for
the previous five (5) consecutive trading days was equal to or greater than
$60.00 (the "FOURTH MANDATORY CONVERSION DATE"). "MANDATORY SERIES C SHARE
CONVERSION AMOUNT" shall mean (i) as of the First Mandatory Conversion
Date, 25% of the number of Series C Preferred Shares issued to the relevant
Holder (or the transferor of such Holder's Series C Preferred Shares) on
the Initial Issuance Date; (ii) as of the Second Mandatory Conversion Date,
50% of the number of Series C Preferred Shares issued to the relevant
Holder (or the transferor of such Holder's Series C Preferred Shares) on
the Initial Issuance Date; (iii) as of the Third Mandatory Conversion Date,
75% of the number of Series C Preferred Shares issued to the relevant
Holder (or the transferor of such Holder's Series C Preferred Shares) on
the Initial Issuance Date; and (iv) as of the Fourth Mandatory Conversion
Date, 100% of the number of Series C Preferred Shares issued to the
relevant Holder (or the transferor of such Holder's Series C Preferred
Shares) on the Initial Issuance Date.
(3) Conversion/Redemption Upon Major Transaction and Redemption Option
------------------------------------------------------------------
Upon Triggering Event.
---------------------
(a) Conversion/Redemption Upon Major Transaction. Within five
--------------------------------------------
(5) days after the earlier of (i) a public announcement of a Major
Transaction (the "ANNOUNCEMENT DATE") and (ii) receipt by the Holders of a
Notice of Major Transaction (as defined below), the Holders shall have the
option to elect to convert all of the Series C Preferred Shares then
outstanding in accordance with Sections 2(e) and 3(e) hereof, calculated as
if the Conversion Notice is given to the Company on the Announcement Date;
provided however, in the event that the Company is unable to deliver Common
Stock that may be immediately sold pursuant to an effective Registration
Statement to the Holders to satisfy the request set forth in the Conversion
Notice, the Company shall be obligated to (i) deliver to the Holders as
much Common Stock as may be immediately sold pursuant to an effective
Registration Statement and then (ii) pay the Holders the balance in cash at
a price per Series C Preferred Share equal to the product of (I) the
aggregate number of shares of Common Stock for which each such Series C
Preferred Share would be converted into on the date the Conversion Notice
is actually delivered to the Company (the "MANDATORY TRANSACTION SHARES")
multiplied by (II) the closing price as reported on the AMEX on such date
("MAJOR TRANSACTION REDEMPTION PRICE"). In addition to the penalties set
forth in Section 2(e)(v), in the event that the Company fails to pay the
Holders as provided in this Section 3(a), interest shall accrue at the rate
of 4% per month on such outstanding amounts and be due and payable in
advance on the first day of each month (the "MANDATORY INTEREST"). The
Company may elect at any time to pay such outstanding cash amounts by
delivering to the Holders, Common Stock that may immediately be sold
pursuant to an effective Registration Statement in an amount equal to the
aggregate of (i) the Mandatory Transaction Shares and (ii) the number of
shares of Common Stock that the Mandatory Interest then due and payable
could purchase on such date at the Average Market Price. If the Holders
fail to exercise their right to convert as set forth in this Section 3(a)
the Company may redeem the Series C Preferred Shares in cash at the Major
Transaction Redemption Price and/or by issuing to the Holders the
-8-
<PAGE>
number of shares of Common Stock that the Holders would be entitled to
receive if they had given a Conversion Notice on the Announcement Date and
the Conversion Date had been fixed as of such date.
(b) Redemption Option Upon Triggering Event. In addition to all
---------------------------------------
other rights of the Holders contained herein, after a Triggering Event (as
defined below), each Holder shall have the right in accordance with Section
3(f), at such Holder's option, to require the Company to redeem all or a
portion of such Holder's Series C Preferred Shares in cash at a price per
Series C Preferred Share equal to 130% of the Stated Value per share of the
Series C Preferred Shares. ("TRIGGERING EVENT REDEMPTION PRICE" and,
collectively with the "MAJOR TRANSACTION REDEMPTION PRICE," the "REDEMPTION
PRICE").
(c) "Major Transaction". A "MAJOR TRANSACTION" shall be deemed
-------------------
to have occurred at such time as any of the following events:
(i) the consolidation or merger of the Company with or
into another Person (other than pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Company or pursuant to a merger after which the holders of the Company's
outstanding capital stock immediately prior to the merger own a number of
shares of the resulting company's outstanding capital stock sufficient to
elect a majority of the resulting company's board of directors);
(ii) the sale or transfer of substantially all of the
Company's assets (other than a sale or transfer to an entity controlling,
controlled by or under common control with the Company); or
(iii) a purchase, tender or exchange offer for more than 50%
of the outstanding shares of Common Stock is made and accepted by the
holders thereof.
(d) "Triggering Event". A "TRIGGERING EVENT" shall be deemed to
------------------
have occurred at such time as any of the following events:
(i) notice from the Company that Common Stock issued or
issuable upon conversion of the Series C Preferred Shares cannot be sold
under the Registration Statement (the "SUSPENSION PERIOD"), for any period
of five consecutive trading days or any ten non-consecutive trading days
(other than by reason of a general suspension of trading of all securities
on the applicable exchange or market) during any period of 180 consecutive
days that is (A) after the date the Registration Statement has been
declared effective by the SEC and (B) prior to the time that the Conversion
Shares may be sold without limitation in accordance with Rule 144(k) under
the 1933 Act; provided that any demand for redemption under this Section
3(d)(i) must be made by a Holder within 30 days after receipt of notice
from the Company of the termination of the Suspension Period; and, provided
further that if a Holder does not make a demand for redemption pursuant to
this Section 3(d)(i), then, the Mandatory Conversion Date shall be extended
by the aggregate number of days in all Suspension Periods multiplied by
1.5;
-9-
<PAGE>
(ii) the failure of the Common Stock or the Conversion Shares
to be listed on the AMEX, The New York Stock Exchange or the Nasdaq
National Market System, for a period of five consecutive trading days or
any ten non-consecutive trading days (the "DELISTING PERIOD") during any
period of 180 consecutive days; provided, however, that any demand for
redemption under this Section 3(d)(ii) must be made by a Holder within 30
days after receipt of the Notice of Triggering Event (as defined in Section
3(f)); and, provided further that if a Holder does not make a demand for
redemption pursuant to this Section 3(d)(ii), then, the Mandatory
Conversion Date shall be extended by the aggregate number of days in all
Delisting Periods multiplied by 1.5;
(iii) the Company's notice to any holder of Series C Preferred
Shares, including by way of public announcement, at any time, of its
intention not to comply with proper requests for conversion of any Series C
Preferred Shares into shares of Common Stock, including due to any of the
reasons set forth in Section 4(a) below, except in any case in which the
basis for such intention by the Company is a bona fide dispute as to the
right of such holder to such conversion; or
(iv) the Registration Statement is not declared effective by
the SEC on or before 180 days immediately following the Initial Issuance
Date.
(e) Mechanics of Conversion/Redemption Upon Major Transaction. No
---------------------------------------------------------
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier ("NOTICE OF MAJOR
TRANSACTION") to each Holder of Series C Preferred Shares. The Holders
shall have the option to elect to convert the Series C Preferred Shares
then outstanding into full shares of Common Stock within five (5) business
days after receipt of the Notice of Major Transaction as if such Holder
were electing to voluntarily convert such shares pursuant to Section 2(e).
(f) Mechanics of Redemption at Option of Holder Upon Triggering
-----------------------------------------------------------
Event. Within one (1) day after the occurrence of a Triggering Event, the
-----
Company shall deliver written notice thereof via facsimile and overnight
courier ("NOTICE OF TRIGGERING EVENT") to each holder of Series C Preferred
Shares. At any time after receipt of a Notice of Triggering Event, but
only for as long as the facts giving rise to the Triggering Event continue
to exist, the holders of the Series C Preferred Shares then outstanding may
require the Company to redeem all or any portion of the Series C Preferred
Shares by delivering written notice thereof via facsimile and overnight
courier ("NOTICE OF REDEMPTION AT OPTION OF HOLDER UPON TRIGGERING EVENT")
to the Company, which Notice of Redemption at Option of Holder Upon
Triggering Event shall indicate (i) the number of Series C Preferred Shares
that such holders are requesting redemption for and (ii) the applicable
Redemption Price, as calculated pursuant to Section 3(b) above.
(g) Payment of Redemption Price. Upon the occurrence of a Major
---------------------------
Transaction or the Company's receipt of a Notice(s) of Redemption at Option
of Holder Upon Triggering Event from any Holder of the Series C Preferred
Shares then
-10-
<PAGE>
outstanding, the Company shall immediately notify each holder by facsimile
of the mechanics of the delivery of each Holder's Preferred Stock
Certificate and each Holder of Series C Preferred Shares shall thereafter
promptly send such Holder's Preferred Stock Certificates to be redeemed to
the Company or its Transfer Agent. The Company shall deliver the applicable
Redemption Price to such holder within ten (10) days after the Company's
delivery of a Notice of Major Transaction or the Company's receipt of the
requisite notices required to affect a redemption; provided that a Holder's
Preferred Stock Certificates shall have been so delivered to the Company or
its Transfer Agent; provided further that if the Company is unable to
redeem all of the Series C Preferred Shares, the Company shall redeem an
amount from each Holder of Series C Preferred Shares equal to such Holder's
pro-rata amount (based on the number of Series C Preferred Shares held by
such Holder relative to the number of Series C Preferred Shares
outstanding) of all Series C Preferred Shares being redeemed. If the
Company shall fail to redeem all of the Series C Preferred Shares submitted
for redemption (other than pursuant to a dispute as to the arithmetic
calculation of the Redemption Price), in addition to any remedy such Holder
of Series C Preferred Shares may have under this Certificate of
Designations and the Securities Purchase Agreement between the Company and
the initial Holders of the Series C Preferred Shares (the "SECURITIES
PURCHASE AGREEMENT"), the Redemption Price payable in respect of such
unredeemed Series C Preferred Shares shall bear interest at the rate of
1.25% per month (prorated for partial months) until paid in full. In the
case of a Triggering Event, until the Company pays such unpaid Redemption
Price in full to each Holder, Holders of the Series C Preferred Shares
submitted for redemption pursuant to this Section 3 and for which the
applicable Redemption Price has not been paid, shall have the option (the
"VOID OPTIONAL REDEMPTION OPTION") to, in lieu of redemption, require the
Company to promptly return to each Holder all of the Series C Preferred
Shares that were submitted for redemption by such Holder under this Section
3 and for which the Redemption Price has not been paid, by sending written
notice thereof to the Company via facsimile (the "VOID OPTIONAL REDEMPTION
NOTICE"). Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full Redemption Price to each Holder,
(i) the Notice(s) of Redemption at Option of Holder Upon Triggering Event
shall be null and void with respect to those Series C Preferred Shares
submitted for redemption and for which the Redemption Price has not been
paid, and (ii) the Company shall immediately return any Series C Preferred
Shares submitted to the Company by each Holder for redemption under this
Section 3(i) and for which the Redemption Price has not been paid.
Notwithstanding the foregoing, in the event of a dispute as to the
determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(e)(iii) above. Payments
provided for in this Section 3 shall have priority to payments to other
stockholders in connection with a Major Transaction.
(4) Inability to Fully Convert.
--------------------------
(a) Holder's Option if Company Cannot Fully Convert. If, upon
-----------------------------------------------
the Company's receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock registered for resale under the Registration
Statement for any reason, including, without limitation, because the
Company (x) does not have a sufficient number of shares
-11-
<PAGE>
of Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its Securities, including without
limitation the AMEX, from issuing all of the Common Stock which is to be
issued to a holder of Series C Preferred Shares pursuant to a Conversion
Notice or (z) fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then the Company
shall issue as many shares of Common Stock as it is able to issue in
accordance with such Holder's Conversion Notice and pursuant to Section
2(e) above and, with respect to the unconverted Series C Preferred Shares,
the Holder, solely at such Holder's option, can elect to (unless the
Company issues and delivers the Conversion Shares underlying the
unconverted Series C Preferred Shares prior to the Holder's election
hereunder, in which case such Holder shall only be entitled to receive Buy
In Actual Damages under Section 2(e)(v)):
(i) require the Company to redeem from such Holder those
Series C Preferred Shares for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("REQUIRED
REDEMPTION") at a price per Series C Preferred Share (the "REQUIRED
REDEMPTION PRICE") equal to the Triggering Event Redemption Price as of
such Conversion Date;
(ii) if the Company's inability to fully convert Series C
Preferred Shares is pursuant to Section 4(a)(z) above, require the Company
to issue restricted shares of Common Stock in accordance with such Holder's
Conversion Notice and pursuant to Section 2(e) above;
(iii) void its Conversion Notice and retain or have retained, as
the case may be, the nonconverted Series C Preferred Shares that were to be
converted pursuant to such Holder's Conversion Notice; or
(iv) if the Company's inability to fully convert Series C
Preferred Shares is pursuant to the AMEX rules and regulations described in
Section 4(a)(y) above, require the Company to issue shares of Common Stock
in accordance with such Holder's Conversion Notice and pursuant to Section
2(e) above at a Conversion Price equal to the Average Market Price of the
Common Stock for the five (5) consecutive trading days preceding such
Holder's Notice in Response to Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election. The Company shall
-----------------------------------------
immediately send via facsimile to a Holder of Series C Preferred Shares,
upon receipt of a facsimile copy of a Conversion Notice from such Holder
which cannot be fully satisfied as described in Section 4(a) above, a
notice of the Company's inability to fully satisfy such Holder's Conversion
Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such Inability to Fully
Convert Notice shall indicate (i) the reason why the Company is unable to
fully satisfy such Holder's Conversion Notice, (ii) the number of Series C
Preferred Shares which cannot be converted and (iii) the applicable
Required Redemption Price. Such Holder must within five (5) business days
of receipt of such Inability to Fully Convert
-12-
<PAGE>
Notice deliver written notice via facsimile to the Company ("NOTICE IN
RESPONSE TO INABILITY TO CONVERT") of its election pursuant to Section 4(a)
above.
(c) Payment of Redemption Price. If such Holder shall elect to
---------------------------
have its shares redeemed pursuant to Section 4(a)(i) above, the Company
shall pay the Required Redemption Price in cash to such holder within ten
(10) days of the Company's receipt of the Holder's Notice in Response to
Inability to Convert. If the Company shall fail to pay the applicable
Required Redemption Price to such holder on a timely basis as described in
this Section 4(c) (other than pursuant to a dispute as to the determination
of the arithmetic calculation of the Redemption Price), in addition to any
remedy such holder of Series C Preferred Shares may have under this
Certificate of Designations and the Securities Purchase Agreement, such
unpaid amount shall bear interest at the rate of 1.25% per month (prorated
for partial months) until paid in full. Until the full Required Redemption
Price is paid in full to such holder, such holder may void the Required
Redemption with respect to those Series C Preferred Shares for which the
full Required Redemption Price has not been paid and receive back such
Series C Preferred Shares. Notwithstanding the foregoing, if the Company
fails to pay the applicable Required Redemption Price within such ten (10)
day time period due to a dispute as to the determination of the arithmetic
calculation of the Redemption Price, such dispute shall be resolved
pursuant to Section 2(e)(iii) above.
(d) Pro-rata Conversion and Redemption. In the event the Company
----------------------------------
receives a Conversion Notice from more than one holder of Series C
Preferred Shares on the same day and the Company can convert and redeem
some, but not all, of the Series C Preferred Shares pursuant to this
Section 4, the Company shall convert and redeem from each holder of Series
C Preferred Shares electing to have Series C Preferred Shares converted and
redeemed at such time an amount equal to such holder's pro-rata amount
(based on the number of Series C Preferred Shares held by such holder
relative to the number of Series C Preferred Shares outstanding) of all
Series C Preferred Shares being converted and redeemed at such time.
(5) Reissuance of Certificates. In the event of a conversion or
--------------------------
redemption pursuant to this Certificate of Designations of less than all of
the Series C Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and delivered to
the holder of such Series C Preferred Shares a Preferred Stock Certificate
representing the remaining Series C Preferred Shares which have not been so
converted or redeemed.
(6) Reservation of Shares. The Company shall, so long as any of the
---------------------
Series C Preferred Shares are outstanding, reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series C Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all of the Series C Preferred Shares then outstanding;
provided that the number of shares of Common Stock initially reserved on
the Initial Issuance Date shall not be less than 1,400,000 shares of Common
Stock for which the Series C Preferred Shares are at any time convertible;
provided further that such shares of
-13-
<PAGE>
Common Stock so reserved shall be allocated for issuance upon conversion of
Series C Preferred Shares pro rata among the Holders of Series C Preferred
Shares based on the number of Series C Preferred Shares held by such Holder
relative to the total number of authorized Series C Preferred Shares.
(7) Voting Rights. Holders of Series C Preferred Shares shall have no
-------------
voting rights, except as required by law, including but not limited to the
General Corporation Law of the State of Delaware, and as expressly provided
in this Certificate of Designations.
(8) Liquidation, Dissolution, Winding-Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the Holders of the Series C Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"PREFERRED FUNDS"), before any amount shall be paid to the holders of any
of the capital stock of the Company of any class junior in rank to the
Series C Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up
of the Company, an amount per Series C Preferred Share equal to the Stated
Value (such amount being referred to as the "LIQUIDATION VALUE"); provided
that, if the Preferred Funds are insufficient to pay the full amount due to
the Holders of Series C Preferred Shares and holders of shares of other
classes or series of preferred stock of the Company that are of equal rank
with the Series C Preferred Shares as to payments of Preferred Funds (the
"PARI PASSU SHARES"), then each Holder of Series C Preferred Shares and
Pari Passu Shares shall receive a percentage of the Preferred Funds equal
to the full amount of Preferred Funds payable to such holder as a
liquidation preference, in accordance with their respective Certificate of
Designations, Preferences and Rights, as a percentage of the full amount of
Preferred Funds payable to all holders of Series C Preferred Shares and
Pari Passu Shares. The purchase or redemption by the Company of stock of
any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a liquidation, dissolution or winding up of the
Company. Neither the consolidation or merger of the Company with or into
any other Person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be deemed
to be a liquidation, dissolution or winding up of the Company.
(9) Preferred Rank. All shares of Common Stock and all other series
--------------
of Preferred Stock of the Company are and shall be of junior rank to all
Series C Preferred Shares in respect to the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the
Company. The rights of the shares of Common Stock and all other series of
Preferred Stock of the Company shall be subject to the preferences and
relative rights of the Series C Preferred Shares. As long as the Series C
Preferred Shares initially issued remain outstanding, then without the
prior express written consent of the Holders of not less than two-thirds
(2/3) of the then outstanding Series C Preferred Shares, the Company shall
not hereafter authorize or issue additional or other capital stock that is
of senior rank to the Series C Preferred Shares in respect of the
preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the
-14-
<PAGE>
Company. Without the prior express written consent of the Holders of not
less than two-thirds (2/3) of the then outstanding Series C Preferred
Shares, the Company shall not hereafter authorize or make any amendment to
the Company's Certificate of Incorporation or bylaws, or file any
resolution of the board of directors of the Company with the Delaware
Secretary of State containing any provisions, which would adversely affect
or otherwise impair the rights or relative priority of the Holders of the
Series C Preferred Shares relative to the holders of the Common Stock or
the holders of any other class of capital stock. In the event of the merger
or consolidation of the Company with or into another corporation, the
Series C Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with respect to
------------------------------------------------------------
Other Capital Stock. Until all of the Series C Preferred Shares have been
-------------------
converted or redeemed as provided herein, the Company shall not, directly
or indirectly, redeem, or declare or pay any cash dividend or distribution
on its Common Stock or any other series of preferred stock of the Company
without the prior express written consent of the Holders of not less than
two-thirds (2/3) of the then outstanding Series C Preferred Shares.
(11) Vote to Change the Terms of Series C Preferred Shares. The
-----------------------------------------------------
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the Holders of not less than two-thirds (2/3)
of the then outstanding Series C Preferred Shares, shall be required for
any change to this Certificate of Designations or the Company's Certificate
of Incorporation which would amend, alter, change or repeal any of the
powers, designations, preferences and rights of the Series C Preferred
Shares.
(12) Lost or Stolen Certificates. Upon receipt by the Company of
---------------------------
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Series C
Preferred Shares, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder (or at the Company's request post
a reasonable bond) to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the
Company shall execute and deliver new Preferred Stock Certificate(s) of
like tenor and date; provided, however, the Company shall not be obligated
to re-issue Preferred Stock Certificates if the Holder contemporaneously
requests the Company to convert such Series C Preferred Shares into Common
Stock.
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by _________________________, its
_________________________________, as of the ____ day of March 1998.
ORGANOGENESIS INC.
By:________________________________
Name: ______________________
Its: ______________________
-16-
<PAGE>
EXHIBIT I
ORGANOGENESIS INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Organogenesis Inc. (the "CERTIFICATE OF DESIGNATIONS"). In accordance with and
pursuant to the Certificate of Designations, the undersigned hereby elects to
convert the number of shares of Series C Convertible Preferred Stock, $1.00 par
value per share (the "SERIES C PREFERRED SHARES"), of Organogenesis Inc., a
Delaware corporation (the "COMPANY"), indicated below into shares of Common
Stock, $.01 par value per share (the "COMMON STOCK"), of the Company, by
tendering the stock certificate(s) representing the share(s) of Series C
Preferred Shares specified below as of the date specified below.
Date of Conversion: ___________________________________
Number of Series C
Preferred Shares to be converted: ___________________________________
Stock certificate no(s). of Series C
Preferred Shares to be converted: ___________________________________
Please confirm the following information:
Conversion Price: ___________________________________
Number of shares of Common Stock
to be issued: ___________________________________
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Series C Preferred Shares are being converted in
the following name and to the following address:
Issue to: ___________________________________
___________________________________
___________________________________
___________________________________
Facsimile Number: ___________________________________
Authorization: ___________________________________
By:____________________________
Title:_________________________
Dated: ___________________________________
<PAGE>
EXHIBIT 5
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
April 22, 1998
Organogenesis Inc.
150 Dan Road
Canton, Massachusetts 02021
Ladies and Gentlemen:
We have acted as counsel to Organogenesis Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement"), pursuant to which the Company is registering under
the Securities Act of 1933, as amended, a total of 1,440,000 shares (the
"Shares") of its common stock, $.01 par value per share (the "Common Stock"),
for resale to the public. The Shares are to be sold by the selling stockholders
identified in the Registration Statement. This opinion is being rendered in
connection with the filing of the Registration Statement.
In connection with this opinion, we have examined the Company's
Certificate of Incorporation and By-Laws, both as currently in effect; such
other records of the corporate proceedings of the Company and certificates of
the Company's officers as we have deemed relevant; and the Registration
Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when sold,
will have been duly and validly issued, fully paid and non-assessable shares of
the Common Stock, free of preemptive rights.
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Organogenesis Inc.
April 22, 1998
Page 2
Our opinion is limited to the federal securities laws of the United
States, the laws of the Commonwealth of Massachusetts and the corporate laws of
the State of Delaware, and we express no opinion with respect to the laws of any
other jurisdiction. No opinion is expressed herein with respect to the
qualification of the Shares under the securities or blue sky laws of any state
or any foreign jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto. We hereby further consent
to the reference to us under the caption "Legality of Common Stock" in the
prospectus included in the Registration Statement.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY and POPEO, P.C.
cc: Board of Directors
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement of Organogenesis Inc. (the "Company") on this Form S-3 of our report
dated March 26, 1998, on our audits of the consolidated financial statements of
Organogenesis Inc. as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997 which report is included in the
Company's Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1998. We also consent to the reference to our Firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 21, 1998
<PAGE>
EXHIBIT 99(A)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of March 26,
1998, by and among Organogenesis Inc., a Delaware corporation, with headquarters
located at 150 Dan Road, Canton, MA 02021 (the "COMPANY"), and the investors
listed on the Schedule of Buyers attached hereto (individually, a "BUYER" and
collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the following series of Preferred
Stock, $1.00 par value per share (the "PREFERRED STOCK"): the Company's Series C
Convertible Preferred Stock ("SERIES C PREFERRED STOCK") which shall be
convertible into shares of the Company's Common Stock, $.01 par value per share
(the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with
the terms of the Company's Certificate of Designations, Preferences and Rights
of the Series C Preferred Shares, in the form attached hereto as Exhibit A (the
---------
"CERTIFICATE OF DESIGNATIONS");
C. The Company has authorized the issuance of Common Stock Purchase
Warrants (the "WARRANTS"), to acquire shares of Common Stock (such shares of
Common Stock issued upon exercise of the Warrants are hereinafter referred to
as, the "WARRANT SHARES", and together with the Series C Preferred Stock, the
Warrants and the Conversion Shares, the "SECURITIES");
D. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of $20 million of Series C Preferred Stock in
the respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers; and to receive, in consideration for such purchase, (i) at the Closing
(as hereinafter defined), Warrants, to purchase an aggregate of 160,000 shares
of Common Stock, subject to adjustment as provided therein in the form attached
hereto as Exhibit B (the "INITIAL WARRANTS") and (ii) the right to receive
---------
additional Warrants under certain conditions specified herein, to purchase an
aggregate of 160,000 shares of Common Stock, subject to adjustment as provided
therein, in the form attached hereto as Exhibit C (the "CONTINGENT WARRANTS");
---------
and
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit D (the "REGISTRATION RIGHTS
---------
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
<PAGE>
1. PURCHASE AND SALE OF SERIES C PREFERRED SHARES.
----------------------------------------------
a. Purchase of Series C Preferred Shares. Subject to the
-------------------------------------
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 200 shares of Series C Preferred Stock (the
"SERIES C PREFERRED SHARES"), in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers (the "CLOSING"). The per share purchase
price (the "PURCHASE PRICE") of the Preferred Shares shall be $100,000 or an
aggregate purchase price of $20 million. On the Closing Date (as defined below)
the Company shall deliver to each Buyer a stock certificate representing such
number of Series C Preferred Shares which such Buyer is then purchasing (as
indicated opposite such Buyer's name on the Schedule of Buyers), duly executed
on behalf of the Company and registered in the name of such Buyer or its
designee (the "STOCK CERTIFICATES").
b. Closing Date. The date and time of the Closing (the "CLOSING
------------
DATE") shall be 10:00 a.m. on March 26, 1998, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below (or such later date as is mutually agreed to by the Company and
the Buyers). The Closing shall occur on the Closing Date at the offices of
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022.
c. Form of Payment. On the Closing Date, each Buyer shall pay
---------------
the Purchase Price to the Company for the Series C Preferred Shares to be issued
and sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions.
d. Warrants. In consideration of the purchase of the Series C
--------
Preferred Shares, the Company shall on the Closing Date issue and deliver to
each Buyer, Initial Warrants to acquire an aggregate of 8,000 shares of Common
Stock for each $1 million face amount of Series C Preferred Stock purchased by
such Buyer. If, at any one time after the Closing Date, the average of the
Closing Bid Prices (as defined on the Certificate of Designations) for the
Common Stock for any ten consecutive trading days is less than $22.00 per share
(the "TRIGGERING EVENT"), the Company shall deliver to each Buyer within three
(3) days of the Triggering Event, Contingent Warrants to purchase 8,000 shares
of Common Stock for each $1 million face amount of Series C Preferred Stock held
by such Buyer on the date of the Triggering Event.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Series C
------------------
Preferred Shares and the Warrants and (ii) upon conversion of the Series C
Preferred Shares and exercise of the Warrants, will acquire the Conversion
Shares and Warrant Shares, respectively, then issuable for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such
2
<PAGE>
Buyer does not agree to hold any Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a) of Regulation D.
c Reliance on Exemptions. Such Buyer understands that the
----------------------
Series C Preferred Shares and Warrants are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Series C Preferred
Shares and the Warrants.
d. Information. Such Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Series C
Preferred Shares and the Warrants which have been requested by such Buyer. Such
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below.
e. No Governmental Review. Such Buyer understands that no
----------------------
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Series C
Preferred Shares and the Warrants or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Series C Preferred Shares and the Warrants.
f. Transfer or Resale. Such Buyer understands that except as
------------------
provided in the Registration Rights Agreement: (i) Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of
such securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
3
<PAGE>
g. Legends. Such Buyer understands that the certificates or
-------
other instruments representing the Series C Preferred Shares and the Warrants
and, until such time as the sale of the Conversion Shares and the Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion Shares and
the Warrants, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Securities upon which it is
stamped, if (i) any such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of any of the Securities may be made without
registration under the 1933 Act, or (iii) any of the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold. Each Buyer
acknowledges, covenants and agrees to sell any of the Securities represented by
a certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from any of the Securities, the
Company may, upon reasonable advance notice to the holder, require that the
above legend be placed on any of the Securities that cannot then be sold
pursuant to an effective registration statement or Rule 144(k) under the 1933
Act (or any successor rule thereto).
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
---------
specified in the Schedule of Buyers.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the Buyers as set
forth in this Section 3.
a. Organization and Qualification. The Company and its
------------------------------
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole or on the transaction contemplated hereby.
b. Authorization; Enforcement; Compliance with Other
-------------------------------------------------
Instruments. (i) The Company has the requisite corporate power and authority to
- -----------
enter into and perform this Agreement and the Registration Rights Agreement, to
issue, sell and perform its obligations with respect to the Series C Preferred
Stock and the Warrants in accordance with the terms hereof, the Certificate of
Designations and the Warrants, as applicable, and to issue the Conversion Shares
and the Warrant Shares upon conversion of the Series C Preferred Shares and the
exercise of the Warrants, respectively, in accordance with the Certificate of
Designations and the Warrants, respectively, (ii) the execution and delivery of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Series C Preferred Shares and
the Warrants and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion of the Series C Preferred Shares and the Warrant
Shares upon exercise of the Warrants have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement, the certificates for the Series C Preferred
Shares and the Warrants have been (or in the case of the Contingent Warrants,
will be upon issuance) duly executed and delivered by the Company, (iv) this
Agreement, Registration Rights Agreement, the certificates for the Series C
Preferred Shares and the Initial Warrants constitute and the Contingent Warrants
(if issued) upon issuance will constitute, the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) prior to the Closing Date, the Certificate of
Designations will have been filed with the Secretary of State of the State of
Delaware and will be in full force and effect, enforceable against the Company
in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized
--------------
capital stock of the Company consists of 40,000,000 shares of Common Stock, of
which as of March 20, 1998, 23,166,524 shares were issued and outstanding and
1,000,000 shares of Preferred Stock, of which as of March 20, 1998, no shares
were issued and outstanding. All of such outstanding shares
5
<PAGE>
have been validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement).
Except as disclosed in Schedule 3(c), there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of any of the Securities as described in this Agreement. The Company
has furnished to the Buyer true and correct copies of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
d. Issuance of Securities. The Series C Preferred Shares and
----------------------
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Certificate of
Designations and the Warrants, respectively. Not less than 1,400,000 shares of
Common Stock have been duly authorized and reserved for issuance upon conversion
of the Series C Preferred Shares and exercise of the Warrants. Upon conversion
or exercise in accordance with the Certificate of Designations and the Warrants,
as applicable, the Conversion Shares and Warrant Shares will be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Warrants by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the Warrants and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
Preferred Stock of the Company or By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its
6
<PAGE>
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither
the Company nor its subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of Preferred Stock of the
Company or By-laws or their organizational charter or by-laws, respectively, or
any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries which violation or default would have a material
adverse effect on the business, operations, financial condition or results of
operations of the Company and any of its subsidiaries, individually or taken as
a whole. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, ordinance or
regulation of any governmental entity which violation would have a material
adverse effect on the business, operations, financial condition or results of
operations of the Company and any of its subsidiaries, individually or taken as
whole. Except as specifically contemplated by this Agreement and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental or regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement, the Registration Rights Agreement or the Warrants or perform its
obligations under the Certificate of Designations in accordance with the terms
hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the American Stock Exchange. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the
foregoing or to delisting of the Common Stock by the American Stock Exchange.
f. SEC Documents; Financial Statements. Since December 31,
-----------------------------------
1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the
"DESIGNATED SEC DOCUMENTS"). The Company has delivered to the Buyer or its
representative true and complete copies of the Designated SEC Documents and the
Risk Factors attached hereto as Exhibit H (the "RISK FACTORS"). As of their
---------
respective dates, the Designated SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the Designated SEC Documents, and none of
the Designated SEC Documents, at the time they were filed with the SEC, nor the
Risk Factors contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the Designated SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved
7
<PAGE>
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Company has not provided and will not provide
to any Buyer any material non-public information which, according to applicable
law, rule or regulation should have been disclosed publicly by the Company but
which has not been so disclosed as of the date hereof.
g. Absence of Certain Changes. Except as expressly set forth in
--------------------------
Schedule 3(g), since December 31, 1996, there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of the
Company and its subsidiaries taken as a whole. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
---------------------
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or its subsidiaries or their respective directors or officers, or the Common
Stock, wherein an unfavorable decision, ruling or finding would (i) have a
material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement, the Registration
Rights Agreement, the Warrants or any of the documents contemplated herein or
(iii), except as expressly set forth in Schedule 3(h), have a material adverse
effect on the business, operations, properties, financial condition, results of
operations or prospects of the Company and its subsidiaries taken as a whole.
i. Acknowledgment Regarding Buyers' Purchase of the Series C
---------------------------------------------------------
Preferred Shares and the Warrants. The Company acknowledges and agrees that
- ---------------------------------
each of the Buyers is acting solely in the capacity of arm's length purchaser
with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that each Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
any of the Buyers or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Buyer's purchase of the Series C Preferred Shares.
The Company further represents to each Buyer that the Company's decision to
enter into this Agreement has been based solely on the independent evaluation by
the Company and its representatives.
j. No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of any of
the Securities offered hereby.
8
<PAGE>
k. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of any of the Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the American Stock Exchange.
l. Employee Relations. Neither the Company nor any of its
------------------
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
m. Intellectual Property Rights. The Company and its
----------------------------
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights (collectively "INTELLECTUAL PROPERTY
RIGHTS") necessary to conduct their respective businesses as now conducted.
Except as set forth on Schedule 3(m), none of the Intellectual Property Rights
or other intellectual property rights have expired or terminated, or are
expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any event, fact or circumstance that
may have a material adverse effect on the business, operations, properties,
financial condition, results of operations or prospects of the Company and its
subsidiaries, either individually or taken as a whole, relating to (i) any
infringement by the Company or its subsidiaries of any Intellectual Property
Rights or other similar rights of others, or of any such development of similar
or identical trade secrets or technical information by others or (ii) any person
or entity now infringing any Intellectual Property Rights or other similar
rights or any such development of similar or identical trade secrets or
technical information owned or used by the Company or any of its subsidiaries
and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding any Intellectual
Property Rights or other infringement; and the Company and its subsidiaries are
unaware of any facts or circumstances which might have a reasonable likelihood
to give rise to any of the foregoing. The Company and its subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.
n. Environmental Laws. The Company and its subsidiaries (i)
------------------
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where the failure to
comply with such laws or regulations or to receive or comply with such permits,
licenses, approvals would not have a material adverse
9
<PAGE>
effect on the business, operations, financial condition or results of operations
of the Company and its subsidiaries, individually or taken as a whole.
o. Title. The Company or its subsidiaries own no real
-----
property. The Company and its subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(o) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.
p. Insurance. The Company and each of its subsidiaries are
---------
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts is prudent and customary in the businesses in
which the Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its subsidiaries
------------------
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
r. Internal Accounting Controls. The Company and each of its
----------------------------
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
s. No Materially Adverse Contracts, Etc. Except as disclosed
------------------------------------
in the Designated SEC Documents, neither the Company nor any of its subsidiaries
is subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the reasonable judgment of
the Company's officers has or is expected in the future to have a material
adverse effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
10
<PAGE>
t. Tax Status. Except as set forth on Schedule 3(t), the
----------
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for all
current tax periods. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
u. Certain Transactions. Except as set forth on Schedule 3(u)
--------------------
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director or any such employee has a substantial interest or
is an officer, director, trustee or partner.
v. [Intentionally Omitted]
w. S-3 Registration. The Company is currently eligible to
----------------
register securities, including the Conversion Shares and the Warrant Shares, on
a registration statement on Form S-3 under the 1933 Act.
4. COVENANTS AND AGREEMENTS.
------------------------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and Warrant Shares without
restriction pursuant to Rule 144(k) promulgated
11
<PAGE>
under the 1933 Act (or successor thereto), (ii) the date on which (A) the
Investors shall have sold all the Conversion Shares and Warrant Shares and (B)
none of the Series C Preferred Shares or Warrants are outstanding (the
"REGISTRATION PERIOD"), or (iii) the date on which the Company has merged or
consolidated with or sold substantially all of its assets to another entity, (x)
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination and (y)
the Company will use its best efforts to maintain its ability and eligibility to
register securities on Form S-3.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Series C Preferred Shares and Warrants for capital expenditures,
general working capital and costs of the offering.
e. Financial Information. The Company agrees to send the
---------------------
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within one (1) day after release
thereof, copies of all press releases issued by the Company or any of its
subsidiaries and (ii) copies of any notices and other information made available
or given to the stockholders of the Company generally, contemporaneously with
the making available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the number of shares of Common Stock needed to provide
for the issuance of the Conversion Shares and Warrant Shares, in the aggregate,
upon conversion of the Series C Preferred Shares and the exercise of the
Warrants, respectively, in accordance with the terms of this Agreement and the
Certificate of Designations.
g. Listing. The Company shall promptly secure the listing of
-------
the Conversion Shares and Warrant Shares upon The American Stock Exchange, Inc.
("AMEX") (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, the listing of all
Conversion Shares and Warrant Shares from time to time issuable under the terms
of this Agreement, the Certificate of Designations and the Warrants on each
national securities exchange and automated quotation system (including the
Nasdaq National Marketing System), if any, upon which shares of Common Stock are
then listed. The Company shall promptly provide to each Buyer copies of any
notices it receives from the AMEX regarding the continued eligibility of the
Common Stock for listing on the AMEX. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(g).
h. Expenses. Each of the Company and the Buyers shall each pay
--------
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement or the Certificate of Designations, the Warrants and the
Registration Rights Agreement; provided, that at the Closing as the Buyers may
request, the Company shall reimburse the Buyers for Buyers' attorneys' fees and
expenses in connection with this Agreement or the Certificate of Designations,
the Warrants and the Registration Rights Agreement up to an aggregate of
$10,000.
12
<PAGE>
i. Additional Issuances of Securities.
----------------------------------
(a) Right of First Refusal. If at any time on or before
----------------------
the first anniversary of the Closing Date, the Company shall desire to issue any
Common Stock or any security convertible, exchangeable or exercisable for Common
Stock or any other right to acquire any Common Stock (the "CONVERTIBLE
SECURITIES") pursuant to Section 4(2) of the 1933 Act or an offering under
Regulation D or Regulation S of the 1933 Act or in any other private placement
(other than pursuant to Company authorized stock option plans or future equity
financing whereby Common Stock or Convertible Securities are issued to any
person or entity which has or is proposed to have a material business,
technology or commercial relationship with the Company in addition to any equity
financing provided by such person or entity), then the Company shall first
comply with the terms of this Section 4(i).
(b) Notice Requirements. The Company shall notify, or
-------------------
cause to be notified, the Buyers not less than twenty (20) business days prior
to the time the Company intends to consummate such issuance (the "ISSUANCE
NOTICE"). The Issuance Notice shall set forth all of the material terms of such
proposed issuance.
(c) Exercise of Right of First Refusal. The right of first
----------------------------------
refusal provided for in this Section 4(i) may be exercised by the Buyers by
delivery of a written notice to the Company (the "EXERCISE NOTICE"), within ten
(10) business days following receipt of the Issuance Notice (the "REFUSAL
PERIOD"). The Exercise Notice shall state that the Buyers agree to purchase all
or any specified part (to this extent set forth in this Section 4(i)) of the
proposed issuance of such Common Stock or Convertible Securities on terms
substantially equal to the terms set forth in the Issuance Notice. If the
transactions contemplated by an Exercise Notice are not consummated solely at
the fault of the Buyers, the Company shall be relieved from fulfilling its
obligations pursuant to such Exercise Notice.
(d) Right to Issue Securities. After expiration of the
-------------------------
Refusal Period, if the provisions of this Section 4(i) have been complied with
in all respects by the Company and no Exercise Notice has been given, or if
given, the Buyers have not agreed to purchase all of the securities set forth in
the Issuance Notice, the Company shall have the right for ninety (90) calendar
days following the termination of the Refusal Period to issue such securities,
or any portion thereof not being purchased by the Buyers, specified in the
Issuance Notice on the terms described in the Issuance Notice without further
notice to the Buyers, but after such ninety (90) calendar days, no such issuance
may be made without again giving notice to the Buyers and complying with all of
the requirements of this Section 4(i).
(e) The Buyers will be entitled to exercise their rights
under this Section 4(i) for any individual proposed issuance of securities by
the Company, but and subject to the provisions set forth in this Section 4(i),
only in connection with the first $10 million of consideration to be received by
the Company in any such issuance.
(f) The Company will not issue any Series C Preferred
Shares other than to the Buyers as contemplated hereby or as otherwise
contemplated in the Certificate of Designations.
13
<PAGE>
(j) Dilutive Effect. The Company understands and acknowledges
---------------
that the number of Conversion Shares and Warrant Shares issuable upon conversion
of the Series C Preferred Shares and exercise of the Warrants, respectively,
will increase in certain circumstances. The Company further acknowledges and
agrees that its obligation to issue Conversion Shares and Warrant Shares upon
conversion of the Series C Preferred Shares and exercise of the Warrants,
respectively, in accordance with this Agreement, the Certificate of
Designations, and the Warrants, as applicable, is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
(in the form attached hereto as Exhibit E) to issue certificates, or at a
Buyer's request, to electronically issue such shares (e.g. through DWAC or DTC),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares or Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Series C Preferred
Shares or exercise of the Warrants, respectively (the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares and
Warrant Shares under the 1933 Act, such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that
no instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares and Warrant Shares, prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act)
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Registration Rights Agreement, the
Certificate of Designations and the Warrants. Nothing in this Section 5 shall
affect in any way each Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of any of the Securities. If a Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in form
and substance to the Company, that registration of a resale by such Buyer of any
of the Securities is not required under the 1933 Act, the Company shall permit
the transfer, and, in the case of the Conversion Shares or Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Series C
Preferred Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of
14
<PAGE>
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. Such Buyer shall have delivered to the Company the Purchase
Price for the Series C Preferred Shares being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such Buyer shall be
true and correct in all material respects as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such Buyer at or
prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Series C
Preferred Shares at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Buyer.
b. The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation on the
AMEX, trading in the Common Stock issuable upon conversion of the Series C
Preferred Shares and exercise of the Warrants to be traded on the AMEX shall not
have been suspended by the SEC or the AMEX and all of the Conversion Shares and
Warrant Shares issuable upon conversion of the Series C Preferred Shares or
exercise of the Warrants to be sold at the Closing shall be listed upon the
AMEX.
d. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case such representations and warranties shall be true and
correct without further qualification) as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. Such Buyer shall have received a certificate, executed by
the Chief Executive Officer of the Company,
15
<PAGE>
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer including, without
limitation, an update as of the Closing Date regarding the representation
contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit F attached
---------
hereto.
f. The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall request) for
the Series C Preferred Shares being purchased by such Buyer at the Closing and
the Initial Warrants.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit G attached hereto.
---------
h. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Series C Preferred Shares and the exercise of the
Warrants, at least 1,400,000 sha res of Common Stock.
i. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged in
- ---------
writing by the Company's transfer agent.
j. The transactions contemplated hereby shall not violate any
law, regulation or order then in effect and applicable to Buyers or the Company.
8. INDEMNIFICATION.
---------------
In consideration of each Buyer's execution and delivery of this
Agreement and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "BUYER INDEMNIFIED
LIABILITIES"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) subject to Section 9(i), any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Certificate of Designations, the Warrants, the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Certificate of
Designations, the Warrants or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, or (c) any
cause of action,
16
<PAGE>
suit or claim brought or made against such Buyer Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Buyer Indemnitees, any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Series C Preferred Shares and Warrants or the status of such
Buyer or holder of any of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Buyer Indemnified Liabilities which is permissible
under applicable law.
b. In consideration of the Company's execution and delivery of
this Agreement and selling the Series C Preferred Shares and Conversion Shares
hereunder and in addition to all of the Buyers' other obligations under this
Agreement, the Buyers shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "COMPANY INDEMNITEES") from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Company Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "COMPANY INDEMNIFIED LIABILITIES"),
incurred by any Company Indemnitee (and shall advance the same) as a result of,
or arising out of, or relating to (a) subject to Section 9(i), any
misrepresentation or breach of any representation or warranty made by the Buyers
in this Agreement or the Registration Rights Agreement, or (b) any breach of any
covenant, agreement or obligation of the Buyers contained in this Agreement or
the Registration Rights Agreement, provided, however, that in no event shall the
-------- -------
aggregate amount for which the Investors would be liable under this Section 8(b)
exceed $5,000,000. To the extent that the foregoing undertaking by the Buyers
may be unenforceable for any reason, the Buyers shall make the maximum
contribution to the payment and satisfaction of each of the Company Indemnified
Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
17
<PAGE>
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
----------------------------
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
f. Notices. Any notices, consents, waivers or other
-------
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Telephone: (781) 575-0775
Facsimile: (781) 575-1570
Attention: Chief Executive Officer and
Chief Strategic Officer
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Facsimile: (617) 542-2241
Attention: Neil Aronson, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street
18
<PAGE>
46th Floor
New York, NY 10005
Telephone: (718)921-8200
Facsimile: (718)921-8331
Attention: Paula Caroppoli
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Securities. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Buyers, except pursuant to a Major Transaction (as
defined in Section 3(c) of the Certificate of Designations) with respect to
which the Company is in compliance with Section 3 of the Certificate of
Designations. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, provided, however, that (i) any such assignment shall
not release such Buyer from its obligations hereunder unless such obligations
are assumed by such assignee and the Company has consented to such assignment
and assumption and (ii) no Buyer may assign its rights hereunder in a manner
that would cause the offering of Securities hereunder to be required to be
registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company
--------
and the Buyers contained in Sections 3 and 2, respectively, shall survive the
Closing until two years after the Closing Date including without limitation all
financial statements thereto. The agreements and covenants set forth in Sections
4, 5 and 9, and the indemnification provisions set forth in Section 8, shall
survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably
19
<PAGE>
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
l. Placement Agent. The Company acknowledges that it has
---------------
engaged a placement agent in connection with the sale of the Series C Preferred
Shares and Warrants, which placement agent may have formally or informally
engaged other agents on its behalf. The Company shall be responsible for the
payment of any placement agent's fees or broker's commissions relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out of pocket expenses) arising in
connection with any such claim.
m. No Strict Construction. The language used in this Agreement
----------------------
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
20
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
- -------- -------
ORGANOGENESIS INC. STARK INTERNATIONAL
By:_______________________ By:_________________________
Name: Name:
Its: Its:
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
By:_________________________
Name:
Its:
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
Number of
Investor Address and Series C Investor's Advisors and Legal
Investor Name Facsimile Number Preferred Share Counsel Address
- -------------------------- ------------------------ --------------- ------------------------------------
<S> <C> <C> <C>
Stark International c/o Staro Asset Management 100 Eleazer Klein, Esq.
(Bermuda) 1500 West Market Street Schulte Roth Zabel LLP
Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
Shepherd Investments c/o Staro Asset Management 100 Eleazer Klein, Esq.
International, Ltd. 1500 West Market Street Schulte Roth Zabel LLP
(British Virgin Islands) Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
</TABLE>
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(A)
SUBSIDIARIES
------------
Dan Capital Corp. (a Delaware Corporation)
ECM Pharma/TM/, Inc. (a Delaware Corporation)
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(C)
-------------
CAPITALIZATION
--------------
As of March 20, 1998
1. Common Stock The authorized capital stock of the Corporation consists of
40,000,000 shares of Common Stock, of which:
(A) 23,166,524 shares are duly authorized, validly issued
and outstanding, fully paid and nonassessable;
(B) 5,312,504 shares are duly authorized and reserved for
issuance to officers, employees or directors of, or
consultants to, the Corporation pursuant to options or
other rights to acquire such shares approved or to be
approved by the Board of Directors or a committee
thereof pursuant to the Corporation's stock option and
employee stock purchase plans;
2. Preferred Stock The Company has authorized 1,000,000 shares of Preferred
Stock, of which:
(A) 250,000 shares have been designated as Series A
Preferred Stock, all of which shares of Series A
Preferred stock have been issued and converted into
Common Stock; and
(B) 50,000 shares have been designated as Series B
Preferred Stock, all of which are duly authorized and
unissued.
3. Reedland Capital Partners will receive three year warrants to purchase 40,000
shares of the Company's common stock, par value $.01 per share, with an
exercise price of $36.00 per share pursuant to the Company's engagement of
Reedland as Placement Agent. These warrants will have provisions for cashless
exercise and all customary and appropriate anti-dilution protections. The
shares of common stock underlying the warrants will be included in the
Registration Statement filed on behalf of the Buyers.
4. The Company has adopted a Shareholder Rights Plan as disclosed in SEC
Disclosure Documents.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(E)
-------------
CONFLICTS
---------
Neither the Company nor its subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of Preferred Stock of the
Company or By-laws or their organizational charter or by-laws, respectively, or
any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(G)
-------------
MATERIAL CHANGES
----------------
Other than losses as reflected in the Company's quarterly financial results for
the Quarter ended September 30, 1997 (as reflected on its form 10-Q as reflected
in the SEC Disclosure Documents), and losses since that date (which losses have
continued at approximately the same rate as operating losses incurred during the
first nine months of fiscal year 1997) and the resulting reduction in total
assets, there has been no adverse change and no material adverse development in
the business, properties, operations, financial condition, results of operations
or prospects of the Company and its subsidiaries taken as a whole.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(H)
-------------
LITIGATION
----------
No material litigation.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(M)
-------------
INTELLECTUAL PROPERTY
---------------------
No intellectual property rights or other intellectual property rights have
expired or terminated, or are expected to expire or terminate in the near
future.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(O)
-------------
LIENS
-----
The Company and its subsidiaries have good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(T)
-------------
TAX STATUS
----------
No material taxes are due.
<PAGE>
SCHEDULES TO SECURITIES PURCHASE AGREEMENT OF MARCH 26, 1998
SCHEDULE 3(U)
-------------
CERTAIN TRANSACTIONS
--------------------
1. See SEC Disclosure Documents.
2. Kenneth J. Novack, a partner at Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. ("ML") was elected to the Company's Board of Directors on March
19, 1998. ML has and continues to provide significant legal services to the
Company in amounts which will require disclosure in future SEC proxy
materials.
<PAGE>
EXHIBIT 99(b)
EXHIBIT B
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND THE SECURITIES
PURCHASE AGREEMENT DATED AS OF MARCH 26, 1998 BY AND AMONG ORGANOGENESIS INC.,
STARK INTERNATIONAL AND SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
ORGANOGENESIS INC.
[FORM OF COMMON STOCK PURCHASE WARRANT]
No. W-[ ] March 26, 1998
Warrant to Purchase 80,000
Shares of Common Stock
ORGANOGENESIS INC., a Delaware corporation (the "Company"), for value
received, hereby certifies that [STARK INTERNATIONAL] [SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.], or registered assigns (the "Holder"), is entitled to
purchase from the Company 80,000 duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at a purchase price equal to $39.00, at any time or from
time to time prior to the earlier of (i) 5:00 P.M., New York City time, on March
26, 2001 or (ii) at the election of the Company, the date of the occurrence of a
Major Transaction (as defined in the Certificate of Designations) (each of (i)
or (ii) are referred to herein as the "Expiration Date"), all subject to the
terms, conditions and adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants
(collectively, the "Warrants", such term to include any such warrants issued in
substitution therefor) originally issued pursuant to the terms of the Securities
Purchase Agreement, dated as of March 26, 1998 by and among the Company, the
Holder and [Stark International] [Shepherd Investments International, Ltd.] (the
"Purchase Agreement"). The Warrants originally so issued evidence rights to
purchase an aggregate of 160,000 shares of Common Stock subject to adjustment as
<PAGE>
provided herein. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned such terms in the Purchase Agreement.
1. DEFINITIONS. As used herein, unless the context otherwise
-----------
requires, the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares (including
---------------------------------
treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.3 or
3.4, deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) (i) shares issued upon the exercise of the Warrants and (ii) such
number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to such Warrants as in effect on the date hereof and
(b) (i) shares issued upon the exercise of options granted or to be
granted under the Company's stock option plans as in effect on the date
hereof or under any other employee stock option or purchase plan or plans
adopted or assumed after such date by the Company's Board of Directors;
provided in each such case that the exercise or purchase price for any such
--------
share shall not be less than 85% of the fair market value (determined in
good faith by the Company's Board of Directors) of the Common Stock on the
date of grant, and (ii) such additional number of shares as may become
issuable pursuant to the terms of any such plans by reason of adjustments
required pursuant to anti-dilution provisions applicable to such securities
in order to reflect any subdivision or combination of Common Stock, by
reclassification or otherwise, or any dividend on Common Stock payable in
Common Stock.
"Business Day" shall mean any day other than a Saturday or a Sunday or
------------
a day on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
"Certificate of Designations" shall mean the Company's Certificate of
---------------------------
Designations, Preferences and Rights of the Series C Preferred Shares.
"Closing Bid Prices" shall mean for any security as of any date, the
------------------
closing bid price on the American Stock Exchange ("AMEX") as reported by the
----
AMEX, or, if the AMEX is not the principal securities exchange for such
security, the closing bid price of such security on the principal securities
exchange or trade market where such security is listed or trades as reported by
Bloomberg, L.P. ("Bloomberg"), or if the foregoing do not apply, the closing bid
-----------
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc..
2
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any
----------
successor agency having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning assigned to it in the
------------
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the introduction to
-------
this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.
"Convertible Securities" shall mean any evidences of indebtedness,
----------------------
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" shall mean, on any date specified herein, the
--------------------
average of the daily Closing Bid Prices during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Fair Value on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
---------------
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in the case
----------
of cash, the dollar amount thereof, (ii) in the case of a security admitted for
trading on any national securities exchange or quoted in the over-the-counter
market, the Current Market Price, and (iii) in all other cases determined in
good faith jointly by the Company and the Holder; provided, however, that if
-------- -------
such parties are unable to reach agreement within a reasonable period of time,
the Fair Value shall be determined in good faith by an independent investment
banking firm selected jointly by the Company and the Holder or, if that
selection cannot be made within ten days, by an independent investment banking
firm selected by the American Arbitration Association in accordance with its
rules, and provided further, that the Company shall pay all of the fees and
-------- -------
expenses of any third parties incurred in connection with determining the Fair
Value.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Options" shall mean any rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
3
<PAGE>
"Other Securities" shall mean any stock (other than Common Stock) and
----------------
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
"Person" shall mean any individual, firm, partnership, corporation,
------
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall have the meaning assigned to it in the
------------------
introduction to this Warrant.
"Purchase Price" shall mean initially $39.00, subject to adjustment
--------------
and readjustment from time to time as provided in Section 3, and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by Section 3.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated as of March 26, 1998, substantially in the form of Exhibit D to
the Purchase Agreement.
"Rights" shall have the meaning assigned to it in Section 3.10.
------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Warrants" shall have the meaning assigned to it in the introduction
--------
to this Warrant.
2. EXERCISE OF WARRANT.
-------------------
2.1. Manner of Exercise; Payment of the Purchase Price. (a) This
-------------------------------------------------
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to the Expiration Date, by surrendering to the
Company at its principal office this Warrant, with the form of Election to
Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof)
duly executed by the Holder and accompanied by payment of the Purchase Price for
the number of shares of Common Stock specified in such form.
(b) Payment of the Purchase Price shall be made in United States
currency by cash or delivery of a certified check or bank draft payable to the
order of the Company or by wire transfer to the Company.
2.2. When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and at such time the Person or Persons in whose name or
4
<PAGE>
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in Section 2.3
shall be deemed to have become the holder or holders of record thereof for all
purposes.
2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
--------------------------------------------------------
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
- --------
whole or in part, and in any event within three Business Days thereafter, the
Company shall cause to be issued in the name of and delivered to the Holder
hereof or, subject the Purchase Agreement, as the Holder may direct,
(i) a certificate or certificates, or at a Holder's request to
electronically issue such shares (e.g. through DWAC or DTC), for the number
of shares of Common Stock (or Other Securities) to which the Holder shall
be entitled upon such exercise plus, in lieu of issuance of any fractional
share to which the Holder would otherwise be entitled, if any, a check for
the amount of cash equal to the same fraction multiplied by the Current
Market Price per share on the date of Warrant exercise, and
(ii) in case such exercise is for less than all of the shares of
Common Stock purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the shares of Common Stock purchasable
hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or transfer tax or other incidental expense, in respect of
the issuance of such certificates, all of which such taxes and expenses
shall be paid by the Company.
2.4. Company to Reaffirm Obligations. The Company shall, at the time
-------------------------------
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
--------
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
-------------------------------------------------
3.1. Adjustment of Number of Shares.
------------------------------
Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 3, this Warrant shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i)
the product of the aggregate number of shares covered by this Warrant
immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
----------------------------
5
<PAGE>
3.2.1. Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10), without consideration or for a consideration per share less
than both the Current Market Price and the Purchase Price, as each are in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Purchase Price by a fraction
(a) the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
and (ii) the number of shares of Common Stock which the gross consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at such Current Market Price,
and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, provided
--------
that, for the purposes of this Section 3.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant
to Section 3.3 or 3.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be outstanding.
3.2.2. Extraordinary Dividends and Distributions. In case the
-----------------------------------------
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock, then,
in each such case, subject to Section 3.8, the Purchase Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Purchase Price by
a fraction
(x) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading, less
the Fair Value of such dividend or distribution applicable to one share of
Common Stock, and
(y) the denominator of which shall be such Current Market Price.
3.3. Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the
6
<PAGE>
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of ex-
dividend trading), provided that such Additional Shares of Common Stock shall
--------
not be deemed to have been issued unless (i) the consideration per share
(determined pursuant to Section 3.5) of such shares would be less than both of
the Current Market Price and the Purchase Price, as each are in effect on the
date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date (or, if the
Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading), as the case may be and (ii) such
Additional Shares of Common Stock are not purchasable pursuant to Rights
referred to in Section 3.10, and provided, further, that
-------- -------
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue or
sale of Convertible Securities or shares of Common Stock upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such
7
<PAGE>
Options or the conversion or exchange of such Convertible Securities
and the consideration received therefor was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue
or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue or sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 3.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Purchase Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Purchase Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
------------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of this Section
----------------------------
3,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
8
<PAGE>
(i) insofar as it consists of cash, be computed at the amount
of cash received by the Company, without deducting any expenses paid
or incurred by the Company or any commissions or compensations paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services in connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time of
such issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, such
allocation to be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be determined as
provided in the definition of 'Fair Value' herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
9
<PAGE>
3.6. Adjustments for Combinations, etc. In case the outstanding
---------------------------------
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment of the
----------------------
Purchase Price per share required pursuant to this Section 3 would be less than
$.02, such amount shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate a change in the Purchase Price of at least $.02 per share. All
calculations under this Warrant shall be made to the nearest .001 of a cent or
to the nearest one-hundredth of a share, as the case may be.
3.9. Abandoned Dividend or Distribution. If the Company shall take a
----------------------------------
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the
-----------------------
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such
10
<PAGE>
exercise at the time of such exercise would be entitled in accordance with the
terms and provisions of and applicable to the Rights; and (ii) if such exercise
occurs after the Distribution Date, the same number of Rights to which a holder
of the number of shares into which the Warrant so exercised was exercisable
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the terms and provisions of and applicable
to the Rights, and in each case subject to the terms and conditions of the
Rights.
4. CONSOLIDATION, MERGER, ETC.
--------------------------
4.1. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
------------------------------------------------------
REORGANIZATION, ETC. In case the Company after the date hereof (a) shall
- -------------------
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction
(unless the Company has given notice to the Holder that the Company has elected
to accelerate the Expiration Date as set forth in clause (ii) of the
introductory paragraph to this Warrant), shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the amount of securities, cash or
other property to which such Holder would actually have been entitled as a
shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 through 5.
4.2. Assumption of Obligations. Notwithstanding anything contained
-------------------------
in the Warrants or in the Purchase Agreement to the contrary, the Company shall
not effect any of the transactions described in clauses (a) through (d) of
Section 4.1 unless, prior to the consummation thereof, each Person (other than
the Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company under the Agreement, the Certificate of Designations and the
Registration Rights Agreement and (c) the obligation to deliver to the Holder
such shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 4, the Holder may be entitled to receive.
Nothing in this Section 4 shall be deemed to
11
<PAGE>
authorize the Company to enter into any transaction not otherwise permitted by
the Purchase Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
---------------------
the provisions of Section 3 or Section 4 hereof are not strictly applicable or
if strictly applicable would not fairly protect the purchase rights of the
Holder in accordance with the essential intent and principles of such Sections,
then, in each such case, the Board of Directors of the Company shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to preserve, without dilution, the
purchase rights represented by this Warrant.
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) shall take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens, security interests, encumbrances, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, (c) shall not take any
action which results in any adjustment of the Purchase Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's certificate
of incorporation and available for the purpose of issue upon such exercise, and
(d) shall not issue any capital stock of any class which is preferred as to
dividends or as to the distribution of assets upon voluntary or involuntary
dissolution, liquidation or winding-up, unless the rights of the holders thereof
shall be limited to a fixed sum or percentage of par value or a sum determined
by reference to a formula based on a published index of interest rates, an
interest rate publicly announced by a financial institution or a similar
indicator of interest rates in respect of participation in dividends and to a
fixed sum or percentage of par value in any such distribution of assets.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate, signed by the Chairman of the Board, President or one of
the Vice Presidents of the Company, and by the Chief FinanciaL Officer, The
Treasurer or one of the Assistant Treasurers of the Company, setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or to be received
by the Company for any Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Purchase Price in effect
12
<PAGE>
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Section 3) on account thereof. The Company shall forthwith mail a
copy of each such certificate to each holder of a Warrant and shall, upon the
written request at any time of any holder of a Warrant, furnish to such holder a
like certificate. The Company shall also keep copies of all such certificates at
its principal office and shall cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof. The Company
shall, upon the request in writing of the Holder (at the Company's expense),
retain independent public accountants of recognized national standing selected
by the Board of Directors of the Company to make any computation required in
connection with adjustments under this Warrant, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment, which
shall be binding on the Holder and the Company.
8. NOTICES OF CORPORATE ACTION. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or
series of transactions in which more than 50% of the voting securities of
the Company are transferred to another Person, or any transfer, sale or
other disposition of all or substantially all the assets of the Company to
any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or
13
<PAGE>
approval of any governmental authority under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company shall, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Stock is listed on any national securities
exchange, the Company shall, at its expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of issuance,
the shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance; and the
Company shall also list on such national securities exchange, shall register
under the Exchange Act and shall maintain such listing of, any Other Securities
that at any time are issuable upon exercise of the Warrants, if and at the time
that any securities of the same class shall be listed on such national
securities exchange by the Company.
10. RESERVATION OF STOCK, ETC. The Company shall at all times
-------------------------
reserve and keep available, solely for issuance and delivery upon exercise of
the warrants, the number of shares of common stock (or other securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
all shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof, and, in the case of all
securities, shall be free from all taxes, liens, security interests,
encumbrances, preemptive rights and charges. The transfer agent for the Common
Stock, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's capital stock issuable upon the
exercise of any of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the
Transfer Agent for the Common Stock and with every subsequent Transfer Agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company shall supply such
Transfer Agent with duly executed stock certificates for such purpose. All
Warrant Certificates surrendered upon the exercise of the rights thereby
evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of shares of stock which have been issued upon
the exercise of such Warrants. Subsequent to the Expiration Date, no shares of
stock need be reserved in respect of any unexercised Warrant.
11. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
------------------------------------------
11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. Each Warrant issued
---------------------------------------
by the Company shall be numbered and shall be registered in a warrant register
(the "Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
14
<PAGE>
bearer thereof as the owner of such Warrant for all purposes. A Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
11.2. Transfer of Warrants. If applicable, this Warrant and all
--------------------
rights hereunder are transferable in whole or in part, without charge to the
Holder hereof, upon surrender of this Warrant with a properly executed Form of
Assignment attached hereto as Exhibit B at the principal office of the Company.
Upon any partial transfer, the Company shall at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be exercisable for such number of shares of Common Stock with respect to which
rights under this Warrant were not so transferred.
11.3. Replacement of Warrants. On receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11.4. Adjustments To Purchase Price and Number of Shares.
--------------------------------------------------
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
11.5. Fractional Shares. Notwithstanding any adjustment pursuant to
-----------------
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
12. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that
------------------------------
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.
15
<PAGE>
13. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in
---------------------------------------
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
14. NOTICES. Any notices, consents, waivers or other communications
-------
required or permitted to be given hereunder must be in writing and will be
deemed to have been delivered (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after being sent
by U.S. certified mail, return receipt requested, or (iv) one (1) day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Telephone: (781) 575-0775
Facsimile: (781) 575-1570
Attention: Chief Executive Officer and
Chief Strategic Officer
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Facsimile: (617) 542-2241
Attention: Neil Aronson, Esq.
If to a Holder, to its address and facsimile number on the register
maintained by the Company. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or facsimile number.
Notwithstanding the foregoing, the exercise of any Warrant shall be effective in
the manner provided in Section 2.
15. AMENDMENTS. This Warrant and any term hereof may not be amended,
----------
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
16
<PAGE>
16. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word "including" and words of
similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
17. GOVERNING LAW. This Warrant shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York (without giving effect to
the conflict of laws principles thereof).
18. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding
--------------------
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and
unconditionally consents to the service of process of any of the aforementioned
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, at its address set forth or
provided for in Section 15, such service to become effective 10 days after such
mailing. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section. The Company irrevocably submits to the
executive jurisdiction of the aforementioned courts in such action, suit or
proceeding.
17
<PAGE>
19. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
-----------------------------
Other Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each holder of this Warrant shall be entitled to all of the benefits
afforded to a holder of any such Registrable Securities under the Registration
Rights Agreement and such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions of the Registration
Rights Agreement applicable to such holder as a holder of such Registrable
Securities.
ORGANOGENESIS INC.
By:_____________________________________
Name:
Title:
18
<PAGE>
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, par value $.01 per share ("Common Stock"),
of ORGANOGENESIS INC. and hereby makes payment of $________ therefor. The
undersigned hereby requests that certificates for such shares be issued and
delivered as follows:
ISSUE TO: ______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is less than
the number of shares of Common Stock covered by the Warrant, the undersigned
requests that a new Warrant representing the number of shares of Common Stock
not so purchased be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:_____________________________________________________________________
(NAME OF HOLDER/1/)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________, 19__ [NAME OF HOLDER]
By_______________________________
Name:
Title:
19
<PAGE>
EXHIBIT B to
Common Stock Purchase Warrant
-----------------------------
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $.01 per share ("Common Stock") of
ORGANOGENESIS INC. represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of ORGANOGENESIS INC. maintained for that purpose,
with full power of substitution in the premises.
Dated: _______________, 19__ [NAME OF HOLDER]
By______________________________
Name:
Title:
20
<PAGE>
EXHIBIT 99(C)
EXHIBIT C
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND THE SECURITIES
PURCHASE AGREEMENT DATED AS OF MARCH 26, 1998 BY AND AMONG ORGANOGENESIS INC.,
STARK INTERNATIONAL AND SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
ORGANOGENESIS INC.
[FORM OF COMMON STOCK PURCHASE WARRANT]
No. W-[_] __________, 199_
Warrant to Purchase 80,000
Shares of Common Stock
ORGANOGENESIS INC., a Delaware corporation (the "Company"), for value
received, hereby certifies that [STARK INTERNATIONAL] [SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.], or registered assigns (the "Holder"), is entitled to
purchase from the Company 80,000 duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at a purchase price equal to $________*, at any time or
from time to time prior to the earlier of (i) 5:00 P.M., New York City time, on
March 26, 2001 or (ii) at the election of the Company, the date of the
occurrence of a Major Transaction (as defined in the Certificate of
Designations) (each of (i) or (ii) are referred to herein as the "Expiration
Date"), all subject to the terms, conditions and adjustments set forth below in
this Warrant.
This Warrant is one of the Common Stock Purchase Warrants
(collectively, the "Warrants", such term to include any such warrants issued in
substitution therefor) originally issued pursuant to the terms of the Securities
Purchase Agreement, dated as of March 26, 1998 by and among the Company, the
Holder and [Stark International] [Shepherd Investments
_________________________
* Insert average of Closing Bid Prices of the Company's Common Stock over the
relevant ten consecutive trading day period.
<PAGE>
International, Ltd.] (the "Purchase Agreement"). The Warrants originally so
issued evidence rights to purchase an aggregate of 160,000 shares of Common
Stock subject to adjustment as provided herein. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned such terms in
the Purchase Agreement.
1. DEFINITIONS. As used herein, unless the context otherwise
-----------
requires, the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares (including
---------------------------------
treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.3 or
3.4, deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) (i) shares issued upon the exercise of the Warrants and (ii) such
number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to such Warrants as in effect on the date hereof and
(b) (i) shares issued upon the exercise of options granted or to be
granted under the Company's stock option plans as in effect on the date
hereof or under any other employee stock option or purchase plan or plans
adopted or assumed after such date by the Company's Board of Directors;
provided in each such case that the exercise or purchase price for any such
--------
share shall not be less than 85% of the fair market value (determined in
good faith by the Company's Board of Directors) of the Common Stock on the
date of grant, and (ii) such additional number of shares as may become
issuable pursuant to the terms of any such plans by reason of adjustments
required pursuant to anti-dilution provisions applicable to such securities
in order to reflect any subdivision or combination of Common Stock, by
reclassification or otherwise, or any dividend on Common Stock payable in
Common Stock.
"Business Day" shall mean any day other than a Saturday or a Sunday or
------------
a day on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
"Certificate of Designations" shall mean the company's certificate of
---------------------------
Designations, Preferences and rights of the Series C Preferred Shares.
"Closing Bid Prices" shall mean for any security as of any date, the
------------------
closing bid price on the American Stock Exchange ("AMEX") as reported by the
----
AMEX, or, if the AMEX is not the principal securities exchange for such
security, the closing bid price of such security on the principal securities
exchange or trade market where such security is listed or trades as reported by
Bloomberg, L.P. ("Bloomberg"), or if the foregoing do not apply, the closing bid
----------
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
2
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any
----------
successor agency having jurisdiction to enforce the Securities Act.
"Common stock" shall have the meaning assigned to it in the
------------
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
Reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the introduction to
-------
this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the company hereunder in compliance with
Section 4.
"Convertible Securities" shall mean any evidences of indebtedness,
----------------------
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" shall mean, on any date specified herein, the
--------------------
average of the daily Closing Bid Prices during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the fair value on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
---------------
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in the case
----------
of cash, the dollar amount thereof, (ii) in the case of a security admitted for
trading on any national securities exchange or quoted in the over-the-counter
market, the Current Market Price, and (iii) in all other cases determined in
good faith jointly by the Company and the Holder; provided, however, that if
-------- -------
such parties are unable to reach agreement within a reasonable period of time,
the Fair Value shall be determined in good faith by an independent investment
banking firm selected jointly by the Company and the Holder or, if that
selection cannot be made within ten days, by an independent investment banking
firm selected by the American Arbitration Association in accordance with its
rules, and provided further, that the Company shall pay all of the fees and
-------- -------
expenses of any third parties incurred in connection with determining the Fair
Value.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Options" shall mean any rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
3
<PAGE>
"Other Securities" shall mean any stock (other than Common Stock) and
----------------
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
"Person" shall mean any individual, firm, partnership, corporation,
------
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall have the meaning assigned to it in the
------------------
introduction to this Warrant.
"Purchase Price" shall mean initially $________, subject to adjustment
--------------
and readjustment from time to time as provided in Section 3, and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by Section 3.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated as of March 26, 1998, substantially in the form of Exhibit D to
the Purchase Agreement.
"Rights" shall have the meaning assigned to it in Section 3.10.
------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Warrants" shall have the meaning assigned to it in the introduction
--------
to this Warrant.
2. EXERCISE OF WARRANT.
-------------------
2.1. Manner of Exercise; Payment of the Purchase Price. (a) This
-------------------------------------------------
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to the Expiration Date, by surrendering to the
Company at its principal office this Warrant, with the form of Election to
Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof)
duly executed by the Holder and accompanied by payment of the Purchase Price for
the number of shares of Common Stock specified in such form.
(b) Payment of the Purchase Price shall be made in United States
currency by cash or delivery of a certified check or bank draft payable to the
order of the Company or by wire transfer to the Company.
2.2. When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and at such time the Person or Persons in whose name or
4
<PAGE>
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in Section 2.3
shall be deemed to have become the holder or holders of record thereof for all
purposes.
2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
--------------------------------------------------------
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
- --------
whole or in part, and in any event within three Business Days thereafter, the
Company shall cause to be issued in the name of and delivered to the Holder
hereof or, subject the Purchase Agreement, as the Holder may direct,
(i) a certificate or certificates, or at a Holder's request to
electronically issue such shares (e.g. through DWAC or DTC), for the number
of shares of Common Stock (or Other Securities) to which the Holder shall
be entitled upon such exercise plus, in lieu of issuance of any fractional
share to which the Holder would otherwise be entitled, if any, a check for
the amount of cash equal to the same fraction multiplied by the Current
Market Price per share on the date of Warrant exercise, and
(ii) in case such exercise is for less than all of the shares of
Common Stock purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the shares of Common Stock purchasable
hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or transfer tax or other incidental expense, in respect of
the issuance of such certificates, all of which such taxes and expenses
shall be paid by the Company.
2.4. Company to Reaffirm Obligations. The Company shall, at the time
-------------------------------
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
--------
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
-------------------------------------------------
3.1. Adjustment of Number of Shares.
------------------------------
Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 3, this Warrant shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i)
the product of the aggregate number of shares covered by this Warrant
immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
----------------------------
5
<PAGE>
3.2.1. Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10), without consideration or for a consideration per share less
than both the Current Market Price and the Purchase Price as each are in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Purchase Price by a fraction
(a) the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
and (ii) the number of shares of Common Stock which the gross consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at such Current Market Price,
and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, provided
--------
that, for the purposes of this Section 3.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant
to Section 3.3 or 3.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be outstanding.
3.2.2. Extraordinary Dividends and Distributions. In case the
-----------------------------------------
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock, then,
in each such case, subject to Section 3.8, the Purchase Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Purchase Price by
a fraction
(x) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading, less
the Fair Value of such dividend or distribution applicable to one share of
Common Stock, and
(y) the denominator of which shall be such Current Market Price.
3.3. Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the
6
<PAGE>
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
--------
deemed to have been issued unless (i) the consideration per share (determined
pursuant to Section 3.5) of such shares would be less than both the Current
Market Price and the Purchase Price, each as in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be and (ii) such Additional Shares of Common Stock are
not purchasable pursuant to Rights referred to in Section 3.10, and provided,
--------
further, that
- -------
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue or
sale of Convertible Securities or shares of Common Stock upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the
7
<PAGE>
consideration received therefor was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue
or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue or sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 3.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Purchase Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Purchase Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
------------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of this Section
----------------------------
3,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the amount
of cash received by the Company, without deducting any expenses paid
or incurred by the Company or any commissions or compensations paid or
concessions or discounts
8
<PAGE>
allowed to underwriters, dealers or others performing similar services
in connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time of
such issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, such
allocation to be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be determined as
provided in the definition of 'Fair Value' herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number
to protect against dilution) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
3.6. Adjustments for Combinations, etc. In case the outstanding
----------------------------------
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
9
<PAGE>
3.7. Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment of the
----------------------
Purchase Price per share required pursuant to this Section 3 would be less than
$.02, such amount shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate a change in the Purchase Price of at least $.02 per share. All
calculations under this Warrant shall be made to the nearest .001 of a cent or
to the nearest one-hundredth of a share, as the case may be.
3.9. Abandoned Dividend or Distribution. If the Company shall take a
----------------------------------
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the
-----------------------
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights and in each case subject to the
terms and conditions of the Rights.
10
<PAGE>
4. CONSOLIDATION, MERGER, ETC.
--------------------------
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
------------------------------------------------------
Reorganization, etc. In case the Company after the date hereof (a) shall
- -------------------
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction
(unless the Company has given notice to the Holder that the Company has elected
to accelerate the Expiration Date as set forth in clause (ii) of the
introductory paragraph to this Warrant), shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the amount of securities, cash or
other property to which such Holder would actually have been entitled as a
shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 through 5.
4.2. Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants or in the Purchase Agreement to the contrary, the Company shall not
effect any of the transactions described in clauses (a) through (d) of Section
4.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company under the Agreement, the Certificate of Designations and the
Registration Rights Agreement and (c) the obligation to deliver to the Holder
such shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 4, the Holder may be entitled to receive.
Nothing in this Section 4 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
---------------------
the provisions of Section 3 or Section 4 hereof are not strictly applicable or
if strictly applicable would not fairly protect the purchase rights of the
Holder in accordance with the essential intent and principles of such sections,
then, in each such case, the Board of Directors of the Company
11
<PAGE>
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to preserve, without dilution,
the purchase rights represented by this Warrant.
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment
-------------------------
of its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of stock receivable upon the exercise of this warrant to exceed the
amount payable therefor upon such exercise, (b) shall take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens, security interests, encumbrances, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, (c) shall not take any
action which results in any adjustment of the Purchase Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's certificate
of incorporation and available for the purpose of issue upon such exercise, and
(d) shall not issue any capital stock of any class which is preferred as to
dividends or as to the distribution of assets upon voluntary or involuntary
dissolution, liquidation or winding-up, unless the rights of the holders thereof
shall be limited to a fixed sum or percentage of par value or a sum determined
by reference to a formula based on a published index of interest rates, an
interest rate publicly announced by a financial institution or a similar
indicator of interest rates in respect of participation in dividends and to a
fixed sum or percentage of par value in any such distribution of assets.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate, signed by the Chairman of the Board, President or one of
the Vice Presidents of the Company, and by the Chief Financial Officer, the
Treasurer or one of the Assistant Treasurers of the Company, setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or to be received
by the Company for any additional shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Purchase Price in effect immediately
prior to such issue or sale and as adjusted and readjusted (if required by
Section 3) on account thereof. The company shall forthwith mail a copy of each
such certificate to each holder of a Warrant and shall, upon the written request
at any time of any holder of a Warrant, furnish to such holder a like
certificate. The Company shall also keep copies of all such certificates at its
principal office and shall cause the same to be available for inspection at such
office during normal business hours by any holder of a Warrant or any
prospective purchaser of a warrant designated by the holder thereof. the company
shall, upon the request in writing of the
12
<PAGE>
Holder (at the Company's expense), retain independent public accountants of
recognized national standing selected by the Board of Directors of the Company
to make any computation required in connection with adjustments under this
Warrant, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment, which shall be binding on the Holder and the
Company.
8. NOTICES OF CORPORATE ACTION. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any consolidation
or merger involving the Company and any other Person, any transaction or
series of transactions in which more than 50% of the voting securities of
the Company are transferred to another Person, or any transfer, sale or
other disposition of all or substantially all the assets of the Company to
any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the securities act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. At any such time as Common stock is listed on any national
securities exchange, the Company shall, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice of
issuance, the shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such shares after their
issuance; and the Company shall also list on such national securities exchange,
shall
13
<PAGE>
register under the Exchange Act and shall maintain such listing of, any Other
Securities that at any time are issuable upon exercise of the Warrants, if and
at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.
10. RESERVATION OF STOCK, ETC. The Company shall at all times
--------------------------
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
all shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof, and, in the case of all
securities, shall be free from all taxes, liens, security interests,
encumbrances, preemptive rights and charges. The transfer agent for the Common
Stock, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's capital stock issuable upon the
exercise of any of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the expiration date to
reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the
Transfer Agent for the Common Stock and with every subsequent Transfer Agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company shall supply such
Transfer Agent with duly executed stock certificates for such purpose. All
Warrant certificates surrendered upon the exercise of the rights thereby
evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of shares of stock which have been issued upon
the exercise of such Warrants. Subsequent to the Expiration Date, no shares of
stock need be reserved in respect of any unexercised Warrant.
11. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
-------------------------------------------
11.1. Warrant Register; Ownership of Warrants. Each Warrant issued
---------------------------------------
by the Company shall be numbered and shall be registered in a Warrant Register
(the "Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. A Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
11.2. Transfer of Warrants. If applicable, this Warrant and all
--------------------
rights hereunder are transferable in whole or in part, without charge to the
Holder hereof, upon surrender of this Warrant with a properly executed Form of
Assignment attached hereto as Exhibit B at the principal office of the Company.
Upon any partial transfer, the Company shall at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be
14
<PAGE>
exercisable for such number of shares of Common Stock with respect to which
rights under this Warrant were not so transferred.
11.3. Replacement of Warrants. On receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11.4. Adjustments To Purchase Price and Number of Shares.
--------------------------------------------------
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
11.5. Fractional Shares. Notwithstanding any adjustment pursuant to
-----------------
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
12. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that
------------------------------
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.
13. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in
---------------------------------------
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
14. NOTICES. Any notices, consents, waivers or other communications
-------
required or permitted to be given hereunder must be in writing and will be
deemed to have been
15
<PAGE>
delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile, provided a copy is mailed by U.S. certified mail, return
receipt requested; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. the addresses and facsimile numbers for such
communications shall be:
If to the Company:
Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Telephone: (781) 575-0775
Facsimile: (781) 575-1570
Attention: Chief Executive Officer and
Chief Strategic Officer
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.c.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Facsimile: (617) 542-2241
Attention: Neil Aronson, Esq.
If to a Holder, to its address and facsimile number on the register
maintained by the Company. Each party shall provide five (5) days' prior written
notice to the other party of any change in address or facsimile number.
Notwithstanding the foregoing, the exercise of any Warrant shall be effective in
the manner provided in Section 2.
15. AMENDMENTS. This Warrant and any term hereof may not be amended,
----------
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
16. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word "including" and words of
similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
16
<PAGE>
17. GOVERNING LAW. This Warrant shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York (without giving effect to
the conflict of laws principles thereof).
18. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding
--------------------
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 15, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section. The Company irrevocably submits to the executive jurisdiction of the
aforementioned courts in such action, suit or proceeding.
17
<PAGE>
19. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
-----------------------------
Other Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each holder of this Warrant shall be entitled to all of the benefits
afforded to a holder of any such Registrable Securities under the Registration
Rights Agreement and such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions of the Registration
Rights Agreement applicable to such holder as a holder of such Registrable
Securities.
ORGANOGENESIS INC.
By:_____________________________
Name:
Title:
18
<PAGE>
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, par value $.01 per share ("Common Stock"),
of ORGANOGENESIS INC. and hereby makes payment of $________ therefor. The
undersigned hereby requests that certificates for such shares be issued and
delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is less than
the number of shares of Common Stock covered by the Warrant, the undersigned
requests that a new Warrant representing the number of shares of Common Stock
not so purchased be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:_____________________________________________________________________
(NAME OF HOLDER/1/)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________, 19__ [NAME OF HOLDER]
By__________________________
Name:
Title:
19
<PAGE>
EXHIBIT B to
Common Stock Purchase Warrant
-----------------------------
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $_____ per share ("Common Stock") of
ORGANOGENESIS INC. represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of ORGANOGENESIS INC. maintained for that purpose,
with full power of substitution in the premises.
Dated: _______________, 19__ [NAME OF HOLDER]
By_________________________
Name:
Title:
20
<PAGE>
EXHIBIT 99(D)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March
26, 1998, by and among Organogenesis Inc., a Delaware corporation, with
headquarters located at 150 Dan Road, Canton, MA 02021 (the "COMPANY"), and the
undersigned buyers (each, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyers shares of the Company's
Series C Convertible Preferred Stock (the "SERIES C PREFERRED SHARES"), which
will be convertible into shares of the Company's common stock, $.01 par value
per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES") in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Series C Convertible Preferred Stock (the
"CERTIFICATE OF DESIGNATIONS"); and
B. In consideration for the Buyers agreeing to purchase the Series C
Preferred Shares, the Company shall issue and deliver to the Buyers, common
stock purchase warrants (the "WARRANTS") to acquire additional shares of Common
Stock pursuant to the terms of the Securities Purchase Agreement (the shares of
Common Stock issued or issuable upon exercise of the Warrants are hereinafter
referred to as the "WARRANT SHARES");
C. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
<PAGE>
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Conversion Shares issued
or issuable upon conversion of the Series C Preferred Shares, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants and (iii) any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Series C Preferred Shares, the Warrant Shares or the Warrants as a result of any
stock split, stock dividend, recapitalization, exchange or similar event.
e. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, prior to
----------------------
thirty (30) days after the date of issuance of the Series C Preferred Shares,
file with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject to the
consent of each Buyer and the provisions of Section 2(c), which consent will not
be unreasonably withheld), covering the resale of all of the Registrable
Securities, which Registration Statement(s) shall state that, in accordance with
Rule 416 promulgated under the 1933 Act, such Registration Statement(s) also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Series C Preferred Shares to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
Such Registration Statement shall initially register for resale at least
1,400,000 shares of Common Stock, subject to adjustment as provided in Section
3(b). Such registered shares of Common Stock shall be allocated among the
Investors pro rata based on the total number of Registrable Securities issued or
issuable as of each date that a Registration Statement, as amended, relating to
the resale of the Registrable Securities is declared effective by the SEC. The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC within sixty (60) days after the issuance of the Series C
Preferred Shares. In the event that the SEC shall be closed for business for any
period greater than ten consecutive days, the time periods set forth in this
Section 2(a) shall be extended by the same number of days.
b. Counsel and Investment Bankers. Subject to Section 5 hereof, in
------------------------------
connection with any offering pursuant to Section 2, the Buyers shall have the
right to select legal counsel and an investment banker or bankers and manager or
managers to administer their interest in the offering, which investment banker
or bankers or manager or managers shall be reasonably satisfactory to the
Company. The Company shall reasonably cooperate with any such counsel and
investment bankers.
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c. Eligibility for Form S-3. The Company represents, warrants and
------------------------
covenants that it will meet the requirements for the use of Form S-3 for
registration of the sale by the Buyers and any other Investor of the Registrable
Securities on and after the thirtieth (30th) day following the date of issuance
of the Series C Preferred Shares and the Company has filed and shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to obtain and maintain such eligibility for the use of Form S-3. In the event
that Form S-3 is not available for sale by the Investors of the Registrable
Securities, then the Company (i) with the consent of each Investor pursuant to
Section 2(a), shall register the sale of the Registrable Securities on another
appropriate form and (ii) the Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
-------------------
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (prior to the
thirtieth (30th) day after the date of issuance of the Series C Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)) and use
its best efforts to cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after such filing (but no
later than ninety (90) days after the issuance of the Series C Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)), and
keep the Registration Statement(s) effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A) the
Investors shall have sold all the Registrable Securities and (B) none of the
Series C Preferred Shares is outstanding (the "REGISTRATION PERIOD"), which
Registration Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s), which prospectus(es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
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<PAGE>
In the event the number of shares available under a Registration Statement filed
pursuant to this Agreement is insufficient to cover all of the Registrable
Securities, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within fifteen (15) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use it best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of shares of Common Stock
available for resale under such Registration Statement during the 120 days
immediately prior to the Mandatory Conversion Date (as defined in the
Certificate of Designations) is less than 130% of the number of Registrable
Securities issued or issuable upon conversion of the outstanding Series C
Preferred Shares or exercise of the Warrants. For purposes of the calculation
set forth in the foregoing sentence, any restrictions on the convertibility of
the Series C Preferred Shares shall be disregarded and such calculation shall
assume that the Series C Preferred Shares are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Company's
Certificate of Designations).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of the Registration Statement and any amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus(es) included in such Registration
Statement(s) (including each preliminary prospectus) and, with regards to the
Registration Statement, any correspondence by or on behalf of the Company to the
SEC or the staff of the SEC and any correspondence from the SEC or the staff of
the SEC to the Company or its representatives, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including any preliminary prospectus, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds
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<PAGE>
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single firm of
counsel, initially Schulte Roth & Zabel LLP or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold a majority
of the Registrable Securities being sold, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at least
seven (7) days prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects. The Company shall not submit a
request for acceleration of the effectiveness of a Registration Statement(s) or
any amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
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<PAGE>
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
-6-
<PAGE>
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall provide a CUSIP number, a transfer agent and
registrar of all such Registrable Securities not later than the effective date
of such Registration Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall immediately incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a shareholder or any underwriter of such Registrable
Securities.
-7-
<PAGE>
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
r. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor's Registrable Securities included
in the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
d. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
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<PAGE>
All reasonable expenses incurred in connection with the filing of the
S-3 contemplated hereby, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, shall be paid by
the Company. Notwithstanding the foregoing, in the event that the Investors
request the use of a different form for registration or select underwriters for
an offering pursuant to Section 3(e), then the Company shall not be obligated to
pay for any expenses excess of those set forth in the prior sentence.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents and
each Person, if any, who controls any Investor within the meaning of the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and any
underwriter (as defined in the 1933 Act) for the Investors, and the directors
and officers of, and each Person, if any, who controls, any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED
PERSON"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
reasonable expenses, joint or several (collectively, "CLAIMS"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any
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<PAGE>
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it;
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company; and (iv) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the
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<PAGE>
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
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<PAGE>
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
-12-
<PAGE>
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii)
in the event the assignment occurs subsequent to the date of effectiveness of
the Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested; or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
if to the Company:
-13-
<PAGE>
Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Telephone: (781) 575-0775
Facsimile: (781) 575-1570
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Facsimile: (617) 542-2241
Attention: Neil Aronson, Esq.
if to a Buyer, to its address and facsimile number on the Schedule of
Buyers attached hereto, with copies to such Buyer's counsel as set
forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement, the Certificate of Designations, the Warrants and
the Securities Purchase Agreement (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. The aforementioned documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
-14-
<PAGE>
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
ORGANOGENESIS INC. STARK INTERNATIONAL
By: _________________________ By: ____________________________
Name: Name: _________________
Its: Its: _________________
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
By: ____________________________
Name: _________________
Its: _________________
-16-
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
INVESTOR'S LEGAL COUNSEL AND
INVESTOR NAME INVESTOR ADDRESS AND FACSIMILE NUMBER COUNSEL'S ADDRESS
- ------------------------- ------------------------------------------- -----------------------------
<S> <C> <C>
Stark International c/o Staro Asset Management Eleazer Klein, Esq.
1500 West Market Street Schulte Roth & Zabel LLP
Mequon, Wisconsin 53092 900 Third Avenue
Fax: (414) 241-1888 New York, New York 10022
Fax: (212) 593-5955
Shepherd Investments c/o Staro Asset Management Eleazer Klein, Esq.
International, Ltd. 1500 West Market Street Schulte Roth & Zabel LLP
Mequon, Wisconsin 53092 900 Third Avenue
Fax: (414) 241-1888 New York, New York 10022
Fax: (212) 593-5955
</TABLE>
-17-
<PAGE>
EXHIBIT 99(E)
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED UPON THE
EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER PROVISIONS OF THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS;
AND IN THE CASE OF ANY EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF THE WARRANT OR THE OTHER SECURITIES.
WARRANT TO PURCHASE FORTY THOUSAND (40,000) SHARES OF COMMON STOCK OF
ORGANOGENESIS INC.
Warrant No. 2 Void After March 25, 2001
____________________________________
THIS CERTIFIES THAT, for value received, Reedland Capital Partners of 23
Tamal Vista Boulevard, Suite 201, Corte Madera, California ("RCP") or assigns
(RCP, or such assigns who may be the registered holder or holders hereof, are
hereinafter referred to as the "Holder") is entitled to subscribe for and
purchase Forty Thousand (40,000) shares of the fully paid and nonassessable
Common Stock (as adjusted pursuant to Section 4 hereof, hereinafter, the
"Shares") of ORGANOGENESIS INC., a Delaware corporation (hereinafter, the
"Company"), at the price of $36.00 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Exercise Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, the
term "Common Stock" shall mean the Company's presently authorized Common Stock,
$.01 par value per share, and any stock into which such Common Stock may
hereafter be exchanged.
By acceptance of this Warrant the Holder agrees to comply with the terms,
conditions and obligations imposed by the Agreement.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time or from time to time prior to 5:00 p.m. Boston
time on March 25, 2001.
2. Method of Exercise; Payment; Issuance of New Warrant.
----------------------------------------------------
-1-
<PAGE>
(a) Subject to the terms hereof, the purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company and by the
- ---------
payment to the Company, pursuant to Section 2(b) below, of an amount equal to
then applicable Exercise Price per share multiplied by the number of Shares then
being purchased. Certificates for the Shares purchased shall be delivered to the
Holder hereof within 30 days of the date of exercise and, unless this Warrant
has been fully exercised or expired, a new Warrant representing the unexercised
portion shall also be issued to the Holder hereof within such 30 day period.
(b) Method of Payment. Payment shall be made (i) by check payable
-----------------
to the Company, or (ii) by wire transfer in accordance with the Company's
written instructions, or (iii) as follows: the Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this Warrant or any portion hereof by the surrender of this
Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the office of the Company. Thereupon, the
Company shall issue to the Holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 2.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Section 2.
A = the fair market value of one share of Common Stock, as determined in
good faith by the Board, as at the time the net issue election is
made pursuant to this Section 2.
B = the Purchase Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 2.
The Board shall promptly respond in writing to an inquiry by the
Holder as to the fair market value of one share of Common Stock.
3. Stock Fully Paid; Reservation of Shares. All Shares which may be
---------------------------------------
issued pursuant to this Warrant, shall, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable, and free of any liens and
encumbrances except for restriction on transfer provided for herein or under
applicable federal and state securities laws. While this Warrant is
outstanding, the Company shall at all times have authorized, and reserved for
the purpose of the issue pursuant to this Warrant, a sufficient number of shares
of the Common Stock to provide for the exercise of the purchase right
represented by this Warrant.
-2-
<PAGE>
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification, Consolidation or Merger. In the case of any
-----------------------------------------
reclassification or change of the Common Stock issuable upon exercise of this
Warrant, the Company shall execute a new Warrant, providing that the Holder of
this Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Common Stock theretofore issuable
upon exercise of this Warrant, the number and kind of shares of stock, other
securities, money or property receivable upon such reclassification or change in
respect of one share of the Common Stock. Such new Warrant shall provide for
further adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section.
(b) Split, Subdivision or Combination of Shares. If the Company at any
-------------------------------------------
time while this Warrant remains outstanding shall split, subdivide or combine
its Common Stock, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision and increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding shall pay a dividend with respect to the Common Stock payable in, or
make any other distribution with respect to the Common Stock (except any
distribution specifically provided for in Section 4(a) or 4(b) above) of, shares
of the Common Stock, then the Exercise Price shall be adjusted, from and after
the date of determination of the shareholders entitled to receive such dividend
or distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of the Common Stock outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of shares of the Common Stock outstanding
immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Exercise Price, the number of Shares purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Exercise Price by
a fraction (i) the numerator of which shall be the Exercise Price immediately
prior to such adjustment, and (ii) the denominator of which shall be the
Exercise Price immediately after such adjustment.
5. Transferability. The Holder hereby acknowledges that neither this
---------------
Warrant nor any of the securities that may be acquired upon exercise of this
Warrant have been registered under the Securities Act of 1933, as amended, or
under the securities laws of any state. The Holder acknowledges that, upon
exercise of this Warrant, the securities to be issued upon such exercise may
come under applicable federal and state securities (or other) laws requiring
registration, qualification or
-3-
<PAGE>
approval of governmental authorities before such securities may be validly
issued or delivered upon notice of such exercise. The Company's sole obligation
to any Holder upon exercise hereof shall be to use its best efforts to obtain
exemptions from registration or qualification for the issuance of such
securities under applicable state and federal securities (or other) laws, and
the Holder further agrees that the issuance of such securities shall be deferred
until such exemptions shall have been obtained. With respect to any such
securities, this Warrant may not be exercised by, and securities shall not be
issued to, any Holder in any state in which such exercise would be unlawful. The
Holder agrees that the Company may place such legend or legends on certificates
representing securities issued upon exercise of this Warrant as the Company may
reasonably deem necessary to comply with applicable state and federal securities
laws for the issuance of such securities. The provisions of this Section shall
apply to the transfer of this Warrant and the shares of Common Stock purchasable
upon exercise of this Warrant.
6. Notice of Adjustments. Whenever any Exercise Price shall be adjusted
---------------------
pursuant to Section 4 hereof, the Company shall issue a certificate signed by
its Chief Financial Officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the Exercise Price or Exercise Prices after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Holder of this Warrant.
7. Fractional Shares. No fractional shares of the Common Stock shall be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
8. Prior Notice of Certain Events. The Company shall give the Holder of
------------------------------
this Warrant prior written notice of any of the following transactions: (a) any
consolidation, merger or other corporate reorganization involving the Company;
(b) any transaction or series of related transactions by the Company in which in
excess of 50% of the Company's voting power is transferred; (c) any
reclassification of the Common Stock; or (d) a sale of all or substantially all
of the assets of the Company. Such notice shall be given to the Holder not
later than the earlier of (x) 20 days prior to the consummation of the
transaction, or (y) 15 days prior to the record date for shareholders entitled
to vote on or participate in the transaction. Such notice shall provide the
Holder with a description of the transaction. The Holder may, by so stating in
its notice of exercise, make any exercise of its rights under this Warrant to
purchase Shares for the Exercise Price effective immediately prior to but
conditional upon, the consummation of any such transaction.
9. No Rights of Shareholders. No Holder of this Warrant shall be entitled
-------------------------
to vote or receive dividends or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent
-4-
<PAGE>
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein. Immediately upon any
exercise of this Warrant, and without waiting for the certificates for such
Shares to be issued and delivered, the Holder shall be deemed to be the record
holder of, and to have all rights of a shareholder with respect to, the Shares
issuable upon such exercise.
10. Notices. All notices and other communications from the Company to the
-------
Holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, or sent by telecopier, facsimile machine or telex to such
address as may have been furnished to the Company in writing by such Holder or,
until any such Holder furnishes to the Company an address, then to, and at the
address of, the last Holder of this Warrant who has so furnished an address to
the Company.
11. Transfer. Subject to the provisions of this Warrant and the
--------
Agreement, including without limitation the provisions of Section 5 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
office or agency of the Company by the registered Holder thereof in person or by
a duly authorized attorney, upon surrender of this Warrant together with an
Assignment in the form attached hereto as Exhibit B properly endorsed. Until
---------
transfer hereof on the registration books of the Company, the Company may treat
the registered Holder hereof as the owner hereof for all purposes. Any
transferee of this Warrant and any rights hereunder, by acceptance thereof,
agrees to assume all of the obligations of a Holder thereunder and to be bound
by all of the terms and provisions of the Agreement.
12. Miscellaneous. In case any provision of this Warrant shall be
-------------
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be enforced to the extent, if any, that it
may legally be enforced and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. This
Warrant and any term hereof may be changed, a waived, discharged or terminated
only by a statement in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. This Warrant
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements. This Warrant shall be
governed by and construed in accordance with the domestic substantive laws (and
not the conflict of law rules) of The Commonwealth of Massachusetts. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. This Warrant shall take effect as
an instrument under seal.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of this 26th day of March, 1998.
ORGANOGENESIS INC.
By:_________________________________________
David T. Rovee, President
-6-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: ORGANOGENESIS INC.
1. The undersigned hereby elects to purchase _____________________ shares
of the Common Stock of ORGANOGENESIS INC. pursuant to the terms of the attached
Warrant, and tenders herewith ____________________________________ ($_______) in
payment of the purchase price of such shares in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
the Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________
(Name)
__________________________
__________________________
(Address)
3. The undersigned represents that the aforesaid shares of the Common
Stock are being acquired solely for his own account (or a trust account if the
holder is a trust) and not as a nominee for any other party, for investment only
and not with a view toward the resale or distribution thereof and that the
undersigned has no present intention of reselling, granting any participation in
or otherwise distributing such shares.
Date:______________________ By:_________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
-7-
<PAGE>
EXHIBIT B
---------
FORM OF ASSIGNMENT
------------------
The undersigned holder of this Warrant hereby sells, assigns and transfers
to ____________________________ all of the rights of the undersigned under this
Warrant with respect to ________________________ (________) shares of the Common
Stock of ORGANOGENESIS INC. and requests that a new Warrant of like tenor
evidencing this assignment be issued and delivered to
___________________________________ with an address at ________________________.
____________________________________________
By:_________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
-8-
