<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 1-9898
------
ORGANOGENESIS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2871690
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
150 DAN ROAD, CANTON, MA 02021
------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 575-0775
______________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ( X ) No ( )
The number of shares outstanding of registrant's Common Stock, par value $.01
per share, at April 29, 1999 was 30,435,904 shares (excluding treasury shares).
<PAGE>
ORGANOGENESIS INC.
Index
-----
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1 - Financial Statements
Consolidated Balance Sheets
at December 31, 1998 and March 31, 1999.................. 3
Consolidated Statements of Operations
for the three months ended March 31, 1998 and 1999....... 4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1998 and 1999....... 5
Notes to Consolidated Financial Statements.................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 9
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings............................................. *
Item 2 - Changes in Securities......................................... *
Item 3 - Defaults upon Senior Securities............................... *
Item 4 - Submission of Matters to a Vote of Security Holders........... *
Item 5 - Other Information............................................. 14
Item 6 - Exhibits and Reports on Form 8-K.............................. 14
Signatures.............................................................. 15
* No information provided due to inapplicability of item
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ORGANOGENESIS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31, 1999
1998 (unaudited)
----------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,052 $ 3,467
Investments 12,789 9,476
Receivable from debt financing - 17,500
Inventory 730 733
Other current assets 441 790
--------- ---------
19,012 31,966
Property and equipment -
Less accumulated depreciation of $9,339 and $9,749 7,605 8,688
Other assets 93 594
--------- ---------
$ 26,710 $ 41,248
========= =========
LIABILITIES
Current liabilities:
Accounts payable $ 1,036 $ 1,055
Accrued expenses 2,435 2,750
--------- ---------
3,471 3,805
Long-term debt - 17,682
Commitments (see notes)
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00; authorized 1,000,000
shares:
Series C convertible preferred; designated 200 shares;
62 shares issued and outstanding as of December 31, 1998
and March 31, 1999, respectively - -
Common stock, par value $.01; authorized 40,000,000 shares:
issued and outstanding 30,479,719 and 30,500,904 shares
as of December 31, 1998 and March 31, 1999, 305 305
respectively
Additional paid-in capital 124,342 126,790
Accumulated deficit (101,017) (106,943)
Treasury stock at cost, 40,000 shares at December 31, 1998
and March 31, 1999 (391) (391)
--------- ---------
Total stockholders' equity 23,239 19,761
--------- ---------
$ 26,710 $ 41,248
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
For the
Three Months
Ended March 31,
-------------------
1998 1999
---- ----
Revenues:
<S> <C> <C>
Research and development support from related party $ 2,000 $ -
Product sales to related party, royalties and other income 194 486
Interest Income 72 193
---------- ----------
Total revenues 2,266 679
---------- ----------
Costs and Expenses:
Research, development and operations 3,912 5,091
General and administrative 1,221 1,514
---------- ----------
Total costs and expenses 5,133 6,605
---------- ----------
Net loss $ (2,867) $ (5,926)
========== ==========
Net loss per common share - basic and diluted $ (.10) $ (.19)
========== ==========
Weighted average number of common shares
outstanding - basic and diluted 28,957,114 30,451,477
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ORGANOGENESIS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
For the
Three Months
Ended March 31,
-------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,867) $ (5,926)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 346 410
Changes in assets and liabilities:
Other current assets (1,214) (352)
Other assets - (501)
Accounts payable (320) 19
Accrued expenses (48) 315
Deferred rent payable (10) -
------- --------
Cash used in operating activities (4,113) (6,035)
------- --------
Cash flows from investing activities:
Capital expenditures (176) (1,493)
Sales/maturities of investments 4,362 3,313
------- --------
Cash provided by investing activities 4,186 1,820
------- --------
Cash flows from financing activities:
Long-term borrowings - 20,000
Receivable from debt financing - (17,500)
Proceeds from sale of preferred stock, net 19,117 -
Proceeds from sale of common stock 3,000 -
Proceeds from exercise of warrants - -
Proceeds from exercise of stock options 55 130
------- --------
Cash provided by financing activities 22,172 2,630
------- --------
Increase (decrease) in cash and cash equivalents 22,245 (1,585)
Cash and cash equivalents, beginning of period 333 5,052
------- --------
Cash and cash equivalents, end of period $22,578 $ 3,467
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ORGANOGENESIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation:
----------------------
The accompanying unaudited consolidated financial statements of
Organogenesis Inc., have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the accompanying consolidated financial statements
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial position, results of operations and
changes in cash flows for the periods presented. The results of operations for
the three months ended March 31, 1999 are not necessarily indicative of the
results to be expected for the year ending December 31, 1999.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 1998 as filed with the
Securities and Exchange Commission.
Certain reclassifications have been made to the prior period financial
statements to conform to the current presentation.
2. Receivable from Debt Financing:
------------------------------
The receivable of $17,500,000 relates to the private placement of
convertible debentures and warrants to purchase common stock, as more fully
described in Note 5, Convertible Debt. This amount was received in full in
April 1999.
3. Inventory:
----------
Inventory is stated at the lower of cost or market, cost being determined
using the first-in, first-out method of accounting. Inventory consisted of the
following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31, 1999
1998 (unaudited)
----------- --------------
<S> <C> <C>
Raw Materials $ 300 $290
Work in Process 430 443
----- ----
$ 730 $733
===== ====
</TABLE>
4. Other Current Assets
--------------------
Included in other current assets is a net receivable due from Novartis of
approximately $213,000 at December 31, 1998 and $432,000 at March 31, 1999.
6
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5. Convertible Debt:
-----------------
On March 31, 1999, we completed a financing of $20,000,000 through the
private placement of five-year convertible debentures and 400,000 warrants to
purchase common stock. The debentures are convertible at a fixed price of
$14.50 per share at any time on or after March 30, 2000. Interest on the
debentures accrues at 7% annually, payable in cash, common stock (at the average
trading price for the twenty trading days preceding the due date) or any
combination thereof, at our option, semi-annually on September 30 and March 31
or on the date any of the principal outstanding under the notes has been
converted into common stock. At our option, at any time on or after March 30,
2002, the debentures may be prepaid by conversion of the principal into common
stock at the conversion price of $14.50, cash or any combination thereof and
payment of any accrued interest as described above, provided that the average
per share market value for the twenty consecutive trading days immediately
preceding the date of prepayment equals or exceeds $38.67 per share. The notes
mature on March 29, 2004 and are payable in cash. The warrants grant the right
to purchase one share of common stock at the exercise price of $21.75 for each
$50.00 in face value of the convertible notes at any time before March 30, 2004.
Approximately $2,318,000 of the $20,000,000 financing is allocated to the
estimated fair value of the warrants and is included in additional paid in
capital. This amount will be amortized as a non-cash charge to interest expense
over the life of the debentures. We expect to register the warrants and
underlying common stock for conversion of the debentures, payment of interest
and exercise of the warrants.
Debt issuance costs are included in other assets and will be amortized over
the life of the debentures.
6. Commitments:
-----------
Construction-in-Progress
At March 31, 1999, we had approximately $1,972,000 in construction in
progress relating to expansion of our main facility. Additionally, we have
committed approximately $3.1 million for this build-out. The total project cost
is estimated at about $5.9 million.
Series C Preferred Stock Commitment
At March 31, 1999, we had approximately 62 shares of Series C convertible
preferred stock outstanding. In the event that any Series C preferred stock are
outstanding on the mandatory conversion date of March 26, 2000, we have the
option of redeeming any such outstanding Series C preferred stock by: (1) paying
cash equal to the product of the number of Series C preferred stock outstanding
multiplied by the stated value of $100,000 per share; (2) issuing common stock
equal to 1.15 of the stated value divided by the average of the closing bid
prices for the 20 consecutive trading days prior to the mandatory conversion
date; or (3) any combination of these methods.
7. Other Revenues:
--------------
During the first quarter of 1999, Novartis agreed to provide funding for
certain programs to be conducted by Organogenesis. We have recorded other
income of $139,000 from Novartis during the first quarter of 1999 relating to
our initiation of these programs. This amount is included in "Product sales to
related party, royalties and other income".
7
<PAGE>
8. Treasury Stock:
--------------
In September 1998, the Board of Directors authorized a common stock
repurchase program. Repurchases are allowed through open-market transactions
for up to 500,000 shares that will provide us with treasury shares for general
corporate purposes. At December 31, 1998 and March 31, 1999, we had in treasury
40,000 shares of common stock at an aggregate purchase price of $391,000.
Subsequent to March 31, 1999, we repurchased an additional 35,000 shares of
common stock for an aggregate purchase price of $406,741.
9. Subsequent Event:
-----------------
Subsequent to March 31, 1999, we closed on the purchase of certain assets
and intellectual property of Baxter Healthcare Corporation relating to the
research and development for the design and manufacturing of key mechanical
components of an extracorporeal bioartificial liver device. The purchase price
consists of the reissuance of 50,000 shares of common stock held in treasury.
We expect to register these shares, 25,000 of which are subject to a one-year
lock-up agreement. Additionally, we may be required to make a future cash
payment that is contingent on the average closing price of our common stock over
any twenty consecutive trading days during the period between the first
anniversary of the closing date and the earlier of the date we receive FDA
approval of an Investigational Device Exemption for a liver assist device or
January 1, 2003. Total consideration, including stock and contingent cash, is
$1,000,000.
8
<PAGE>
ORGANOGENESIS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements that involve risks
and uncertainties. Forward-looking statements include information on:
. Our business outlook and future financial performance;
. Anticipated profitability, revenues, expenses and capital
expenditures;
. Future funding and expectations as to any future events; and
. Other statements that are not historical fact and are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties.
Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
can give no assurance that such plans, intentions or expectations will be
achieved. When considering such forward-looking statements, you should keep in
mind the risk factors and other cautionary statements in this Form 10-Q and in
other publicly available filings with the SEC, such as our Annual Report on Form
10-K for the year ended December 31, 1998. The risk and other factors noted
throughout this Form 10-Q could cause our actual results to differ materially
from the results contained in any forward-looking statements.
In Management's Discussion and Analysis, we explain the general financial
condition and results of operations for Organogenesis Inc. As you read this
MD&A, referring to our consolidated financial statements contained in Item 1 of
this Form 10-Q may be helpful. Results of operations may vary significantly from
quarter to quarter depending on, among other factors, the progress of our
research and development efforts, the receipt of milestone and research and
development support payments, if any, from Novartis, product revenues,
manufacturing costs, the timing of certain expenses and the establishment of
additional collaborative agreements, if any.
OVERVIEW OF ORGANOGENESIS INC.
- ------------------------------
Organogenesis designs, develops and manufactures medical therapeutics
containing living cells and/or natural connective tissue. The company was formed
to advance and apply the emerging field of tissue engineering to major medical
needs. Our product development focus includes living tissue replacements, cell-
based organ assist devices and other tissue-engineered products.
OUR LEAD PRODUCT, APLIGRAF(R)
- --------------------------
On May 22, 1998, our lead product, Apligraf(R) living skin construct, was
approved for marketing in the US. Apligraf is the only mass-manufactured product
containing living human cells to be approved for marketing through the FDA PMA
process. Novartis Pharmaceuticals Corporation launched Apligraf in the US in
June 1998. Novartis Pharma AG has global Apligraf marketing rights and also
markets Apligraf in Canada.
Apligraf(R) is a registered trademark of Novartis.
9
<PAGE>
Novartis' marketing strategy is to establish Apligraf as the new
standard of care for venous leg ulcers. The next potential large market for
Apligraf is expected to be diabetic ulcers. Patient enrollment in the Apligraf
diabetic ulcer pivotal trial was completed in November 1998; we plan to submit a
PMA supplement to the FDA by the first quarter next year. An Apligraf study in
burns has been completed; data from this study was presented in February 1999.
Two studies in skin surgery have been completed and their data has been or is
expected to be published. A multicenter, controlled Apligraf pivotal trial
studying the cosmetic outcome of wounds due to skin cancer removal is underway.
We also plan to initiate a study in pressure sores. A study is underway for
epidermolysis bullosa through an investigator-sponsored investigational device
exemption (IDE).
OUR PIPELINE
- ------------
Our pipeline includes Vitrix(TM) soft tissue replacement product, a
bioartificial liver and a vascular graft, as well as the GraftPatch(TM) and
engineered collagen fibril technology out-licensing opportunities. We also
market an in-vitro testing product, TestSkin II. We have an active and expanding
business development program related to our products and technologies.
RESULTS OF OPERATIONS:
- ----------------------
REVENUES
Total revenues for the three months ended March 31, 1999 were $679,000
compared to $2,266,000, for the same period in 1998. Revenues for the first
quarter of 1998 include recognition of $2,000,000 for research and development
support under the collaborative agreement with Novartis. Other revenues of
$486,000 in 1999 represent product sales to related party, royalties, and other
income. The increase over 1998 other revenues of $194,000 is due to increased
sales of product to Novartis and Novartis funding of certain programs. We expect
Apligraf commercial sales to continue to increase. Novartis expects to launch
Apligraf in selected European countries in 1999. Interest income increased to
$193,000 for 1999, compared to $72,000 in 1998. The increase was primarily due
to the difference in funds available for investment.
COSTS AND EXPENSES
Research, development and operations expenses: Our R&D and operations
---------------------------------------------
expenses were $5,091,000 for the three months ended March 31, 1999, compared to
$3,912,000, for the same period in 1998. The increase is primarily due to
personnel additions in the research, development and clinical groups, as well as
personnel additions in manufacturing and quality systems. Production costs
exceeded product sales due to the start-up costs of new product introduction and
the high costs associated with low volume production. We expect production
volume to continue to increase and our margins to improve. Activities for this
period include expansion of Apligraf operations, the diabetic ulcer and the
excision pivotal trials, the Vitrix soft tissue replacement preclinical program,
and the liver assist device research program. We expect to continue to expand
manufacturing operations and advance the product pipeline during 1999.
General and administrative expenses: Our G&A expenses increased to
-----------------------------------
$1,514,000 for the three months ended March 31, 1999, compared to $1,221,000 for
the same period in 1998. The increase was primarily due to personnel additions
and increased professional fees relating to investor and public relations and
business development programs.
10
<PAGE>
As a result of the net effect described above, we incurred a net loss of
$5,926,000 or $.19 per share (basic and diluted), for the three months ended
March 31, 1999, an increase from the net loss of $2,867,000, or $.10 per share
(basic and diluted), for the comparable 1998 period. We may incur additional
losses as expenditures continue to increase due to continued expansion of
operations and research programs.
CAPITAL RESOURCES AND LIQUIDITY:
- --------------------------------
FUNDS USED IN OPERATIONS
At March 31, 1999, we had cash, cash equivalents and investments in the
aggregate amount of $12,943,000 and working capital of $28,161,000, compared to
$17,841,000 and $15,541,000, respectively, at December 31, 1998. Cash
equivalents consist of money market funds, which are highly liquid and have
original maturities of less than three months. Investments consist of
securities that have an A or A1 rating or better with a maximum maturity of two
years. Cash used in operating activities during the three months ended March
31, 1999 was $6,035,000, compared to $4,113,000 for the three months ended March
31, 1998, primarily for financing our ongoing research, development and
manufacturing operations.
CAPITAL SPENDING
Capital expenditures were $1,493,000 and $176,000 during the three months
ended March 31, 1999 and 1998, respectively, primarily related to further build-
out of the current facilities to support Apligraf manufacturing and the
acquisition of laboratory equipment for expanded research and development
programs. We will continue to utilize funds during 1999 to expand our current
facility in the areas of Apligraf manufacturing, quality systems labs, and
packaging. We also plan to add a second facility in the future to enable
further expansion.
FINANCING
From inception, we have financed our operations substantially through
private and public placements of equity securities, as well as receipt of
research support and contract revenues, interest income from investments, sale
of products and receipt of royalties. During the first quarter of 1999,
financing activities provided additional cash and working capital from the sale
of five-year convertible debentures and warrants to purchase common stock that
generated gross proceeds of $20,000,000 and the exercise of stock options of
$130,000. Financing activities provided cash of approximately $22,172,000 for
the first quarter of 1998 from: the sale of 200 shares of Series C convertible
preferred stock that generated net proceeds of approximately $19,117,000; an
equity investment of $3,000,000 from Novartis; and the exercise of stock options
of $55,000.
At December 31, 1998, we had approximately 62 shares of Series C
convertible preferred stock outstanding. In the event that any Series C
preferred stock are outstanding on the mandatory conversion date of March 26,
2000, we have the option of redeeming any such outstanding Series C preferred
stock by: (1) paying cash equal to the product of the number of Series C
preferred stock outstanding multiplied by the stated value of $100,000 per
share; (2) issuing common stock equal to 1.15 of the stated value divided by the
average of the closing bid prices for the 20 consecutive trading days prior to
the mandatory conversion date; or (3) any combination of these methods.
11
<PAGE>
LIQUIDITY AND OTHER RISK FACTORS
Based upon our current plans, we believe that the convertible debt
financing completed on March 31, 1999, together with existing working capital
and future funds from Novartis, including product and royalty revenue, will be
sufficient to finance operations into 2000. However, this statement is forward-
looking and changes may occur that would significantly decrease available cash
before such time. Factors that may change our cash requirements include:
. Delays in obtaining regulatory approvals of products in different
countries, if needed, and subsequent timing of product launches;
. Delays in commercial acceptance and reimbursement when product launches
occur;
. Changes in the progress of research and development programs;
. Changes in the resources devoted to outside research collaborations or
projects, self-funded projects, proprietary manufacturing methods and
advanced technologies; and
. Acquisition of a second manufacturing plant.
Any of these events could adversely impact our capital resources, requiring
us to raise additional funds. Additional funds may not be available when
required on acceptable terms. If adequate funds are not available when needed,
we would need to delay, scale back or eliminate certain research and development
programs or license to third parties certain products or technologies that we
would otherwise undertake ourselves, resulting in a potential material adverse
effect on our financial condition and results of operations.
YEAR 2000
- ---------
The Year 2000 issue ("Y2K") refers to potential problems with computer
systems or any equipment with computer chips or software that use dates where
the year has been stored as just two digits (e. g., 98 for 1998). On January 1,
2000, any clock or date recording mechanism incorporating date sensitive
software which uses two digits to represent the year may recognize a date using
00 as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of operations, including, among
other things, a temporary inability to manufacture product or process
transactions, send invoices or engage in similar business activities.
STATE OF READINESS
In order to address this situation, we conducted an assessment to identify
and determine the Y2K readiness of our systems. This assessment program focused
on three main functional areas, including:
. Information technology which addresses data, phone and administrative
systems;
. Embedded chip technology which addresses manufacturing systems, laboratory
instruments and plant maintenance systems with programmable logic
controllers with date functions; and
. Material suppliers, vendors and other third parties that address areas that
are critical to the manufacturing process, distribution of product or other
business processes.
12
<PAGE>
The task of assessment from a Y2K readiness perspective is 100% complete.
Some of our systems are Y2K compliant, whereas other systems have been
identified as not being Y2K compliant and remedial action is underway. In
addition to the assessment of systems, key vendors, suppliers and other third
parties were identified and a survey form was sent to each of these business
entities to determine if their systems are Y2K compliant. We are monitoring
responses as they are received. Y2K issues with our vendors, suppliers or other
third parties could delay the shipment and receipt of critical supplies,
potentially impacting production and operations. We are proactively addressing
the Y2K issue with vendors, suppliers and other third parties to minimize risk
from these external factors.
COST OF YEAR 2000 COMPLIANCE AND CONTINGENCY PLANS
While our Y2K project is not yet complete, we currently estimate that costs
associated with the Y2K issue will be no more than $250,000, which includes the
use of internal resources. Working capital will be used to fund these costs. To
date, costs consist primarily of payroll costs for existing employees, including
the information technology group, which are not separately tracked, as well as
certain hardware and software upgrades and training costs. However, certain
aspects of the Y2K assessment are still ongoing. If we or key third parties such
as suppliers and customers are not Y2K ready, there could be an adverse effect
on our business, results of operations and financial condition. We believe that
with the implementation of the Y2K program the risk of significant interruptions
of normal operations is reduced. We are developing a contingency plan to address
a situation in which Y2K problems do cause an interruption in normal business
activities. Once developed, contingency plans and related cost estimates will be
continually refined as additional information becomes available.
ADDITIONAL CAUTIONARY CONSIDERATIONS:
- -------------------------------------
We are subject to risks common to entities in the biotechnology industry,
including, but not limited to, the following uncertainties:
. Market acceptance of our products, if and when approved, and successful
marketing and selling of Apligraf by Novartis;
. FDA approval of Apligraf for other indications and successful registrations
of Apligraf outside the US;
. Risk of failure of clinical trials for future indications of Apligraf and
other products;
. Compliance with FDA regulations and similar foreign regulatory bodies;
. Manufacture and sale of products in sufficient volume to realize a
satisfactory margin;
. Continued availability of raw material for products;
. Availability of sufficient product liability insurance;
. Ability to recover the investment in property and equipment;
. Protection of proprietary technology through patents;
. Development by competitors of new technologies or products that are more
effective than ours;
. Adequate third-party reimbursement for products;
. Dependence on and retention of key personnel;
. Year 2000 issues; and
. Availability of additional capital on acceptable terms, if at all.
13
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ORGANOGENESIS INC.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Due to market price at the time of closing the financing, certain terms of the
March 30, 1999 private placement of convertible debentures and warrants to
purchase common stock were slightly modified. The debentures are convertible at
a fixed price of $14.50 per share at any time on or after March 30, 2000 (rather
than $15.00). The warrants grant the right to purchase one share of common
stock at the exercise price of $21.75 for each $50.00 in face value of the
convertible notes at any time before March 30, 2004 (rather than $22.50). The
average per share market value relating to the prepayment option is $38.67
(rather than $40.00). All other terms and conditions remain the same. Refer to
the Notes to Financial Statements in Part I of this document for further
information on this $20,000,000 private placement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(e) By-Laws of the Company, as amended and approved by the Board of
Directors on March 19, 1999
3(f) Amendment to the Rights Agreement approved by the Board of
Directors on March 19, 1999
4(f) Form of Non-Redeemable Warrant dated as of March 30, 1999
4(g) Form of 7% Convertible Subordinated Note dated as of March 30,
1999
4(h) Securities Purchase Agreement between the Registrant and the
Purchasers dated as of March 30, 1999
4(i) Form of Registration Rights Agreement between the Company and the
Purchasers dated as of March 30, 1999
27 Financial Data Schedule (filed with electronic submission only)
(b) No current reports on Form 8-K were filed during the quarter ended March 31,
1999.
14
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ORGANOGENESIS INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORGANOGENESIS INC.
(Registrant)
Date: May 14, 1999 /S/ HERBERT M. STEIN
------------ --------------------------------------
Herbert M. Stein, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1999 /S/ DONNA ABELLI-LOPOLITO
------------ --------------------------------------
Donna Abelli-Lopolito, Vice President Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
15
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ORGANOGENESIS INC.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
3(e) By-Laws of the Company, as amended and approved by the Board of
Directors on March 19, 1999
3(f) Amendment to the Rights Agreement approved by the Board of
Directors on March 19, 1999
4(f) Form of Non-Redeemable Warrant dated as of March 30, 1999
4(g) Form of 7% Convertible Subordinated Note dated as of March 30,
1999
4(h) Securities Purchase Agreement between the Registrant and the
Purchasers dated as of March 30, 1999
4(i) Form of Registration Rights Agreement between the Company and the
Purchasers dated as of March 30, 1999
27 Financial Data Schedule (filed with electronic submission only)
16
<PAGE>
EXHIBIT 3(E)
BY-LAWS
OF
ORGANOGENESIS INC.
(A Delaware Corporation)
<PAGE>
BY-LAWS
OF
ORGANOGENESIS INC.
(A Delaware Corporation)
<TABLE>
<CAPTION>
<S> <C>
Article 1. Articles of Incorporation 1
Section 1.1 Contents 1
Section 1.2 Certificate in Effect 1
Article 2. Meetings of Stockholders 1
Section 2.1 Place 1
Section 2.2 Annual Meeting 1
Section 2.3 Special Meetings 2
Section 2.4 Certain Matters Pertaining to Stockholder Business and Nominations 2
Section 2.5 Notice of Meetings 5
Section 2.6 Affidavit of Notice 5
Section 2.7 Quorum 5
Section 2.8 Voting Requirements 5
Section 2.9 Proxies and Voting 5
Section 2.10 Stockholder List 6
Section 2.11 Record Date 6
Article 3. Directors 8
Section 3.1 Number; Election and Term of Office 8
Section 3.2 Duties 8
Section 3.3 Compensation 8
Section 3.4 Reliance on Books 8
Article 4. Meetings of the Board of Directors 9
Section 4.1 Place 9
Section 4.2 Annual Meeting 9
Section 4.3 Regular Meetings 9
Section 4.4 Special Meetings 9
Section 4.5 Quorum 9
Section 4.6 Action without Meeting 9
Section 4.7 Telephone Meetings 10
Article 5. Committees of Directors 11
Section 5.1 Designation 11
Section 5.2 Records of Meetings 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Article 6. Notices 12
Section 6.1 Method of Giving Notice 12
Section 6.2 Waiver 12
Article 7. Officers 13
Section 7.1 In General 13
Section 7.2 Election of President, 13
Secretary and Treasurer
Section 7.3 Election of Other Officers 13
Section 7.4 Salaries 13
Section 7.5 Term of Office 13
Section 7.6 Duties of President and Chairman
of the Board 13
Section 7.7 Duties of Vice President 14
Section 7.8 Duties of Secretary 14
Section 7.9 Duties of Assistant Secretary 14
Section 7.10 Duties of Treasurer 15
Section 7.11 Duties of Assistant Treasurer 15
Article 8. Resignations, Removals and Vacancies 16
Section 8.1 Directors 16
Section 8.2 Officers 16
Article 9. Certificate of Stock 17
Section 9.1 Issuance of Stock 17
Section 9.2 Right to Certificate; Form 17
Section 9.3 Facsimile Signature 17
Section 9.4 Lost Certificates 17
Section 9.5 Transfer of Stock 18
Section 9.6 Registered Stockholders 18
Article 10. Indemnification 19
Section 10.1 Third Party Actions 19
Section 10.2 Derivative Actions 19
Section 10.3 Expenses 20
Section 10.4 Authorization 20
Section 10.5 Advance Payment of Expenses 20
Section 10.6 Non-Exclusiveness 20
Section 10.7 Insurance 21
Section 10.8 Constituent Corporations 21
Section 10.9 Additional Indemnification 21
Article 11. Execution of Papers 22
Article 12. Fiscal Year 22
Article 13. Seal 22
Article 14. Offices 22
Article 15. Amendments 22
</TABLE>
iii
<PAGE>
ORGANOGENESIS INC.
BY-LAWS
-------
ARTICLE 1
---------
CERTIFICATE OF INCORPORATION
----------------------------
Section 1.1 Contents. The name, location of principal office and purposes of
----------- --------
the Corporation shall be as set forth in its Certificate of Incorporation.
These By-Laws, the powers of the Corporation and of its Directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation shall be subject to such provisions in regard
thereto, if any, as are set forth in said Certificate of Incorporation. The
Certificate of Incorporation is hereby made a part of these By-Laws.
Section 1.2 Certificate in Effect. All references in these By-Laws to the
----------- ---------------------
Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.
ARTICLE 2
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1 Place. All meetings of the stockholders may be held at such place
----------- -----
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors, the Chairman of the Board of Directors or the
President and stated in the notice of the meeting or in any duly executed waiver
of notice thereof.
Section 2.2 Annual Meeting. Annual meetings of stockholders, shall be held on
----------- --------------
the third Tuesday of April in each year, if not a legal holiday, and, if a legal
holiday, then on the next secular day following, at 10:00 A.M., or at such other
date and time as shall be designated from time to time by the Board of
Directors, the Chairman of the Board of Directors or the President and stated in
the notice of the meeting. If such annual meeting has not been held on the day
herein provided therefor, a special meeting of the stockholders in lieu of the
annual meeting may be held, and any business transacted or elections held at
such special meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these By-Laws, except in this
Section 2.2, to the annual meeting of the stockholders shall be deemed to refer
to such special meeting.
1
<PAGE>
Section 2.3 Special Meetings. Special meetings of the stockholders, for any
----------- ----------------
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President, the Chairman of
the Board, or by the Board of Directors and shall be called by the President or
Secretary at the request in writing of a majority of the Directors then in
office. Such request shall state the purpose or purposes of the proposed
meeting, which need not be the exclusive purposes for which the meeting is
called.
Section 2.4 Certain Matters Pertaining to Stockholder Business and
------------------------------------------------------------------
Nominations. (A)(1) For nominations or other business to be properly brought
- -----------
before an annual meeting by a stockholder or for nominations to be properly
brought before a special meeting the stockholder must have (i) given timely
notice thereof in writing to the Secretary of the Corporation (ii) in the case
of other business to be brought before an annual meeting such other business
must otherwise be a proper matter for stockholder action and (iii) if the
stockholder or the beneficial owner on whose behalf any such proposal or
nomination is made has provided the Corporation with a Solicitation Notice as
that term is defined below in this paragraph (A)(1) such stockholder or
beneficial owner must, in the case of a proposal have delivered a proxy
statement and form of proxy to holders of at least the percentage of the
Corporation's voting shares required under applicable law to carry any such
proposal, or in the case of a nomination or nominations have delivered a proxy
statement and form of proxy to holders of at least a percentage of the
Corporation's voting shares reasonably believed by such stockholder or
beneficial owner to be sufficient to elect the nominee or nominees proposed to
be nominated by such stockholder and must, in either case have included in such
materials the Solicitation Notice and (iv) if no Solicitation Notice relating
thereto has been timely provided pursuant to this section, the stockholder or
beneficial holder proposing such business or nomination must not have solicited
a number of proxies sufficient to have required the delivery of such a
Solicitation Notice under this section. To be timely, a stockholder's notice
pertaining to an annual meeting shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the forty-fifth (45th) day nor earlier than the close of business on
the seventy-fifth (75th) day prior to the first anniversary of the preceding
year's mailing date for stockholder proxy materials; provided however, that in
the event that the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after the date of the annual meeting in the
preceding year, or if an annual meeting was not held in the preceding year,
notice by the stockholder to be
2
<PAGE>
timely must be so delivered by the later of (a) the close of business on the
ninetieth (90th) day prior to date of such stockholders' meeting or (b) the
close of business on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the Corporation. Such
stockholder's notice for an annual meeting shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
Director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is otherwise
required, in each case, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Director if elected; (b) as to any other business that the stockholder proposes
to bring before an annual meeting, a brief description of the business desired
to be brought before the annual meeting, the reasons for conducting such
business at the annual meeting and any material interest in such business of
such stockholder and the beneficial owner, if any, on whose behalf the proposal
is made; (c) as to the stockholder giving the notice, (i) the name and address
of such stockholder, as it appears on the Corporation's books, (ii) the class
and number of shares of the Corporation that are owned beneficially and held of
record by such stockholder and such beneficial owner and (d) whether either such
stockholder or the beneficial owner intends to deliver a proxy statement and
form of proxy to holders of, in the case of a proposal, at least the percentage
of the Corporation's voting shares required under applicable law to carry the
proposal or in the case of a nomination or nominations a sufficient number of
holders of the Corporation's voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a "Solicitation Notice"). A stockholder
shall also comply with all applicable requirements of the Exchange Act of 1934
(or any successor provision), and the rules and regulations thereunder with
respect to the matters set forth in these By-Laws. Nothing in this Section 2.4
shall be deemed to affect any rights of the stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
(2) Notwithstanding anything in the second sentence of paragraph (A)(1) of
this Section to the contrary, in the event that the number of Directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
Director or specifying the size of the increased Board of Directors at least
fifty-five (55) days prior to the first anniversary of the preceding year's
mailing date for stockholder
3
<PAGE>
proxy materials (or, if the annual meeting is held more than thirty (30) days
before or sixty (60) days after the date of the annual meeting in the Preceding
year, at least one hundred (100) days prior to the date of such stockholders'
meeting, a stockholder's notice required by this Section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall have been delivered to the Secretary at
the principal executive office of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
(3) In the event the Corporation calls a special meeting of stockholders
for the purpose of electing one or more Directors to the Board of Directors, any
such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (A)(1) of this
Section shall be delivered to the Secretary at the principal executive offices
of the Corporation by the later of (a) the close of business on the ninetieth
(90th) day prior to such special meeting or (b) the close of business on the
tenth (10th) day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
B) General.
(1) Only such persons who are nominated in accordance with the procedures
set forth in this Section shall be eligible to be nominated for election as and
to serve as Directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section. Except as otherwise provided by law or
these By-Laws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section and, if any proposed nomination or business
is not in compliance herewith to declare that such defective proposal or
nomination shall be disregarded.
(2) For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
4
<PAGE>
Section 2.5 Notice of Meetings. A written notice of all meetings of
----------- ------------------
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 2.6 Affidavit of Notice. An affidavit of the Secretary or an
----------- -------------------
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
Section 2.7 Quorum. The holders of a majority of the stock issued and
----------- ------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented by proxy at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by Proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, except as hereinafter provided, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.8 Voting Requirements. When a quorum is present at any meeting, the
----------- -------------------
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of any
applicable statute or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 2.9 Proxies and Voting. Unless otherwise provided in the Certificate
----------- ------------------
of Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Persons holding stock
5
<PAGE>
in a fiduciary capacity shall be entitled to vote the shares so held, and
persons whose stock is pledged shall be entitled to vote the pledged shares,
unless in the transfer by the pledgor on the books of the Corporation he shall
have expressly empowered the pledgee to vote said shares, in which case only the
pledgee, or his proxy, may represent and vote such shares. Shares of the capital
stock of the Corporation owned by the Corporation shall not be voted, directly
or indirectly.
Section 2.10 Stockholder List. The officer who has charge of the stock ledger
------------ ----------------
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The original or duplicate stock ledger shall be the only evidence as
to who are the stockholders entitled to examine such list, the stock ledger or
the books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 2.11 Record Date. In order that the Corporation may determine the
------------ -----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
6
<PAGE>
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
7
<PAGE>
ARTICLE 3
---------
DIRECTORS
---------
Section 3.1 Number; Election and Term of Office. There shall be a Board of
----------- -----------------------------------
Directors of the Corporation consisting of not less than one member, the number
of members to be determined by resolution of the Board of Directors or by the
stockholders at the annual or any special meeting, unless the Certificate of
Incorporation fixed the number of Directors, in which case a change in the
number of Directors shall be made only by amendment of the Certificate. Subject
to any limitation, which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any time
by vote of a majority of the Directors then in office. The Directors shall be
elected at the annual meeting of the stockholders, except as provided in
paragraph (c) of Section 8.1, and each Director elected shall hold office until
his successor is elected and qualified or until his earlier resignation or
removal. Directors need not be stockholders.
Section 3.2 Duties. The business of the Corporation shall be managed by or
----------- ------
under the direction of its Board of Directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these By-Laws directed or required
to be exercised or done by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the Certificate of
----------- ------------
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as Directors. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a member
----------- -----------------
of any committee designated by the Board of Directors shall, in the performance
of his duties, be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its officers, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee, or in relying in
good faith upon other records of the Corporation.
8
<PAGE>
ARTICLE 4
---------
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4.1 Place. The Board of Directors of the Corporation may hold
----------- -----
meetings, both regular and special, either within or without the State of
Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected Board of
----------- --------------
Directors shall be held immediately following the annual meeting of stockholders
or any special meeting held in lieu thereof, and no notice of such meeting shall
be necessary to the newly elected Directors in order legally to constitute the
meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of Directors may
----------- ----------------
be held without notice at such time and at such place as shall from time to time
be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be called by
----------- ----------------
the President on two days' notice to each Director either personally or by mail
or by telegram; special meetings shall be called by the President or Secretary
in like manner and on like notice on the written request of two Directors unless
the Board consists of only one Director, in which case special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of the sole Director.
Section 4.5 Quorum. At all meetings of the Board a majority of the Directors
----------- ------
then in office shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 4.6 Action without Meeting. Unless otherwise restricted by the
----------- ----------------------
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
9
<PAGE>
Section 4.7 Telephone meetings. Unless otherwise restricted by the
----------- ------------------
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
10
<PAGE>
ARTICLE 5
---------
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation.
-----------------------
(a) The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution of the Board
of Directors designating the committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular minutes of
-------------------------------
its meetings and report the same to the Board of Directors when required.
11
<PAGE>
ARTICLE 6
---------
NOTICES
-------
Section 6.1 Method of Giving Notice. Whenever, under any provision of the law
--------------------- -------------
or of the Certificate of Incorporation or of these By-Laws, notice is required
to be given to any Director or stockholder, such notice shall be given in
writing by the Secretary or the person or persons calling the meeting by leaving
such notice with such Director or stockholder at his residence or usual place of
business or by mailing it addressed
to such Director or stockholder, at his address as it appears on the records
of the Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to Directors may also be given by telegram.
Section 6.2 Waiver. Whenever any notice is required to be given under any
----------- ------
provision of law or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
12
<PAGE>
ARTICLE 7
--------
OFFICERS
--------
Section 7.1 In General. The officers of the Corporation shall be chosen by
----------- ----------
the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board of
----------- ----------------------------------------------
Directors at its first meeting after each annual meeting of stockholders shall
choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may appoint
----------- --------------------------
such other officers and agents as it shall deem appropriate who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the
----------- --------
Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold office
----------- --------------
until their successors are chosen and qualify or until their earlier resignation
or removal. Any officer elected or appointed by the Board of Directors may be
removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of President and Chairman of the Board. The President
----------- ---------------------------------------------
shall be the chief executive officer of the Corporation, shall preside at all
meetings of the stockholders and, if he is a Director, at all meetings of the
Board of Directors if there shall be no Chairman of the Board or in the absence
of the Chairman of the Board, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of
Directors are carried into effect. The President shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The Chairman of the Board, if any, shall make his counsel
available to the other officers of the Corporation, shall be authorized to sign
stock certificates on behalf of the Corporation, shall preside at all meetings
of the Directors at which he is present, and, in the absence of the President at
all meetings of the stockholders, and shall
13
<PAGE>
have such other duties and powers as may from time to time be conferred upon him
by the Directors.
Section 7.7 Duties of Vice President. In the absence of the President or in
----------- ------------------------
the event of his inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President not otherwise
conferred upon the Chairman of the Board, if any, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
The Vice-Presidents shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
Section 7.8 Duties of Secretary. The Secretary shall attend all meetings of
----------- -------------------
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.
Section 7.9 Duties of Assistant Secretary. The Assistant Secretary, or if
----------- -----------------------------
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
14
<PAGE>
Section 7.10 Duties of Treasurer. The Treasurer shall have the custody of the
------------ -------------------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the-Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of this office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 7.11 Duties of Assistant Treasurer. The Assistant Treasurer, or if
------------ -----------------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
15
<PAGE>
ARTICLE 8
---------
RESIGNATIONS, REMOVALS AND VACANCIES
------------------------------------
Section 8.1 Directors.
---------------------
(a) Resignations. Any Director may resign at any time by giving written
------------
notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of Incorporation,
--------
the holders of stock entitled to vote for the election of Directors may, at any
meeting called for the purpose, by vote of a majority of the shares of such
stock outstanding, remove any Director or the entire Board of Directors with or
without cause and fill any vacancies thereby created. This Section 8.1(b) may
not be altered, amended or repealed except by the holders of a majority of the
shares of stock issued and outstanding and entitled to vote for the election of
the Directors.
(c) Vacancies. Vacancies occurring in the office of Director and newly
---------
created Directorships resulting from any increase in the authorized number of
Directors shall be filled by a majority of the Directors then in office, though
less than a quorum, unless previously filled by the stockholders entitled to
vote for the election of Directors, and the Directors so chosen shall hold
office subject to the By-Laws until the next annual election and until their
successors are duly elected and qualify or until their earlier resignation or
removal. If there are no Directors in office, then an election of Directors may
be held in the manner provided by statute.
Section 8.2 Officers.
----------- --------
Any officer may resign at any time by giving written notice to the Board of
Directors or the President or the Secretary. Such resignation shall take effect
at the time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. The
Board of Directors may, at any meeting called for the purpose, by vote of a
majority of their entire number, remove from office any officer of the
Corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of President, Secretary or Treasurer shall be filled by
the Board of Directors and the officers so chosen shall hold office subject to
the By-Laws for the unexpired term in respect of which the vacancy occurred and
until their successors shall be elected and qualify or until their earlier
resignation or removal.
16
<PAGE>
ARTICLE 9
---------
CERTIFICATE OF STOCK
--------------------
Section 9.1 Issuance of Stock. The Directors may, at any time and from time
----------- -----------------
to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the
----------- --------------------------
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a Vice-
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation; provided that the Directors may provide by one or more
resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.
Section 9.3 Facsimile Signature. Any of or all the signatures on the
----------- -------------------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 9.4 Lost Certificates. The Board of Directors may direct a new
----------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against
17
<PAGE>
the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the
----------- -----------------
transfer agent of the Corporation of a for shares duly endorsed or accompanied
by proper succession, assignation or authority to transfer, the duty of the
Corporation to issue a new to the person entitled thereto, cancel the old and
record the transaction upon its books.
9.6 Registered Stockholders. The Corporation shall be entitled to recognize
--- -----------------------
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
18
<PAGE>
ARTICLE 10
----------
INDEMNIFICATION
---------------
Section 10.1 Third Party Actions. The Corporation shall indemnify any person
------------ -------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contenders or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 10.2 Derivative Actions. The Corporation shall indemnify any person
------------ ------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person
19
<PAGE>
is fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
------------ --------
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and 10.2
------------ -------------
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 10.1 and 10.2. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of Directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer or
------------ ----------------------------
Director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this Article
------------ -----------------
10 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
20
<PAGE>
Section 10.7 Insurance. The Corporation shall have power to purchase and
------------ ---------
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
------------ ------------------------
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
------------ --------------------------
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
21
<PAGE>
ARTICLE 11
----------
EXECUTION OF PAPERS
-------------------
Except as otherwise provided in these By-Laws or as the Board of Directors may
generally or in particular cases otherwise determine, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
President or the Treasurer.
ARTICLE 12
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the Board
of Directors.
ARTICLE 13
----------
SEAL
----
The Corporate seal shall have inscribed thereon the name of the Corporation,
the year of its organization and the word "Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE 14
----------
OFFICES
-------
In addition to its principal office, the Corporation may have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE 15
----------
AMENDMENTS
----------
Except as otherwise provided herein, these By-Laws may be altered, amended
or repealed or new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors, or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws is contained in the notice of such special meeting, or by the
written consent of a majority in interest of the outstanding voting stock of the
Corporation or by the unanimous written consent of the Directors. If the power
to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by
the Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
22
<PAGE>
Exhibit 3(f)
AMENDMENT TO RIGHTS AGREEMENT
Reference is made to that certain Rights Agreement dated as of September 1,
1995, (the "Agreement") between Organogenesis Inc., a Delaware Corporation (the
"Company"), and American Stock Transfer & Trust Company, a New York corporation,
as Rights Agent (the "Rights Agent").
This Amendment to the Rights Agreement (the "Amendment") is made as of this
19th day of March, 1999 by and between the Company and the Rights Agent.
Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Agreement.
WHEREAS, the Board of Directors of the Company has been advised by legal
counsel that certain provisions of the Agreement may no longer comport with the
law of the Commonwealth of Massachusetts;
WHEREAS, the parties hereto desire to amend the Agreement to reflect the
modifications to the law which governs the provisions amended herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. The Agreement is hereby amended by deleting in its entirety
subparagraph "(i)" of Section 1 and inserting the language "Intentionally
Omitted."
2. The Agreement is hereby amended by deleting in its entirety
subparagraph "(1,)" of Section 1 and inserting the language "Intentionally
Omitted."
3. The Agreement is hereby amended by deleting the following language
from lines 8 and 9 of subparagraph (a)(ii) of Section 11.
"(unless pursuant to a Permitted Offer)".
4. The Agreement is hereby amended by deleting the following language
from lines 2 and 3 and lines 4 and 5 of subparagraph (a) ofSection23:
"the tenth day following".
5. The Agreement is hereby amended by deleting the following language
from lines 12, 13 and 14 of subparagraph(a) ofSection24:
"Notwithstanding the foregoing, the Board of Directors may effect such
an exchange only if there are at least two Continuing Directors then in office
and a majority of such Continuing Directors concur with such exchange."
<PAGE>
6. The Agreement is hereby amended by deleting the following language
from lines 16,17,18 and 19 of clause (iii) ofSection27:
"(which shortening or lengthening shall be effective only if there are
at least two Continuing Directors then in office and shall require the
concurrence of a majority of such Continuing Directors)".
7. Except as amended hereby, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Rights
Agreement to be executed as of the date first above written.
ORGANOGENESIS INC.
a Delaware corporation
By:____________________________
Title:_________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
a New York corporation
By:____________________________
Title:_________________________
2
<PAGE>
EXHIBIT 4(f)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAW OR ANY OTHER SECURITIES
LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
ORGANOGENESIS INC.
FORM OF NON-REDEEMABLE WARRANT
------------------------------
Warrant No. 1999- Dated March 30, 1999
Organogenesis Inc., a corporation organized and existing under the laws of
the State of Delaware (the "COMPANY"), hereby certifies that, for value
-------
received, ______________________ (the "ORIGINAL HOLDER") or its registered
---------------
assigns ("HOLDER"), is entitled, subject to the terms set forth below, to
------
purchase from the Company up to a total of ________ shares of Common Stock, $.01
par value (the "COMMON STOCK"), of the Company (each such share, a "WARRANT
------------ -------
SHARE" and all such shares, the "WARRANT SHARES") at an exercise price equal to
- ----- --------------
$21.75 per share (as adjusted from time to time as provided in Section 8, the
"EXERCISE PRICE"), at any time and from time to time from and after this date
--------------
through and including March 29, 2004 or earlier as provided herein (the
"EXPIRATION DATE"), and subject to the following terms and conditions:
---------------
1. Registration of Warrant. The Company shall register this Warrant,
-----------------------
upon records to be maintained by the Company for that purpose (the "WARRANT
-------
REGISTER"), in the name of the record Holder hereof from time to time. The
- --------
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
---------------------------------------
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly completed and signed, to the Company at the
office specified in or pursuant to Section 3(b). Upon any such registration or
transfer, a new warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new warrant, a "NEW WARRANT"), evidencing the portion of
-----------
this Warrant so transferred shall be issued to the transferee (a "TRANSFEREE")
----------
and a New Warrant evidencing the remaining portion of this Warrant not so
transferred, if any, shall be issued to the transferring Holder. The acceptance
of the New Warrant by the Transferee thereof
<PAGE>
shall be deemed the acceptance of such Transferee of all of the rights and
obligations of a holder of a Warrant, including the obligations with regard to a
mandatory conversion as set forth herein.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company specified in or pursuant to Section 3(b) for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Exercise of Warrants and Redemption.
---------------------------------------------
(a) This Warrant shall be exercisable upon 75 days' prior written
notice by the registered Holder on any business day before 5:30 P.M., Eastern
Standard time, at any time and from time to time on or after March 30, 1999 to
and including the Expiration Date. At 5:30 P.M., Eastern Standard time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value. At the Company's option, the Company, in
its sole discretion as to any Holder or Holders, may waive the seventy-five (75)
day prior written notice requirement.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its office at 150 Dan Road, Canton, Massachusetts
02021, Attention: Chief Financial Officer, or at such other address as the
Company may specify in writing to the then registered Holder, and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
by certified or official bank check or checks or wire transfer, all as specified
by the Holder in the Form of Election to Purchase, the Company shall promptly
(but in no event earlier than seventy-five (75) business days after the Date of
Exercise (as defined herein), unless waived by the Company as described above in
Section 3(a)), issue or cause to be issued and cause to be delivered to or upon
the written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends other than as required by the Purchase Agreement of
even date herewith between the Holder and the Company and any legends placed on
all registered shares of the Company relating to the then current agreement
between the Company and its transfer agent relating to the issuance of "rights"
to all holders of the Company's Common Stock. Any person so designated by the
Holder to receive Warrant Shares shall be deemed to have become holder of record
of such Warrant Shares as of the Date of Exercise of this Warrant.
A "DATE OF EXERCISE" means the date on which the Company shall have
----------------
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
2
<PAGE>
(c) This Warrant shall be exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares. If less than
all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(d) Notwithstanding anything in this Paragraph 3 to the contrary, in
the event of the occurrence of any of the following: (i) any Person is or
becomes the "beneficial owner" as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), directly or
indirectly, of more than thirty-five percent (35%) of the Common Stock, (ii)
individuals who at the date hereof constituted the Board of Directors (together
with any such individuals whose election by the Board of Directors or whose
nomination for election by the stockholders of the Company was approved by a
majority of the directors then still in office who were directors on the date
hereof or persons whose election as directors or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office, (iii) a tender or exchange offer made to the
stockholders of the Company, or (iv) the Company enters into an agreement for
the consolidation of the Company with, or merger of the Company with or into,
another corporation, or the sale, lease or conveyance to another corporation of
the property and assets of any nature of the Company as an entirety or
substantially as an entirety, the Holder shall be entitled to exercise this
Warrant in whole or in part and purchase shares of Common Stock immediately upon
prior written notice to the Company. The Holder shall effect exercise by
surrendering this Warrant (or such portions thereof) to be exercised together
with the Form of Election to Purchase, which shall specify the number of shares
of Common Stock to be purchased and the Date of Exercise (which shall be no less
than five (5) days from the date of such notice).
4. Registration Rights. The Warrants and the shares underlying this
-------------------
Warrant are subject to the rights and benefits of that certain Registration
Rights Agreement dated March 30, 1999 by and among the Company and the
Purchasers (as defined in such Registration Rights Agreement).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
----------------
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
----------------------
destroyed, the Company may in its discretion issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but
3
<PAGE>
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction and indemnity, if reasonably satisfactory to it.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
-----------------------------
all times reserve and keep available out of its authorized and unissued Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which
are then issuable and deliverable upon the exercise of this entire Warrant, free
from preemptive rights or any other actual contingent purchase rights of persons
other than the Holders (taking into account the adjustments and restrictions of
Section 8). The Company covenants that all Warrant Shares that shall be so
issuable and deliverable shall, upon issuance and the payment of the applicable
Exercise Price in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable. The Company shall provide
for and maintain the listing of the Common Stock, including the Warrant Shares,
upon the American Stock Exchange (or any other securities exchange or automated
quotation system which is the principal exchange or system on which the Common
Stock is then traded or listed).
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
-------------------
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 8. Upon each such adjustment of the Exercise
Price pursuant to this Section 8, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock (as defined below), (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value,
or as a result of a subdivision or combination covered by (a) above, but
including any change in the shares into one or more classes or series of
shares), or in case of any consolidation or merger of another
4
<PAGE>
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive shares of stock (other than Common Stock), other securities,
property or cash) of the shares of Common Stock (other than a change in par
value, or as a result of a subdivision or combination covered by (a) above, but
including any change in the shares into one or more classes or series of
shares), then the Holder shall have the right thereafter to exercise this
Warrant only into the shares of stock and other securities of the Company and
property receivable or deemed to be held by holders of Common Stock following
such reclassification, change, consolidation, or merger, and the Holder shall
thereafter upon exercise of this Warrant be entitled to receive such amount of
securities or property attributable to the number of Warrant Shares such Holder
would have been entitled to receive had such Holder exercised this Warrant
immediately prior to such action. The terms of any such reclassification or
other action shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or other action.
(c) In case of any consolidation of the Company with, or merger of
the Company with or into, another corporation (other than a merger or
consolidation in which the Company is the surviving or continuing corporation),
or in case of any sale, lease or conveyance to another corporation of the
property and assets of any nature of the Company as an entirety or substantially
as an entirety, such successor, leasing or purchasing corporation, as the case
may be, shall (i) execute and deliver to the Holder an agreement providing that
the Holder shall have the right thereafter to receive upon exercise of this
Warrant solely the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such consolidation,
merger, sale, lease or conveyance by a holder of the number of shares of Common
Stock for which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance, and (ii) make effective
provision in its certificate of incorporation or otherwise, if necessary, to
effect such agreement. Such agreement shall provide for adjustments which shall
be as nearly equivalent as practicable to the adjustments in this Section 8.
(d) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
8(a), (b) and (e)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"APPRAISER") mutually selected in good faith by the holders of a majority in
---------
interest of the Warrants then outstanding and the Company. Any determination
made by the Appraiser shall be final and binding upon the Company and the
Holder.
5
<PAGE>
(e) If, at any time while this Warrant is outstanding, the Company
shall issue or cause to be issued rights or warrants to acquire or otherwise
sell or distribute shares of Common Stock to all holders of Common Stock for a
consideration per share less than the Exercise Price then in effect, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by dividing (i) an amount
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Exercise Price, and
(B) the consideration, if any, received or receivable by the Company upon such
issue or sale by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(f) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the
-----------
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on its Common Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
6
<PAGE>
(iv) the approval of any stockholders of the Company shall
be required in connection with any reclassification or
change of the shares of Common Stock issuable upon
exercise of this Warrant (other than a change in par
value, or as a result of a subdivision or combination,
but including any change in the shares into one or more
classes or series of shares), or any consolidation or
merger of another corporation with the Company; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the
Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 45 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
-------- -------
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Fractional Shares. The Company shall not be required to issue or
-----------------
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 9, be issuable
on the exercise of this Warrant, the Company shall, at its option, (i) pay an
amount in cash equal to the Exercise Price multiplied by such fraction or (ii)
round the number of Warrant Shares issuable, up to the next whole number.
10. Notices. Any and all notices or other communications or deliveries
-------
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern Standard Time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Standard Time) on any date and earlier
than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (1) if
to the
7
<PAGE>
Company, to Organogenesis Inc., 150 Dan Road, Canton, Massachusetts 02021,
Attention: Chief Financial Officer (or to facsimile no. (781) 575-1570) with a
copy to Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., One Financial Center,
Boston, MA 02111, Attention: Neil H. Aronson, Esquire and John J. Cheney,
Esquire (or facsimile no. (617) 542-2241) or (ii) if to the Holder, to the
Holder at the address or facsimile number appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 10 with a copy to Kramer Levin Naftalis &
Frankel LLP, 919 Third Avenue, New York, New York, 10022, Attn: Ezra G. Levin,
Esquire (or facsimile No.: (212) 715-8000).
11. Warrant Agent.
-------------
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a new warrant
agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
12. Miscellaneous.
-------------
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder.
(b) Subject to Section 12(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant; this
Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the Commonwealth of Massachusetts without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision which shall be a
8
<PAGE>
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
(f) Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof the right to vote or to consent as
stockholders in respect of the meetings of stockholders or the election of
members of the Board of Directors of the Company or any other matter, or any
rights whatsoever as stockholders of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing any liabilities on such
holder as a stockholder of the Company, whether such obligation or liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding the
foregoing, the Company will furnish to each holder of any Warrants, promptly
upon their becoming available, copies of all financial statements, reports,
notices and proxy statements sent or made available generally by the Company to
its stockholders or otherwise filed pursuant to the provisions of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
[THIS SPACE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its duly authorized officer on the date first written above.
ORGANOGENESIS INC.
By: _______________________________________
Herbert M. Stein, Chairman and Chief
Executive Officer
ATTEST:
___________________
[Seal]
10
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Organogenesis Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock, .01 par value ("COMMON STOCK"), of Organogenesis Inc.
------------
and encloses herewith $________ in cash or certified or official bank check or
checks, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
__________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______________, _____ ____________________________________________
(Signature)
(Print)_____________________________________
(By:)_______________________________________
(Name:)_____________________________________
(Title:)__________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
11
<PAGE>
FORM OF ELECTION TO TRANSFER
----------------------------
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Organogenesis Inc.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Organogenesis Inc. with full power of
substitution in the premises.
Dated:
_______________, ____
_______________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________________
Address of Transferee
_______________________________________________
_______________________________________________
In the presence of:
__________________________________
12
<PAGE>
EXHIBIT 4(g)
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAW OR ANY OTHER
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
No. CSN1999-X U.S. $[ ]
March 30, 1999
ORGANOGENESIS INC.
FORM OF 7% CONVERTIBLE SUBORDINATED NOTE
DUE MARCH 29, 2004
FOR VALUE RECEIVED, Organogenesis Inc. a corporation organized and existing
under the laws of the State of Delaware, having a principal place of business at
150 Dan Road, Canton, Massachusetts 02021 (the "COMPANY" ) promises to pay to
-------
___________ , or its registered assigns (the "HOLDER" ), the principal sum of
Dollars ($_________), on March 29, 2004 or such earlier date that this Note is
required to be repaid as provided hereunder (the "MATURITY DATE") and to pay
-------------
interest on the principal sum outstanding under this Note at the rate of 7% per
annum (or otherwise as described in Section 1.3) as described herein.
Section 1. Payment.
--------- -------
1.1 Payment of Principal. The Company shall pay all outstanding
--------------------
principal due on this Note on the Maturity Date or earlier as provided in
Section 5.2 herein. Such payment on the Maturity Date shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debt. Any earlier conversion of
the principal and interest thereon in accordance with the provisions of Section
5 shall be in the form of Common Stock on the principal balance so converted and
in the manner described in Section 1.3 as to the payment of accrued interest.
1.2 Prepayment of Principal and Interest. Except as set forth in
------------------------------------
Section 5 herein, this Note may not be prepaid in whole or in part at any time.
1.3 Payment of Interest. The Company shall pay all outstanding interest
-------------------
due on this Note semi-annually or earlier as provided in Section 5.2 herein.
Interest will be payable on each of September 30 and March 31 (each an "INTEREST
PAYMENT DATE") of each year this Note is outstanding, except that the first
interest payment will be due on September 30, 1999. Interest shall accrue from
the most recent date to which interest has been
<PAGE>
paid or, if no interest has been paid, from the date of original issuance and
shall continue until the following Interest Payment Date. Notwithstanding the
foregoing, upon receipt of a notice of conversion in accordance with the
provisions of Section 5 herein by either the Holder or the Company, interest
shall be payable in full within five (5) days following conversion of the Note
as to all accrued interest due on the principal sum outstanding under this Note
that has been converted into the Company's Common Stock through such conversion
date. Interest shall be calculated on the basis of a 360-day year and for the
actual number of days elapsed. Interest hereunder will be paid to the person in
whose name this Note is registered on the records of the Company regarding
registration and transfers of the Note (the "NOTE REGISTER"); provided, however,
------------- -------- -------
that the Company's obligation to a transferee of this Note arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions hereof and of the Securities Purchase Agreement, dated as of March
30, 1999, as amended from time to time (the "PURCHASE AGREEMENT"), executed by
------------------
the original Holder. All sums hereunder shall bear interest at the rate of 10%
per annum from the Maturity Date through the date of payment or such earlier
date in which this Note is accelerated or converted through and including the
date of payment, or from the Interest Payment Date until the date of payment.
All of the foregoing payments of interest (other than payments subsequent to the
Maturity Date) shall be made in (a) such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debt, (b) in Common Stock (as defined in Section 6), or (c) in any
combination of (a) and (b), at the Company's option. For purposes of clause (b),
the value of one share of Common Stock shall be, on the Interest Payment Date,
the Maturity Date or on the date of conversion of the Convertible Note pursuant
to Section 5 hereof, as applicable, an amount that is equal to the average of
the Per Share Market Value for one share of Common Stock for the twenty (20)
Trading Days immediately preceding such date. Notwithstanding the foregoing, the
Company is not permitted to pay any sums due hereunder in the Company's Common
Stock at any time when the Underlying Shares Registration Statement is not then
effective or shares of Common Stock are not listed for trading. Notwithstanding
anything to the contrary contained herein, the Company may not issue shares of
Common Stock in payment of the interest on principal if: (i) there is an
insufficient number of authorized shares of Common Stock reserved (pursuant to
Section 3.7 of the Purchase Agreement) for issue for full conversion of all of
the Notes issued pursuant to the Purchase Agreement; (ii) such shares are not
either registered for resale pursuant to the Registration Statement (as defined
in the Registration Rights Agreement) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Act, as determined by
counsel to the Company pursuant to a written opinion letter addressed and in
form and substance acceptable to the Holder and the transfer agent for such
shares, subject to receipt from the Holder of a representation from such Holder
that it is not an Affiliate of the Company; (iii) such shares are not listed or
quoted on the American Stock Exchange; or (iv) an Event of Default has occurred
and is continuing or an event that, with the passage of time or giving of notice
or both would constitute an Event of Default, has occurred and is continuing.
Section 2. Owner of Note. Prior to due presentment to the Company for
--------- -------------
transfer of this Note, the Company and any agent of the Company may treat the
person in whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
2
<PAGE>
Section 3. Subordination.
--------- -------------
3.1 Note Subordinated to Senior Debt. The payment of principal of,
--------------------------------
interest on, and all other amounts payable with respect to, this Note
(collectively, the "SUBORDINATED PAYMENTS") are hereby subordinated and junior
---------------------
in right of payment, to the extent and in the manner set forth herein to all
Senior Debt. As used herein, the term "SENIOR DEBT" shall mean with respect to
-----------
the Company (i) all indebtedness for money borrowed from any bank, trust
company, insurance company or other financial institution, including commercial
paper and accounts receivable sold or assigned by the Company to such
institutions, and (ii) all obligations of the Company as lessee under leases of
real or personal property; provided any such indebtedness in either event is not
--------
convertible into Common Stock. This Section 3 shall constitute a continuing
offer to all persons who, in reliance upon such provisions, become holders of,
or continue to hold, Senior Debt, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, and such provisions are made for the benefit of
the holders of Senior Debt. This Note is binding upon the Company and its
permitted successors and assigns and the Holder and its endorsees, each of whom,
by its acceptance of this Note, agrees to be bound by and comply with all of the
provisions of this Note.
3.2 Payment Upon Dissolution, Etc. Upon any payment or distribution of
------------------------------
assets or securities of the Company of any kind or character, whether in cash,
property or securities, by way of set-off or otherwise of the Company (all such
payments and distributions being referred to collectively as "DISTRIBUTIONS"),
-------------
upon any dissolution, winding up, liquidation (partial or complete) or
reorganization of the Company (whether voluntary or involuntary and whether in
bankruptcy, insolvency, receivership or other proceedings, or upon an assignment
for the benefit of creditors or any other marshalling of the assets and
liabilities of the Company or otherwise), each of the Company and the Holder, by
acceptance hereof, covenants and agrees that:
(a) all Senior Debt shall first be paid in full, or provision made for
such payment, in accordance with the terms of such Senior Debt and the
documents evidencing such Senior Debt (hereinafter, "SENIOR DEBT
-----------
DOCUMENTS") before any payment or distribution of any Distribution is made
---------
on account of any Subordinated Payments and before the Holder shall be
entitled to retain any amounts so paid or distributed in respect thereof;
(b) any payments or distribution of any Distribution to which the
Holder would be entitled except for the provisions of this Section, shall
be paid or delivered by the Company or any debtor, custodian, receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making
such payment or distribution, directly to the holders of Senior Debt or
their representative or representatives or to the trustee or agent under
any Senior Debt Document, as their respective interests may appear, to the
extent necessary to pay in full all Senior Debt remaining unpaid in
accordance with the terms of such Senior Debt and the Senior Debt
Documents, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Debt, before any payment or distribution
is made to the Holder of this Note; and
3
<PAGE>
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of any Distribution shall be received by the Holder of this
Note before all Senior Debt is paid in full, or provision made for the
payment thereof, in accordance with the terms of such Senior Debt and the
Senior Debt Documents, such payment or distribution shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
such Senior Debt or their representative or representatives, or to the
trustee or agent under any Senior Debt Document, as their respective
interests may appear, to the extent necessary to pay in full all Senior
Debt remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
The Company shall give prompt written notice to the holders of the
Convertible Notes of any dissolution, winding up, total liquidation or
reorganization of the Company within the meaning of this Section 3.2. Upon any
payment or distribution of assets of the Company referred to in this Section
3.2, the holders of the Convertible Notes shall be entitled to rely upon a
certificate of the trustee in bankruptcy, receiver, assignee for the benefit of
creditors or other liquidating agent making such payment or distribution,
delivered to the holders of the Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 3.2.
3.3 No Payment Under Certain Circumstances. No cash payment shall be made
--------------------------------------
or agreed to be made, directly or indirectly, in cash, property or securities,
or by way of set-off or otherwise, by the Company of any Subordinated Payment
with respect to this Note if, at the time of such payment or immediately after
giving effect thereto, the Company shall be in default in the payment of any
principal of, premium, if any, or interest on, or any other amounts due with
respect to, any Senior Debt.
3.4 No Impairment. Nothing contained in this Note is intended to or shall
-------------
impair, as between the Company, its creditors other than the holders of Senior
Debt and the Holder, the obligation of the Company, which is absolute and
unconditional, to pay to the Holder, subject to the rights of the holders of
Senior Debt, this Note, as and when the same shall become due and payable in
accordance with its terms (subject to the applicable requirements of the
Internal Revenue Code concerning withholding of taxes), or is intended to or
shall affect the relative rights of the holders and creditors of the Company
other than the holders of Senior Debt, nor shall anything herein or therein
prevent the Holder from exercising all remedies otherwise permitted by
applicable law or under the terms of this Note subject to the rights, if any,
under this Note, of the holders of Senior Debt in respect of Distributions
received upon the exercise of any such remedy.
3.5 Subrogation. Subject to the payment in full of all Senior Debt at the
-----------
time outstanding, the Holder shall be subrogated (equally and ratably with the
holders of all indebtedness of the Company which, by its express terms, ranks on
a parity with this Note and is entitled to like rights of subrogation) to the
rights of the holders of Senior Debt (to the extent of
4
<PAGE>
payments or distributions previously made to such holders of Senior Debt
pursuant to this Note) to receive payments or distributions of assets or
securities of the Company payable or distributable to holders of the Senior Debt
until all Subordinated Payments with respect to this Note shall be paid in full.
For purposes of such subrogation, no payments or distributions on the Senior
Debt shall, as between the Company, its creditors other than the holders of
Senior Debt, and the Holder, be deemed to be a payment of distribution by the
Company to or on account of the Senior Debt, and no payments or distributions to
the Holder of assets or securities by virtue of the subrogation herein provided
for shall, as between the Company, its creditors other than the holders of
Senior Debt, and the Holder, be deemed to be a payment to or on account of this
Note. The provisions of this Section are and are intended solely for the purpose
of defining the relative rights of the Holder, on the one hand, and the holders
of Senior Debt, on the other hand.
3.6 No Impairment of Rights. No right of any present or future holder of
-----------------------
any Senior Debt of the Company to enforce subordination as herein provided shall
at any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms, provisions
and covenants of this Note, regardless of any knowledge thereof with which any
such holder may have or be otherwise charged.
3.7 Waiver of Notice. The Holder, by its acceptance hereof, waives all
----------------
notice of the acceptance of the subordination provisions contained herein by
each holder of Senior Debt, whether no outstanding or hereafter incurred, and
waives reliance by each such holder upon such provisions.
3.8 Subordination Rights Not Impaired by Acts/Omissions of the Company or
---------------------------------------------------------------------
Holders of Senior Debt. The holders of Senior Debt may at any time or from time
- ----------------------
to time, and in their absolute discretion, change the manner, place or terms of
payment of, change or extend the time of payment of, renew or alter, any Senior
Debt, or amend or supplement any Senior Debt Document, or exercise or refrain
from exercising any other of their rights under the Senior Debt including
without limitation the waiver of default hereunder, all without notice to or
assent from the Holder. No right of any present or future holders of any Senior
Debt to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder or by any noncompliance by
the Company with the terms of this Note, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with.
Section 4. Default.
--------- -------
4.1 Event of Default. As used herein, the term "EVENT OF DEFAULT", means
---------------- ----------------
any one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
Federal, state, local or foreign administrative or governmental body):
5
<PAGE>
(a) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Note, as and when the same shall
become due and payable on the Conversion Date, the Maturity Date, by
acceleration or otherwise and which for payments of interest only shall
continue for a period of three (3) days after the date such payment was
due;
(b) any representation or warranty of the Company shall prove to have
been incorrect when given under, or the Company shall fail to observe or
perform in any covenant or agreement under, or otherwise commit any breach
of, this Note, the Purchase Agreement, the Warrant (as defined in the
Purchase Agreement) or the Registration Rights Agreement (as defined in the
Purchase Agreement), and such failure or breach shall not have been
remedied within 30 days after the date on which notice of such failure or
breach shall have been given;
(c) the Company shall commence, or there shall be commenced against
the Company a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any Subsidiary thereof or there is
commenced against the Company or any Subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 60 days; or the Company or any Subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed
for a period of 60 days; or the Company or any Subsidiary thereof makes a
general assignment for the benefit of creditors; or the Company shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Company or any Subsidiary
thereof shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any Subsidiary
thereof shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company or any Subsidiary thereof for the
purpose of effecting any of the foregoing; or
(d) the Common Stock shall be delisted from the American Stock
Exchange or any other national securities exchange or market on which such
Common Stock is listed for trading or suspended from trading thereon
without being relisted or having such suspension lifted, as the case may
be, within 30 Trading Days.
4.2. Effect of Event of Default. If during the time that any portion of
--------------------------
this Note remains outstanding, any Event of Default occurs and is continuing,
and in every such case, then the Holder may, by notice to the Company, declare
the full principal amount of this Note, together with all accrued but unpaid
interest hereon and other amounts owing hereunder to the date of acceleration,
to be immediately due and payable in cash without presentment, demand,
6
<PAGE>
protest or other notice of any kind, all of which are waived by the Company,
notwithstanding anything herein contained to the contrary, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by the Holder at
any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereon.
Section 5. Conversion.
--------- ----------
5.1 Conversion by Holder. Subject to Section 5.11, at any time upon
--------------------
seventy-five (75) days' prior written notice to the Company at any time and from
time to time on or after March 30, 2000, (the "INITIAL CONVERSION DATE"), and
-----------------------
prior to the close of business on the Maturity Date or earlier as set forth in
this Section 5, the principal sums due under this Note shall be convertible into
shares of Common Stock at the Conversion Price, at the option of the Holder in
whole or in part. The Company may waive the seventy-five (75) day notice
requirement at its sole discretion as to any Holder or Holders. The Holder
shall effect conversions by surrendering this Note (or such portions thereof) to
be converted, together with the form of conversion notice attached hereto as
Exhibit A (the "HOLDER CONVERSION NOTICE") to the Company. Each Holder
- --------- ------------------------
Conversion Notice shall specify the principal amount of this Note to be
converted (which may not be less than $100,000 or such less principal amount of
this Note then held in the aggregate by such Holder) and the date on which such
conversion is to be effected (which, in any event, shall be no less than
seventy-five (75) days from the date of such notice under subparagraph (a)) (the
"HOLDER CONVERSION DATE", unless waived by the Company as set forth above). If
----------------------
no Holder Conversion Date is specified in a Holder Conversion Notice, the Holder
Conversion Date shall be the date that is seventy-five (75) days after the date
that the Holder Conversion Notice is deemed delivered pursuant to Section 5.10.
Each Holder Conversion Notice, may be revoked and rescinded at the election of
the Holder exercised in its sole discretion prior to the Holder Conversion Date.
If the Holder is converting less than all of the principal amount represented by
this Note or if a conversion hereunder cannot be effected in full for any
reason, the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to such Holder (in the manner and within
the time set forth in Section 5.10) a new Note for such principal amount as has
not been converted. Interest on the Note shall continue to accrue through the
Holder Conversion Date.
5.2 Company Conversion. At the Company's option, at any time on or after
------------------
March 30, 2002, all but not less than all of the entire principal amount of this
Note may be prepaid by (a) conversion of such principal sums into shares of
Common Stock at the Conversion Price, (b) cash or (c) any combination of payment
in Common Stock at the Conversion Price and cash; provided, however, that the
-------- -------
Company is not permitted to deliver a Company Conversion Notice (as defined
below) (a) at any time when the Underlying Shares Registration Statement is not
then effective or shares of Common Stock are not listed for trading, and (b) if
the average Per Share Market Value for the twenty (20) consecutive Trading Days
immediately preceding the date of issuance of the Company Conversion Notice does
not exceed the Conversion Price by at least one hundred sixty-seven percent
(167%) (e.g., $40.00 if the Conversion Price is $15.00; $38.67 if the Conversion
Price is $14.50). The Company shall effect such conversion by delivering to the
7
<PAGE>
Holder a written notice in the form attached hereto as Exhibit B (the "COMPANY
--------- -------
CONVERSION NOTICE"), which Company Conversion Notice, once given, shall be
- -----------------
irrevocable. Each Company Conversion Notice shall specify the principal amount
together with accrued interest of this Note to be converted in accordance with
the provisions of Section 1.3 above. The Company shall deliver such Company
Conversion Notice at least thirty (30) days before the date of conversion (such
date being hereinafter referred to as the "COMPANY CONVERSION DATE"). Upon its
-----------------------
receipt of a Company Conversion Notice, the Holder shall surrender the principal
amount of this Note subject to such notice at the office of the Company or of
any transfer agent for this Note or Common Stock. If the Company is converting
less than the aggregate principal amount of this Note, the Company shall, upon
conversion of the principal amount of this Note subject to such Company
Conversion Notice and receipt of this Note surrendered for conversion, deliver
to the Holder, a replacement Note for such principal amount of this Note as has
not been converted. Each of a Holder Conversion Notice and a Company Conversion
Notice is sometimes referred to herein as a "CONVERSION NOTICE," and each of a
-----------------
"Holder Conversion Date" and a "Company Conversion Date" is sometimes referred
to herein as a "CONVERSION DATE."
---------------
5.3 Delivery of Certificates. Not later than five (5) Trading Days after
------------------------
the Conversion Date, the Company will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than any required by Section 3.1 of the Purchase Agreement) representing
the number of shares of the Common Stock being acquired upon the conversion of
the Note, (ii) a new Note in a principal amount equal to the principal amount of
the Note not converted; and (iii) a check in the amount of all accrued and
unpaid interest (if the Company has elected to pay accrued interest in cash),
together with all other amounts then due and payable in accordance with the
terms hereof, in respect of the portion of this Note tendered for conversion or,
if the Company has elected to pay accrued interest in shares of the Common
Stock, certificates, which shall be free of restrictive legends and trading
restrictions, representing such number of shares of the Common Stock as equals
such interest due as set forth in Section 1.3 herein; provided, however, that
-------- -------
the Company shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon conversion of the principal amount of this Note
until this Note is either delivered for conversion to the Company or any
transfer agent for this Note or the Common Stock, or the Holder notifies the
Company that such Note has been lost, stolen or destroyed and provides a bond
(or other adequate security) reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith (in which case
the Company shall issue a replacement Note in like principal amount). The
Company shall, upon request of the Holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case
of any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be issued on the Conversion
Date on account of accrued but unpaid interest hereunder, are not delivered to
or as directed by the applicable Holder by the fifth Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the Company
at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the Note tendered for conversion.
8
<PAGE>
If the Company shall fail to issue to a Holder on a timely basis as
described in this Section 5.3 the number of shares of Common Stock to which such
Holder is entitled upon such Holder's conversion of this Convertible Note, 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 (3)
days after the last possible date which the Company could have issued such
Common Stock to such Holder without violating this Section 5.3, on each date
such conversion is not timely effected, an amount equal to one percent (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 with out violating this Section
5.3.
5.4 Conversion Price. The "CONVERSION PRICE" shall be $14.50 provided
---------------- ---------------- --------
that, (a) if the registration statement registering the resale of shares of
Common Stock issuable upon conversion of this Note and payment of interest
thereunder and naming the Holder as a Selling Stockholder thereunder in
accordance with the Registration Rights Agreement of even date herewith (the
"UNDERLYING SHARES REGISTRATION STATEMENT") is not filed on or prior to the 45th
----------------------------------------
day after the Original Issue Date, or (b) the Company fails to file with the
Securities and Exchange Commission (the "COMMISSION") a request for acceleration
----------
in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of
1934, as amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Shares Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) if the Underlying
Shares Registration Statement is not declared effective by the Commission on or
prior to the 90th day after the Original Issue Date, or (d) if such Underlying
Shares Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at any
time prior to the expiration of the "Effectiveness Period" (as such term as
defined in the Registration Rights Agreement), without being succeeded by a
subsequent Underlying Shares Registration Statement filed with and declared
effective by the Commission within 10 Business Days (as defined in Section 6),
or (e) if trading in the Common Stock shall be suspended for any reason for more
than five Trading Days, or (f) if the conversion rights of the Holder of this
Note hereunder are suspended for any reason (any such failure being referred to
as an "EVENT," and for purposes of clauses (a), (c) and (f) the date on which
-----
such Event occurs, or for purposes of clause (b) the date on which such five (5)
days period is exceeded, or for purposes of clause (d) the date which such ten
(10) Business Day-period is exceeded, or for purposes of clause (e) the date on
which such five (5) Trading Day period is exceeded, being referred to as "EVENT
-----
DATE"), the Conversion Price shall be decreased by 1% on the Event Date and each
- ----
monthly anniversary thereof until such time as the applicable Event is cured
(i.e., the Conversion Price would decrease by 1% as of the Event Date and 2% as
of the one month anniversary of such Event Date). Any decrease in the
Conversion Price pursuant to this Section shall remain in effect notwithstanding
the fact that the Event causing such decrease has been subsequently cured and
further monthly decreases have ceased. The provisions of this Section are not
exclusive and shall in no way limit
9
<PAGE>
the Company's obligations under the Registration Rights Agreement. Any time
period set forth in clauses (a) through (c) of this Section 5.4 shall be
extended for such period of time as allowed under the penultimate paragraph of
Section 3 of the Registration Rights Agreement.
5.5 Adjustments to Conversion Price. The Conversion Price and number of
-------------------------------
shares of Common Stock issuable upon conversion of this Note are subject to
adjustment from time to time as set forth in this Section 5.5. Upon each such
adjustment of the Conversion Price pursuant to this Section 5.5, the Holder
shall thereafter be entitled to convert this Note, at the Conversion Price
resulting from such adjustment, the number of shares of Common Stock obtained by
multiplying the Conversion Price in effect immediately prior to such adjustment
by the number of shares of Common Stock issuable upon conversion of this Note
immediately prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment.
(a) If the Company shall at any time while this Note is outstanding
(i) pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of the Common Stock, (ii) subdivide
outstanding shares of the Common Stock into a larger number of shares, or
(iii) combine outstanding shares of the Common Stock into a smaller number
of shares, the Conversion Price then in effect shall be multiplied by a
fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and
of which the denominator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section 5.5(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(b) If the Company shall at any time while this Note is outstanding,
issue rights or warrants to all holders of the Common Stock (and not to the
Holder of this Note) entitling them to subscribe for or purchase shares of
the Common Stock at a price per share less than the Per Share Market Value
of the Common Stock at the record date mentioned below, the Conversion
Price then in effect shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock
offered for subscription or purchase, and of which the numerator shall be
the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase shares of
the Common Stock the issuance of which resulted in an adjustment
10
<PAGE>
in the Conversion Price pursuant to this Section 5.5(b), if any such right
or warrant shall expire and shall not have been exercised, the Conversion
Price shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it would
have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section 5.5 after the issuance of
such rights or warrants) had the adjustment of the Conversion Price made
upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(c) If the Company shall at any time while this Note is outstanding,
distribute to all holders of the Common Stock (and not to the Holder of
this Note) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any Company security (excluding those referred to
in Sections 5.5 (a) and (b) above), then in each such case the Conversion
Price at which the Note shall thereafter be convertible shall be determined
by multiplying the Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Per
Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed as determined by the Board of Directors in good
faith applicable to one outstanding share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(d) All calculations under this Section 5.5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(e) Whenever the Conversion Price is adjusted pursuant to Section 5.5
(a),(b) or (c), the Company shall promptly mail to the Holder of this Note
in accordance with Section 5.10, a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
(f) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par
value, or as a result of a subdivision or combination (covered by (a)
above), but including any change in the shares into one or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive shares of stock (other than Common Stock),
other securities, property or cash) of the shares of Common Stock (other
than a change in par value, or as a result of a subdivision or combination,
but including any change in the shares into one or more classes or series
of shares), then the Holder shall have the right thereafter to convert this
Note only into the shares of stock and other securities of the Company and
property
11
<PAGE>
receivable or deemed to be held by holders of Common Stock following such
reclassification, change, consolidation or merger, and the Holder shall
thereafter upon conversion of this Note be entitled to receive such amount
of securities or property attributable to the number of shares of Common
Stock such Holder would have been entitled to receive had such Holder
converted this Note immediately prior to such action. The terms of any such
reclassification or other action shall include such terms so as to continue
to give to the Holder the right to receive the securities or property set
forth in this Section 5.5(f) upon any exercise following such
reclassification or other action.
(g) In case of any consolidation of the Company with, or merger of the
Company with or into, another corporation (other than a merger or
consolidation in which the Company is the surviving or continuing
corporation), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety, such successor, leasing or
purchasing corporation, as the case may be, shall (i) execute an agreement,
signed by the successor, leasing or purchasing corporation and the Holder,
providing that the Holder shall have the right thereafter to receive upon
conversion of this Note, solely the kind and amount of shares of stock and
other securities, property, cash or any combination thereof receivable upon
such consolidation, merger, sale, lease or conveyance by a holder of the
number of shares of Common Stock for which this Note might have been
converted immediately prior to such consolidation, merger, sale, lease or
conveyance, and (ii) make effective provision in its certificate of
incorporation or otherwise, if necessary, to effect such agreement. Such
agreement shall provide for adjustments which shall be as nearly equivalent
as practicable to the adjustments in this Section 5.5.
(h) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption (other than redemptions of the
stock of employees upon their termination of employment with
the Company) of its Common Stock or
C. the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any
compulsory share of exchange whereby
12
<PAGE>
the Common Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder of this Note at its last address as it shall appear upon the stock books
of the Company, no later than forty-five (45) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
-------- -------
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to convert this Note during the period
commencing the date of such notice to the effective date of the event triggering
such notice.
5.6 Conditions Adversely Affecting Holder. If at any time conditions
-------------------------------------
shall arise by reason of action taken by the Company which in the good faith
opinion of the Board of Directors are not adequately covered by the other
provisions hereof and which might adversely affect the rights of the Holder
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly describing the action
contemplated and the adverse effects of such action on the rights of the Holder
at least thirty (30) calendar days prior to the effective date of such action,
and an appraiser mutually acceptable to the Holder and the Company shall give
its opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 5), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which this Note may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the Holder. The determination of the
appraiser shall be final.
5.7 Reservation of Common Stock. The Company covenants that it will at
---------------------------
all times reserve and keep available out of its authorized and unissued shares
of Common Stock solely for the purpose of issuance upon conversion of this Note
and payment of interest on this Note, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holder, such number of shares of Common Stock as shall be from
time to time sufficient to effect the conversion of this Note (taking into
account the adjustments and
13
<PAGE>
restrictions of Section 5.5) and payment of interest hereunder in Common Stock
in accordance with the terms hereof and of the Purchase Agreement. The Company
covenants that all shares of the Common Stock that shall be so issuable shall,
upon issue, be duly and validly authorized, issued and fully paid, nonassessable
and, if the Underlying Shares Registration Statement has been declared effective
under the Securities Act, all such registered shares shall be freely tradeable.
5.8 No Fractional Shares. Upon a conversion hereunder the Company shall
--------------------
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Conversion Price at such time. If
the Company elects not, or is unable, to make such a cash payment, the holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
5.9 Payment of Transfer Taxes, Etc. The issuance of certificates for
-------------------------------
shares of the Common Stock on conversion of this Note shall be made without
charge to the Holder hereof for any documentary stamp or similar taxes that may
be payable in respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder of this Note
so converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
5.10 Notices. Any and all notices or other communications or deliveries to
-------
be provided by the Holder of this Note hereunder, including, without limitation,
any Holder Conversion Notice, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or sent by
certified or registered mail, postage prepaid, addressed to the Company, at 150
Dan Road, Canton, MA 02021 (facsimile number (781) 575-1570, Attention: Herbert
M. Stein, Chairman and Chief Executive Officer and Donna L. Abelli, Chief
Financial Officer, with copy to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., One Financial Center, Boston, Massachusetts 02111 Attention: Neil H.
Aronson, Esquire and John J. Cheney, Esquire (facsimile number (617) 542-2241),
or such other address or facsimile number as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Holder of this Note at the
facsimile telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the holder with a copy to Kramer Levin Naftalis &
Frankel LLP, 919 Third Avenue, New York, New York 10022, Attention: Ezra G.
Levin, Esquire (facsimile no.: (212) 715-8000). Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern Standard time),
14
<PAGE>
(ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Standard time) on any date and earlier
than 11:59 p.m. (Eastern Standard time)on such date, (iii) four days after
deposit in the United States mails, (iv) the Business Day following the date of
mailing, if send by nationally recognized overnight courier service, or (v) upon
actual receipt by the party to whom such notice is required to be given.
5.11 Other Actions. Notwithstanding anything in this Article V to the
-------------
contrary, in the event of the occurrence of any of the following: (i) any
Persons is or becomes the "beneficial owner" as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, as amended, directly or indirectly,
of more than 35% of the Common Stock or (ii) individuals who at the date hereof
constituted the Board of Directors (together with any such individuals whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a majority of the directors then
still in office who were directors on the date hereof or persons whose election
as directors or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in office,
(iii) a tender or exchange offer made to the stockholders of the Company, (iv)
the Company delivers a Company Conversion Notice of its intent to prepay this
Note in cash or in any combination of cash and Common Stock, or (v) the Company
enters into an agreement for the consolidation of the Company with, or merger of
the Company with or into, another corporation, or the sale, lease or conveyance
to another corporation of the property and assets of any nature of the Company
as an entirety or substantially as an entirety, the Holder shall be entitled to
convert this Note in whole or in part into shares of Common Stock immediately
upon prior written notice to the Company. The Holder shall effect conversion by
surrendering this Note (or such portions thereof) to be converted together with
a Conversion Notice, which shall specify the principal amount of this Note to be
converted and the Holder Conversion Date (which shall be no less than five (5)
days from the date of such notice).
Section 6. Definitions. For the purposes hereof, the following terms
--------- -----------
shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in Boston are
authorized or required by law or other government action to close.
"COMMON STOCK" means the common stock, $.01 par value per share, of
------------
the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
-------------------
this Note regardless of the number of transfers of this Note and regardless of
the number of instruments which may be issued to evidence this Note.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
----------------------
price per share of the Common Stock on such date on the American Stock Exchange
or other stock
15
<PAGE>
exchange or quotation system on which the Common Stock is then listed or if
there is no such price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any stock exchange or
quotation system, the closing price for a share of Common Stock in the OTC
Bulletin Board or the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded, the fair market value of a share of
Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) (an "APPRAISER") mutually selected in good faith by
---------
the Holders of a majority in interest of the Notes and the Company. Any
determination made by the Appraiser shall be final and binding upon the Company
and the Holder.
"PERSON" means a corporation, an association, a partnership,
------
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
-----------
the American Stock Exchange or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
American Stock Exchange or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
"UNDERLYING SHARES" means the number of shares of Common Stock into
-----------------
which this Note is convertible in accordance with the terms hereof and the
Purchase Agreement.
Section 7. No Impairment. Except as expressly provided in Section 3 or as
--------- -------------
elsewhere provided herein, no provision of this Note shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in
the securities, coin and currency, herein prescribed.
Section 8. No Right As Stockholder. This Note shall not entitle the
--------- -----------------------
Holder to any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
16
<PAGE>
Section 9. Lost Note. If this Note shall be mutilated, lost, stolen or
--------- ---------
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, and indemnity, if requested, all reasonably satisfactory to the Company.
Section 10. Governing Law. This Note shall be governed by and construed
---------- -------------
in accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to conflicts of laws thereof.
Section 11. Waivers. Any waiver by the Company or the Holder of a breach
---------- -------
of any provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Note. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must
be in writing.
Section 12. Invalidity. If any provision of this Note is invalid, illegal
---------- ----------
or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 13. Business Day. Whenever any payment or other obligation
---------- ------------
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day (or, if such next succeeding Business
Day falls in the next calendar month, the preceding Business Day in the
appropriate calendar month).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
ORGANOGENESIS INC.
By:___________________________________
Herbert M. Stein, Chairman and
Chief Executive Officer
Attest:
By:_____________________________
Name:
Title:
17
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby elects to convert Note No. [ ] into shares of Common
Stock, $.01 par value per share (the "Common Stock"), of ORGANOGENESIS INC. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
_______________________________________________________
Date to Effect Conversion
_______________________________________________________
Principal Amount of Note to be Converted
_______________________________________________________
Remaining Principal Balance Following Note Conversion
_______________________________________________________
Number of shares of Common Stock to be Issued
_______________________________________________________
Applicable Conversion Price
_______________________________________________________
Signature
_______________________________________________________
Name
_______________________________________________________
Address
The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested hereby),
notify the converting holder by facsimile of the number of shares of Common
Stock outstanding on such date and the number of shares of Common Stock which
would be issuable to the holder if the conversion requested in this conversion
notice were effected in full.
18
<PAGE>
EXHIBIT B
ORGANOGENESIS INC.
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of ORGANOGENESIS INC. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to exercise
its right to convert the above Note No. [ ] into shares of Common Stock, $.01
par value per share (the Common Stock ), of the Company according to the
conditions hereof, as of the date written below. No fee will be charged to the
Holder for any conversion hereunder, except for such transfer taxes, if any,
which may be incurred by the Company if shares are to be issued in the name of a
person other than the person to whom this notice is addressed.
Conversion calculations:
_______________________________________________________
Date to Effect Conversion
_______________________________________________________
Principal Amount of Note to be Converted
_______________________________________________________
Number of shares of Common Stock to be Issued
_______________________________________________________
Applicable Conversion Price
_______________________________________________________
Signature
_______________________________________________________
Name:
_______________________________________________________
Address:
19
<PAGE>
EXHIBIT 4(h)
SECURITIES PURCHASE AGREEMENT
between
ORGANOGENESIS INC.
and
PURCHASERS
March 30, 1999
______________________________
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of March 30, 1999 (this "Agreement"),
---------
between Organogenesis Inc., a corporation organized and existing under the laws
of the State of Delaware (the "COMPANY"), and those Purchasers listed on Exhibit
-------
I annexed hereto, each sometimes referred to herein as a "PURCHASER" and
---------
collectively as the "PURCHASERS."
----------
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to purchase from the Company, (i) up to an aggregate principal amount of
$20,000,000 of the Company's 7% Convertible Subordinated Notes due March 29,
2004 (the "CONVERTIBLE NOTES"), which are convertible into shares of the
-----------------
Company's common stock, $.01 par value per share (the "COMMON STOCK"), and (ii)
------------
warrants to purchase up to an aggregate of 400,000 shares of the Company's
Common Stock (the "WARRANTS").
--------
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase and Sale of Securities. Subject to the terms and conditions
-------------------------------
set forth herein, the Company shall issue and sell to the Purchasers, and the
Purchasers shall purchase from the Company the Convertible Notes and the
Warrants at the Closing described below. At the Closing the Company shall issue
and deliver to the Purchasers the Convertible Notes substantially in the form of
Exhibit A hereto and the Warrants substantially in the form of Exhibit B hereto.
- --------- ---------
The Warrants shall grant to the Purchasers the right to purchase one share of
the Company's Common Stock for each $50.00 in face value of the Convertible
Notes sold to each Purchaser at the Closing at the Exercise Price as set forth
in the Warrants. All references herein to "dollars" or "$" shall be to U.S.
dollars (U.S.$) unless otherwise specified.
1.2 The Closing. The closing of the purchase and sale of the Convertible
-----------
Notes (the "Closing") shall take place at the offices of Mintz, Levin, Cohn,
-------
Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts
02111 ("MINTZ LEVIN") immediately following the execution hereof or such later
-----------
date as the parties shall agree. The date of the Closing is hereinafter
referred to as the "CLOSING DATE." At the Closing, (a) the Company shall
------------
deliver to the Purchasers (i) the Convertible Notes and the Warrants, each in
the amounts and registered in the name of the Purchasers as specified on Exhibit
-------
I hereto, and (ii) all other documents, instruments and writings required to
- -
have been delivered at or prior to the Closing by the Company to the Purchasers
pursuant to this Agreement; and (b) the Purchasers shall deliver to the Company
(i) the purchase price for the Convertible Notes and Warrants being purchased by
them at the Closing, determined in accordance with Section 1.2(a)(i), in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose on
<PAGE>
or prior to the Closing Date, and (ii) all documents, instruments and writings
required to have been delivered at or prior to the Closing by the Purchasers
pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
---------------------------------------------------------
Company hereby makes the following representations and warranties to each of the
Purchasers:
(a) Organization and Qualification. The Company is a corporation,
------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
--------
2.1(a) (collectively, the "SUBSIDIARIES"). Each of the Subsidiaries is a
- ------ ------------
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable),
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate be reasonably be expected to (x)
adversely affect the legality, validity or enforceability of this Agreement, the
Convertible Notes, the Warrants, and the Registration Rights Agreement (in
substantially the form set forth in Exhibit C attached hereto (the "Registration
---------
Rights Agreement") (this Agreement, the Convertible Notes, the Warrants and the
Registration Rights Agreement are hereinafter collectively referred to as the
"TRANSACTION DOCUMENTS"), (y) have or result in a material adverse effect on the
---------------------
results of operations, business, properties, assets, prospects, or financial
condition of the Company and the Subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under the Transaction Documents (a "MATERIAL ADVERSE EFFECT").
-----------------------
(b) Authorization; Enforcement. The Company has the requisite
--------------------------
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all requisite corporate action
on the part of the Company. Each of the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof
shall constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
2
<PAGE>
(c) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is set forth in Schedule 2.1(c). No holder of the Common
---------------
Stock is entitled to preemptive or similar rights arising by or out of any
charter document or bylaws of the Company or by any agreement or understanding
with the Company. Except as disclosed in Schedule 2.1(c), there are no
---------------
outstanding options, warrants, rights to subscribe to, calls or commitments
relating to, or, except as a result of the purchase and sale of the Convertible
Notes and the Warrants hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents (as defined below) or
Schedule 2.1(c), no Person (as defined below) beneficially owns (as determined
- ---------------
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) or has the right to acquire by agreement with or
------------
by obligation binding upon the Company beneficial ownership of in excess of 5%
of the Common Stock. For purposes of this Agreement, a "PERSON" shall mean an
------
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
There are no agreements or arrangements under which the Company or any
Subsidiary is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended (the "Securities Act"). Except as
disclosed in Schedule 2.1(c), there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities (as defined below) pursuant to this Agreement, the Convertible
Notes or the Warrants.
(d) Issuance of Convertible Note and Warrant. The Convertible Notes
----------------------------------------
and the Warrants are duly authorized for issuance and sale to the Purchasers by
the Company pursuant hereto, and, when issued and paid for in accordance with
the terms hereof, shall be validly issued, fully paid and nonassessable. Such
number of shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in the following sentence) as to which the Company
shall file a listing application in accordance with Section 3.7 hereof have been
duly authorized and reserved for issuance upon conversion of the Convertible
Notes and the exercise of the Warrants. The Company, as at the respective dates
the outstanding Convertible Notes (and all interest accrued thereon) and the
Warrants first become convertible or exercisable, as the case may be, in
accordance with their respective terms, has authorized at least 300,000 shares
of Common Stock for issuance upon payment of interest due under the Convertible
Notes and will maintain an adequate reserve of duly authorized shares of Common
Stock to enable it to perform the exercise of the Warrants, the conversion of
the Convertible Notes and the payment of interest on such Convertible Notes in
accordance with the respective terms of such Warrants and Convertible Notes. The
shares of Common Stock issuable upon conversion of the Convertible Notes, the
payment of interest due on such Convertible Notes, and upon exercise of the
Warrants are collectively referred to herein as the "UNDERLYING SHARES." When
-----------------
issued in accordance with the terms of the Convertible Notes and the Warrants,
as the case may be, the Underlying Shares
3
<PAGE>
will be validly issued, fully paid and nonassessable. The Convertible Notes, the
Warrants and the Underlying Shares are collectively referred to herein as the
"SECURITIES."
----------
(e) No Conflicts. The execution, delivery and performance of the
------------
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or By-laws (each as
amended through the date hereof) or (ii) subject to obtaining the Required
Approvals (as defined below), 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 agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company, result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal, state and foreign securities laws and regulations), or by
which any material property or asset of the Company is bound or affected, except
in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate of
incorporation (or other similar charter documents) or bylaws. Neither the
Company nor any Subsidiary is conducting its business in violation of any
applicable law, ordinance or regulation of any governmental authority which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any Subsidiary is
----------------------
required to obtain any consent, waiver, authorization or order of, or make any
filing or registration with, any court or other Federal, state, local, foreign
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents
(the "REQUIRED APPROVALS") other than the following post-closing requirements
------------------
(which do not constitute Required Approvals) (i) the filing of the Registration
Statement (as defined in the Registration Rights Agreement) for the Underlying
Shares with the Securities and Exchange Commission (the "COMMISSION") pursuant
----------
to the Registration Rights Agreement, and (ii) the applications for the listing
of the Underlying Shares with the American Stock Exchange (and with any other
national securities exchange or market on which the Common Stock is then
listed), which listing will not require any stockholder approval.
(g) Litigation; Proceedings. Except as specifically disclosed in the
-----------------------
Disclosure Materials (as defined below), there is no action, suit, notice of
violation, proceeding or investigation pending or, to the best knowledge of the
Company, threatened against, or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, state, local or foreign)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect.
4
<PAGE>
(h) No Default or Violation. Except in each case as could not
-----------------------
reasonably be expected to have or result in, individually or in the aggregate, a
Material Adverse Effect, neither the Company nor any Subsidiary (i) is in
default under or in violation of any indenture, loan or credit agreement or any
other material contract, agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body (Federal, state, local or foreign),
or (iii) is in violation of any statute, rule or regulation.
(i) Private Offering. Neither the Company nor any Person acting on
----------------
its behalf has taken or will take any action which might subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
--------------
(j) SEC Documents. The Company has filed all reports required to be
-------------
filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC DOCUMENTS" and, together with
-------------
the Schedules to this Agreement the "DISCLOSURE MATERIALS") on a timely basis,
--------------------
or has received a valid extension of such time of filing. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, 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. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the consolidated financial position of the Company and
the Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods shown, subject, in the case of unaudited
statements, to normal year-end audit adjustments. Except as set forth in the
Risk Factors Memorandum attached hereto as Exhibit "D" (the RISK FACTORS
----------- ------------
MEMORANDUM"), since the date of the financial statements included in the
- -----------
Company's last filed Quarterly Report on Form 10-Q, there has been no event,
occurrence or development that has had or that would reasonably expected to have
or result in a Material Adverse Effect which has not been specifically disclosed
in writing to the Purchasers by the Company.
(k) Investment Company. The Company is not, and is not an Affiliate
------------------
of an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by the
------------
Company to any broker, financial or investment advisor, placement agent finder,
investment banker, bank or any other Person acting in a similar capacity with
respect to the transactions contemplated by this
5
<PAGE>
Agreement as a result of the actions of the Company. The Purchaser shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless the Purchaser, its respective
employees, officers, directors, agents, and their respective Affiliates (as such
term is defined under Rule 405 promulgated under the Securities Act), from and
against all claims, losses, damages, costs (including the costs of preparation
and reasonable attorney's fees) and expenses suffered in respect of any such
claimed or existing fees.
(m) Solicitation Materials. The Company has not (i) distributed any
----------------------
offering materials in connection with the offering and sale of the Securities
other than the Disclosure Materials or (ii) solicited any offer to buy or sell
the Securities by means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is, as of the Closing Date,
--------------------
eligible to register securities for resale with the Commission under Form S-3
promulgated under the Securities Act.
(o) Listing and Maintenance Requirements Compliance. The Company has
-----------------------------------------------
not in the two years preceding the date hereof received written notice from any
stock exchange or market on which the Common Stock is or has been listed (or on
which it has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.
2.2 Representations and Warranties of the Purchaser. Each of the
-----------------------------------------------
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. If such Purchaser is a corporation or a
-----------------------
partnership, such Purchaser (if a corporation) is duly incorporated, or (if a
partnership) is duly formed, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, as the case may be,
with the requisite power and authority to enter into and to consummate the
transactions contemplated hereby and by the Registration Rights Agreement and
otherwise to carry out its obligations hereunder and thereunder. The purchase
by such Purchaser of the Securities to be purchased by it hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed by
such Purchaser and when delivered in accordance with the terms hereof shall
constitute the valid and legally binding obligations of such Purchaser,
enforceable against such Purchaser in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium liquidation and similar laws
relating to or affecting generally the enforcement of creditors' rights and
remedies or by other general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the Securities
-----------------
hereunder for its own account for investment purposes only and not with a view
to, or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or
6
<PAGE>
exempted under the Securities Act; provided, however, that such Purchaser
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 Securities
Act.
(c) Purchaser Status. At the time such Purchaser was offered the
----------------
Convertible Note and the Warrant to be purchased by it hereunder, it was, and at
the date hereof, it is, and at the Closing Date it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or together
-----------------------
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment including, but not limited to, the risks set
forth in the Risk Factors Memorandum.
(e) Ability of Purchaser to Bear Risk of Investment. Such Purchaser
-----------------------------------------------
is able to bear the economic risk of an investment in the Securities, and, at
the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges receipt of the
---------------------
Disclosure Materials and the Risk Factors Memorandum and further acknowledges
that it has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities, and the
risks of investing in the Securities; (ii) access to information about the
Company and the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that the Purchaser believes is necessary to make an informed investment
decision with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure Materials and the
Risk Factors Memorandum.
(g) Reliance. Such Purchaser understands and acknowledges that (i)
--------
the Convertible Note and the Warrant to be sold to it hereunder are being
offered and sold to it in a private placement that is exempt from the
registration requirements of the Securities Act and (ii) the availability of
such exemption depends in part on and the Company will rely upon the accuracy
and truthfulness of the foregoing representations, and the Purchaser hereby
consents to such reliance.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should decide to dispose
---------------------
of any portion of the Securities held by it, each such Purchaser understands and
agrees that it may do so
7
<PAGE>
only pursuant to an effective registration statement under the Securities Act,
to the Company or pursuant to an available exemption from the registration
requirements thereof. In connection with any transfer of any portion of the
Securities other than pursuant to an effective registration statement or to the
Company such Purchaser shall deliver to the Company an opinion of counsel, in a
form reasonably acceptable to the Company and the Company's legal counsel, 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 such
Purchaser shall provide the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule thereto) ("Rule 144").
(b) The Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities, as applicable:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAW OR ANY
OTHER SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
The Underlying Shares shall not contain the legends set forth above
(or any other legend other than legends relating to the existence of any
shareholder rights or similar plan then in effect) if (i) such Underlying Shares
are registered for sale under the Securities Act and all necessary state and
foreign approvals are obtained or (ii) in connection with a sale transaction,
such holder provides the Company with an opinion of counsel, in form and
substance reasonably acceptable to the Company, to the effect that a public sale
or transfer of such Security may be made without registration under the
Securities Act. The Company agrees that it will provide each Purchaser, upon
request, with a certificate or certificates representing Underlying Shares, free
from any legend at such time as such legends are no longer required pursuant to
this Section.
3.2 Stop Transfer Instruction. The Company may not make any notation on
-------------------------
its records or give instructions to any transfer agent of the Company other than
as provided for in the Transaction Documents.
3.3 Furnishing of Information. As long as any Purchaser owns Underlying
-------------------------
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act. If the Company is not
at the time required to file reports pursuant to such sections, it will prepare
and furnish to the Purchaser and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby,
8
<PAGE>
in the time period that such filings would have been required to have been made
under the Exchange Act.
3.4 Copies and Use of Disclosure Materials. The Company consents to the
--------------------------------------
use of the Disclosure Materials and the Risk Factors Memorandum, and any
amendments and supplements thereto, by the Purchasers in connection with resales
of Securities other than pursuant to an effective Underlying Shares Registration
Statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights Agreement,
-------------
the Company shall qualify the Underlying Shares under the securities or Blue Sky
laws of such jurisdictions as any Purchaser may reasonably request and shall
continue such qualification at all times through the second anniversary of the
Closing Date; provided, however, that neither the Company nor its Subsidiaries
-------- -------
shall be required in connection therewith to qualify as a foreign corporation
where they are not now so qualified or to take any action that would subject the
Company to general service of process in any such jurisdiction where it is not
then so subject.
3.6 Integration. The Company shall not and shall use its best efforts to
-----------
ensure that no Affiliate of the Company shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the issue or sale of any of the Securities to the Purchaser.
3.7 Listing and Reservation of Underlying Shares. (a) The Company shall
--------------------------------------------
(i) not later than the fifth Business Day following the Closing Date prepare and
file with the American Stock Exchange (as well as any other national securities
exchange or market on which the Common Stock is then listed or traded) an
additional shares listing application covering at least the sum of 2,046,333
---------
Underlying Shares (comprised of 1,346,333 shares reserved for issuance upon
---------
conversion of the Convertible Notes, 300,000 shares which may be issued as
-------
payment for interest which may be payable on the Convertible Notes, and 400,000
-------
shares reserved for issuance upon exercise of the Warrants) (ii) take all steps
after the Closing necessary to cause such shares to be approved for listing on
the American Stock Exchange (as well as on any other national securities
exchange or market on which the Common Stock is then listed) as soon as possible
thereafter; and (iii) provide to the Purchaser evidence of such listing. The
Company shall maintain the listing of its Common Stock on such exchange.
(b) The Company shall take all action necessary to at all times have
authorized and reserved for the purpose of issuance, upon conversion of the
Convertible Notes, for payment of interest thereupon in shares of Common Stock
pursuant to the terms thereof, and upon exercise of the Warrants in accordance
with their terms the number of shares to be listed on the American Stock
Exchange (and such other national securities exchange or market on which the
Common Stock is then listed or traded) as set forth in Section 3.7(a).
3.8 Use of Proceeds. The Company shall use all of the net proceeds from
---------------
the placement of the Securities for general working capital purposes and capital
equipment requirements. Pending application of the proceeds of this placement
in the manner permitted
9
<PAGE>
hereby, the Company will invest such proceeds in accordance with its written
investment guidelines.
3.9 Conversion Obligations of the Company. The Company covenants to honor
-------------------------------------
conversions of the Convertible Notes and exercise of the Warrants and to deliver
Underlying Shares in accordance with the terms and conditions and time period
set forth in the respective Convertible Notes and the Warrants.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to Purchase
--------------------------------------------------------------------
the Convertible Note. The obligation of the Purchasers hereunder to acquire and
- --------------------
pay for the Convertible Notes is subject to the satisfaction (or waiver by the
Purchasers) at or before the Closing of each of the following conditions:
(a) Accuracy of the Company's Representations and Warranties. The
--------------------------------------------------------
representations and warranties of the Company contained herein 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
2.1, in which case such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the Closing
Date as though made on and as of such date;
(b) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date;
(c) No Injunction. No suit, action or other proceeding shall have
-------------
been commenced (and be pending) which seeks to restrain or prohibit or questions
the validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(d) No Suspensions of Trading in Common Stock. The trading in the
-----------------------------------------
Common Stock shall not have been suspended by the Commission or on the American
Stock Exchange (except for any suspension of trading of limited duration solely
to permit dissemination of material information regarding the Company;
(e) Legal Opinion. The Company shall have delivered to the Purchaser
-------------
an opinion of Mintz Levin in substantially the form attached hereto as Exhibit E
---------
and dated the Closing Date;
(f) Required Approvals. All Required Approvals shall have been
------------------
obtained;
10
<PAGE>
(g) Shares of Common Stock. On the Closing Date the Company shall
----------------------
have reserved for issuance to the Purchaser the number of shares of Common Stock
specified in Section 2.1 (d); and
(h) Delivery of Securities. The Company shall have delivered to Mintz
----------------------
Levin in escrow pending the Closing the Convertible Notes and the Warrants by
the Purchasers, registered in the name of the Purchaser, each in form
satisfactory to counsel for the Purchasers;
(i) Registration Rights Agreement. The Company and the Purchaser
-----------------------------
shall have executed the Registration Rights Agreement.
ARTICLE V
INDEMNIFICATION
5.1 In consideration of each Purchaser's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each purchaser and
each other holder of the 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 "PURCHASER INDEMNITEES") from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and reasonable expenses in connection therewith (irrespective of whether any
such Purchaser Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "PURCHASER INDEMNIFIED LIABILITIES"), incurred by any Purchaser Indemnitee
as a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any certificate, instrument or document delivered pursuant thereto,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any certificate, instrument or document
delivered pursuant thereto, or (c) any cause of action, suit or claim brought or
made against such Purchaser Indemnitee and arising out of or resulting from any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or the status of
such Purchaser or holder of the Securities as an investor in the Company.
5.2 In consideration of the Company's execution and delivery of the
Transaction Documents and in addition to the other obligations of the Purchasers
under the Transaction Documents, each of the Purchasers severally, and not
jointly (the "RESPONSIBLE PURCHASER"), shall defend, protect, indemnify and hold
harmless the Company and all of its officers, directors, employees and agents
(including, with out 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 reasonable
expenses in connection therewith (irrespective of whether any such Company
Indemnitee is a party to the action for which indemnification hereunder is
11
<PAGE>
sought), and including reasonable attorneys' fees and disbursements (the
"COMPANY INDEMNIFIED LIABILITIES"), incurred by any Company Indemnitee as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Responsible Purchaser(s) contained
in the Transaction Documents or any certificate, instrument or document
delivered pursuant thereto, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee and arising out of or resulting from the
status of such Responsible Purchaser(s) or holder of the Securities as an
investor in the company. To the extent that the foregoing undertaking by the
Purchasers may be unenforceable for any reason, the Responsible Purchaser(s)
shall make the maximum contribution to the payment and satisfaction of each of
the Company Indemnified Liabilities which is permissible under applicable law;
provided however, that in no event shall the Responsible Purchaser be liable or
responsible for any amounts in excess of the principal amounts of Convertible
Notes set forth opposite such Purchaser's name on Exhibit I. 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 Purchaser Indemnified Liabilities which is
permissible under applicable law; provided however, that in no event shall the
Responsible Purchaser be liable or responsible for any amounts in excess of the
principal amounts of Convertible Notes set forth opposite such Purchaser's name
on Exhibit I.
ARTICLE VI
MISCELLANEOUS
6.1 Fees and Expenses. Each party shall pay the fees and expenses of its
-----------------
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement and the Transaction Documents, except
that the Company shall pay Kramer Levin Naftalis & Frankel LLP, counsel to the
Purchasers, an amount not to exceed Seventy-Five Thousand Dollars ($75,000.00)
in connection with the transactions contemplated by this Agreement and except as
set forth in the Registration Rights Agreement. The Company shall pay all stamp
and other U.S. taxes and duties levied in connection with the issuance of the
Securities pursuant hereto.
6.2 Entire Agreement; Amendments. This Agreement, together with the
----------------------------
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Convertible Notes and the Warrants contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
6.3 Notices. Any and all notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Eastern Standard
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m.
(Eastern Standard time) on any date and earlier than
12
<PAGE>
11:59 p.m. (Eastern Standard time) on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Attn: Mr. Herbert M. Stein, Chairman
Facsimile No.: (781) 575-1570
and Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Attn: Donna L. Abelli, Chief Financial Officer
Facsimile No.: (781) 575-1570
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Neil H. Aronson, Esquire
John J. Cheney, Esquire
Facsimile No.: (617) 542-2241
If to the Purchasers: At the Addresses Set Forth
in Schedule I Attached hereto
With copies to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attn: Ezra G. Levin, Esquire
Facsimile No.: (212) 715-8000
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
6.4 Amendments; Waivers. No provision of this Agreement may be waived or
-------------------
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers holding at least sixty percent (60%) of the
then principal balance of Convertible Notes; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such
13
<PAGE>
right accruing to it thereafter. Notwithstanding the foregoing, no Convertible
Note or Warrant may be modified without the consent of the holder of such
security.
6.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
No Purchaser shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company, except that a Purchaser may
assign some or all of its rights hereunder to (i) an "affiliate" of such
Purchaser (as such term is defined in the 1934 Act (subject to such affiliate
demonstrating to the reasonable satisfaction of the Company its satisfaction of
the representations and warranties of the Purchaser set forth in Section 2.2
hereof)) or (ii) any other Purchaser without the consent of the Company.
6.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the internal laws of the Commonwealth of
Massachusetts without regard to the principles of conflicts of law thereof.
6.8 Survival. The agreements and covenants contained in Article III, IV
-------- ----------- --
and this Article VI shall survive the delivery and conversion of the Convertible
----------
Notes pursuant to this Agreement and the representations and warranties of the
Company and the Purchaser contained in Article II shall survive until a date
----------
that is two years after the Closing Date.
6.9 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.10 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this PURCHASE AGREEMENT
to be duly executed as of the date first indicated above.
Company:
ORGANOGENESIS INC.
By: ___________________________________
Herbert M. Stein, Chairman
and Chief Executive Officer
Purchasers:
Purchaser Name:
______________________________________
By:___________________________________
Name:_________________________________
Title:________________________________
Amount: ______________________________
15
<PAGE>
EXHIBIT I
---------
1. Allan Ades
2. Alblert Erani
3. Dennis Erani
4. David Gardner
5. Bernard Marden
6. North American Management Corp.
7. New England Aquarium
8. Deerwood Corporation
9. Brown Simpson Strategic Growth Fund, Ltd.
10. Brown Simpson Strategic Growth Fund, L.P.
16
<PAGE>
COMPANY DISCLOSURE SCHEDULES
----------------------------
NOTES TO SCHEDULES
1. Capitalized terms used in these Company Disclosure Schedules but not
defined herein shall have the meanings ascribed to such terms in the
Securities Purchase Agreement (the "Agreement").
2. Headings and captions in these Company Disclosure Schedules are for
convenience of reference only and shall in no way modify or affect, or be
considered in construing or interpreting any information provided herein.
17
<PAGE>
SCHEDULE 2.1(A)
SUBSIDIARIES
------------
1. Dan Capital Corp. (a Delaware Corporation)
2. ECM Pharma(TM), Inc. (a Delaware Corporation)
18
<PAGE>
SCHEDULE 2.1(C)
CAPITALIZATION
--------------
As of March 19, 1999
1. Common Stock The authorized capital stock of the Corporation consists of
40,000,000 shares of Common Stock, of which:
(A) 30,454,300 shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable (exclusive of 40,000
treasury shares);
(B) 6,682,997 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;
(C) 663,712 shares are duly authorized and reserved for issuance for the
conversion of Series C Convertible Preferred Stock and upon exercise
of warrants related to this stock;
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 Convertible
Preferred Stock, all of which shares of Series A Convertible Preferred
stock have been issued and converted into Common Stock; and
(B) 50,000 shares have been designated as Series B Junior Participating
Preferred Stock, all of which are duly authorized and unissued.
(C) 200 shares have been designated as Series C Convertible Preferred
Stock, 62 of which are authorized, validly issued and outstanding,
fully paid and nonassessable and 138 of which have been issued and
converted into Common Stock.
(D) 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.
19
<PAGE>
3. Shareholder Rights Plan. The Company has adopted a Shareholder Rights Plan
as disclosed in SEC Disclosure Documents.
4. Description of the Rights of the Holders of Series C Preferred Stock and
Placement Agent Warrants. Pursuant to a Securities Purchase Agreement dated
March 26, 1998, the Company sold an aggregate amount of $20 million of
Convertible Preferred Stock and warrants in a private placement with two
institutional investors. The Company sold 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 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) $28.80 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 number of shares of Common Stock into which
the investors, in the aggregate, may convert the Preferred Stock is subject
to certain limits. 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 was 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 was 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 became 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 200,000 three year warrants to purchase Common Stock at
$31.20 per share. The warrants may be exercised at any time prior to April
2001. In July 1998, the investors exercised their right to receive
additional warrants to purchase 150,000 shares of common stock at $17.45 per
share with an expiration date of March 26, 2001. We also issued a warrant to
purchase an aggregate of 50,000 shares of common stock at $28.80 per share
to the Placement Agent that expires March 25, 2001. No further warrants may
be issued under the Series C preferred stock placement. A registration
statement
20
<PAGE>
covering 1,800,000 shares of Common Stock pursuant to the foregoing was
filed by the Company in April 1998 and declared effective on May 5, 1998.
In May, September and November 1998, an aggregate of $13,800,000 face
amount of the Series C Preferred Stock was converted into Common Stock
resulting in the issuance of approximately 1,136,000 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.
5. Stock Issuance and Registration Rights of Novartis Pharma. Shares of Common
Stock that have been or will be issued to Novartis Pharma A.G. (formerly
"Sandoz") pursuant to a Stock Purchase Agreement dated January 17, 1996 are
subject to registration rights. We received $6,000,000 from Novartis in 1998
relating to milestone equity investments for approximately 212,000 shares of
Common Stock. As a result of these equity investments and a prior equity
investment of $5,000,000 made in January 1996, Novartis held approximately
2.2% of the Company's outstanding shares as of December 31, 1998.
6. We are currently negotiating an asset purchase transaction that may involve
the issuance of up to 50,000 shares of the Company's Common Stock subject to
registration rights.
21
<PAGE>
SCHEDULE 2.1(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.
22
<PAGE>
SCHEDULE 2.1(G)
LITIGATION; PROCEEDINGS
-----------------------
1. No material litigation.
23
<PAGE>
EXHIBIT 4(i)
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "AGREEMENT") is made and entered
---------
into as of March 30, 1999, between Organogenesis Inc. a corporation organized
and existing under the laws of the State of Delaware (the "COMPANY"), and those
-------
Purchasers listed on Schedule I annexed hereto (the "PURCHASERS").
----------
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "PURCHASE
--------
AGREEMENT").
- ---------
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
-----------
shall have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 3(m).
------
"AFFILIATE" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
---------- ----------- ----------
correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the
Commonwealth of Massachusetts generally are authorized or required by law or
other government actions to close.
"CLOSING DATE" shall have the meaning set forth in the Purchase
------------
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
----------
"COMMON STOCK" means the Company's Common Stock, $.01 par value per
------------
share.
"CONVERTIBLE NOTE" means the 7% Convertible Subordinated Note Due
----------------
March 29, 2004 issued to the Purchasers pursuant to the Purchase Agreement.
"EFFECTIVENESS DATE" means the 90th day following the Closing Date.
------------------
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
--------------------
2(a).
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
------------
"FILING DATE" means the 45th day following the Closing Date.
-----------
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
------ -------
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
-----------------
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
------------------
"LOSSES" shall have the meaning set forth in Section 5(a).
------
"PERSON" means an individual or a corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
----------
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means (a) the shares of Common Stock issuable
----------------------
upon (i) conversion of the Convertible Notes, (ii) exercise of the Warrants
issued by the Company to the Purchasers, and (iii) payment of interest in
respect of such Convertible Notes and (iv) as a result of any stock split, stock
dividend, recapitalization, combination, merger, consolidation, distribution or
similar event or otherwise with respect to the Shares referenced in (i) through
(iii) above, as to which the Company shall file an exchange listing application
pursuant to Section 3.7 of the Purchase Agreement, and (b) the Warrants.
"REGISTRATION STATEMENT" means the registration statements
----------------------
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
2
<PAGE>
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
--------------
"WARRANTS" means the Warrants issued pursuant to the Purchase
--------
Agreement.
2. Registration. (a) On or prior to the Filing Date the Company shall
------------
prepare and file with the Commission a Registration Statement covering all
Registrable Securities. The Registration Statement shall be on Form S-3 (except
if otherwise directed by the Holders of a majority in interest of the applicable
Registrable Securities in accordance herewith or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith). The Company shall (i) not permit any securities other than (a) the
Registrable Securities (and the shares issued or issuable to Novartis Pharma,
A.G. (f/k/a/ "Sandoz") under an agreement dated January 17, 1996) and (b) such
other shares of other third party holders totaling not more than 100,000 shares
of Company Common Stock, to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until the
later of the date which is one year after the date that such Registration
Statement is declared effective by the Commission or such date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter, addressed to
the Company's transfer agent to such effect (the "EFFECTIVENESS PERIOD");
--------------------
provided, however, that the Company shall not be deemed to have used its best
- -------- -------
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
(b) Piggy-Back Registrations. If at any time when there is not an
------------------------
effective Registration Statement the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for the
account of the Company or others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall
3
<PAGE>
send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Securities such holder
requests to be registered. No right to registration of Registrable Securities
under this Section shall be construed to limit any registration otherwise
required hereunder. Notwithstanding the foregoing, if the managing underwriter
shall advise the Company and the Holders of the Registrable Securities in
writing that, in its opinion, the inclusion of the Registrable Securities could
materially adversely effect the offering, then the managing underwriter may
elect to exclude all or such portion of such Registrable Securities from such
offering, provided that the managing underwriter may only exclude any of the
Registrable Securities to the same extent, on a pro rata basis, that it excludes
securities of other holders. The Company shall have the right to withdraw any
such proposed registration statement, or to withdraw the same after the filing,
but prior to the effective date thereof.
(c) Liquidated Damages. If the Registration Statement is not filed on
------------------
or before the Filing Date or is not declared effective on or before the
Effectiveness Date, the Conversion Price of the Note shall be decreased as
provided in Section 5.4 of the Note.
3. Registration Procedures. In connection with the Company's
-----------------------
registration obligations hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or such other form if the Company
is not then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form in
accordance herewith) in accordance with the method or methods of distribution
thereof as specified by the Holders (except if otherwise directed by the
Holders), and cause the Registration Statement to become effective as soon as
possible, but in no event later than the Effectiveness Date, and to remain
effective as provided herein; provided, however, that not less than seven (7)
-------- -------
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference), the
Company shall (i) furnish to the Holders copies of all such documents proposed
to be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders and
their counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities or their counsel, shall reasonably object in writing
within five (5) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration
4
<PAGE>
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and promptly provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and their
counsel immediately (and, in the case of (c)(i)(A) below, not less than five
(5) days prior to such filing) and (if requested by any such Person) confirm
such notice in writing no later than one (1) Business Day following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any 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.
(d) Use its best efforts to prevent the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder and their counsel, without charge, at
least one conformed copy of the Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by
5
<PAGE>
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(g) Use its best efforts to register or qualify or cooperate with the
selling Holders and their counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
- -------- -------
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(h) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends (other than legends relating to the existence of any
shareholder rights or similar agreement then in effect to which the Holders are
party and which legend appears on all other certificates for the Company's
Common Stock), and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request at
least two Business Days prior to any sale of Registrable Securities.
(i) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an 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 under which they were made,
not misleading.
(j) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement to be listed on the American Stock Exchange and
any other securities exchange, quotation system, market or over-the-counter
bulletin board, if any, on which similar
6
<PAGE>
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.
(k) Make available for inspection by the selling Holders, a
representative of such Holders, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
attorney or accountant in connection with the Registration Statement; provided,
--------
however, that any information that is determined in good faith by the Company in
- -------
writing to be of a confidential nature at the time of delivery of such
information shall not be available to such Persons unless and until such Persons
shall have entered into a confidentiality agreement with the Company with
respect thereto.
(l) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of the Company after the effective
date of the Registration Statement, which statement shall cover said 12-month
period, or such shorter periods as is consistent with the requirements of Rule
158.
(m) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(n) If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
The Purchasers covenant and agree that (i) they will not sell any
Registrable Securities under the Registration Statement until they have received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) the Purchasers and, if applicable, their officers,
directors or Affiliates, if any, will comply with the prospectus delivery
requirements of the Securities Act as applicable to them in connection with
sales of Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon
7
<PAGE>
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(j), or until it is
------------
advised in writing (the "ADVICE") by the Company that the use of the applicable
------
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
Notwithstanding anything to the contrary in this Section 3, at any
time after the Registration Statement has been declared effective, the Company
may delay the filing or effectiveness of a Registration Statement and delay the
disclosure of any information concerning the Company if the Board of Directors
of the Company determines in good faith that in its reasonable business judgment
such disclosure would interfere in any material respect with any financing,
acquisition, corporate reorganization or other transaction or development
involving the Company that in the reasonable good faith business judgment of
such board is a transaction or development that is or would be material to the
Company and, in the opinion of counsel to the Company, such disclosure is not
otherwise required (a "Grace Period"); provided, that the Company shall promptly
(i) notify the Holders in writing of the existence of material non-public
information giving rise to a Grace Period and the date on which the Grace Period
will begin, and (ii) notify the Holders in writing of the date on which the
Grace Period ends; and, provided further, that (A) during any consecutive 120
day period, the Grace Period shall not exceed thirty (30) calendar days in the
aggregate, and (B) during any consecutive 365 day period, the Grace Period shall
not exceed forty-five (45) calendar days in the aggregate. For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Holders receive the notice referred to in clause (i) of
this paragraph and shall end on and include the date the Holders receive the
notice referred to in clause (ii) of this paragraph.
4. Registration Expenses. All fees and expenses incident to the
---------------------
performance of or compliance with this Agreement by the Company shall be borne
by the Company and whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with The American Stock Exchange and each other securities
exchange or market on which Registrable Securities are required hereunder to be
listed and (B) in compliance with state securities or Blue Sky laws, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of photocopying prospectuses), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of
8
<PAGE>
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
Any fees of counsel to the Purchasers shall be borne by the Purchasers.
5. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall,
------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors and agents and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, reasonable costs (including, without limitation,
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising out
------
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by or on behalf of such Holder expressly for
use therein, or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
--------------------------
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses arising
solely out of or based solely upon any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the gross proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
--------------------------------------
be brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED
-----------
9
<PAGE>
PARTY"), such Indemnified Party promptly shall notify the Person from whom
- -----
indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the Indemnifying
------------------
Party shall have the right to participate in, and to the extent the Indemnifying
Party so desires, to assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 30 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
--------
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally determined that such Indemnified Party is not entitled
to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
------------
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such
10
<PAGE>
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), each Purchaser shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 5
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144. The Company shall file the reports required to be filed by
--------
it under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
7. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder,
--------
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this
11
<PAGE>
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
it of any of the provisions of this Agreement and hereby further agrees that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as described herein, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person.
(c) No Piggyback on Registrations. Except as set forth herein,
-----------------------------
neither the Company nor any of its security holders (other than the Purchasers
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not enter into any
agreement providing any such right to any of its securityholders.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
-------- -------
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
-------- -------
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(e) Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern
Standard time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (Eastern Standard time) on any date and earlier than 11:59 p.m. (Eastern
Standard time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
If to the Company: Organogenesis Inc.
12
<PAGE>
150 Dan Road
Canton, MA 02021
Attn: Herbert M. Stein, Chairman
Attn: Donna L. Abelli, Chief Financial Officer
Facsimile No.: (781) 575-1570
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Neil H. Aronson, Esquire
John J. Cheney, Esquire
Facsimile No.: (617) 542-2241
If to the Purchasers: To the Purchasers at the Addresses
Listed on Schedule I
With copies to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attn: Ezra G. Levin, Esquire
Facsimile No.: (212) 715-8000
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder.
(g) Assignment of Registration Rights. The rights of the Purchasers
---------------------------------
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Purchasers to any assignee or transferee of all
or a portion of the Notes, the Warrants or the Registrable Securities if: (i)
each such Purchaser 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 proposed 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) at or before the time the Company receives the written notice
contemplated by clause (ii) of this Section, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions of this
Agreement, and (iv) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Purchasers (and to subsequent) successors and assigns.
13
<PAGE>
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Massachusetts, without regard
to principles of conflicts of law.
(j) Cumulative Remedies. The remedies provided herein are cumulative
-------------------
and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this REGISTRATION RIGHTS
AGREEMENT as of the date first written above.
ORGANOGENESIS INC.
By:____________________________________
Herbert M. Stein, Chairman and
Chief Executive Officer
PURCHASERS
Purchaser Name:
______________________________________
By:___________________________________
Name:_________________________________
Title:________________________________
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,467
<SECURITIES> 9,466
<RECEIVABLES> 17,500
<ALLOWANCES> 0
<INVENTORY> 733
<CURRENT-ASSETS> 31,966
<PP&E> 18,437
<DEPRECIATION> 9,749
<TOTAL-ASSETS> 41,248
<CURRENT-LIABILITIES> 3,805
<BONDS> 17,682
0
0
<COMMON> 305
<OTHER-SE> 19,456
<TOTAL-LIABILITY-AND-EQUITY> 41,248
<SALES> 0
<TOTAL-REVENUES> 679
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,926)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,926)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
