<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 June 30, 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
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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 August 2, 1999 was 30,485,630 shares (excluding treasury shares).
<PAGE>
ORGANOGENESIS INC.
Index
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<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets
at December 31, 1998 and June 30, 1999.......................... 3
Consolidated Statements of Operations
for the three and six months ended June 30, 1998 and 1999....... 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1999................. 5
Notes to Consolidated Financial Statements............................ 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 10
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................... 16
Item 5 - Other Information..................................................... *
Item 6 - Exhibits and Reports on Form 8-K...................................... 17
Signatures..................................................................... 18
</TABLE>
* 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, June 30, 1999
1998 (unaudited)
------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,052 $ 4,051
Investments 12,789 16,350
Inventory 730 780
Other current assets 441 1,138
------------- --------------
19,012 22,319
Property and equipment -
Less accumulated depreciation of $9,339 and $10,208 7,605 10,526
Other assets 93 646
------------- --------------
$ 26,710 $ 33,491
============= ==============
Liabilities
Current liabilities:
Accounts payable $ 1,036 $ 474
Accrued expenses 2,435 2,733
------------- --------------
3,471 3,207
Long-term debt - 17,772
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 June 30, 1999, respectively - -
Common stock, par value $.01; authorized 80,000,000 shares:
issued and outstanding 30,479,719 and 30,526,753 shares
as of December 31, 1998 and June 30, 1999, respectively 305 305
Additional paid-in capital 124,342 127,340
Accumulated deficit (101,017) (114,533)
Treasury stock at cost, 40,000 and 60,000 shares as of
December 31, 1998 and June 30, 1999, respectively (391) (600)
------------- --------------
Total stockholders' equity 23,239 12,512
------------- --------------
$ 26,710 $ 33,491
============= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ORGANOGENESIS INC.
Consolidated Statements of Operations
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
For the For the
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Research and development support
from related party $ 4,750 $ - $ 6,750 $ -
Product sales to related party,
royalties and other income 308 624 502 1,111
Interest income 321 314 393 507
----------- ----------- ----------- -----------
Total revenues 5,379 938 7,645 1,618
----------- ----------- ----------- -----------
Costs and Expenses:
Research, development and operations 3,873 5,568 7,786 10,661
General and administrative 1,191 1,654 2,411 3,168
Non-recurring, non-cash purchase of
technology - 900 - 900
Interest expense, net - 405 - 405
----------- ----------- ----------- -----------
Total costs and expenses 5,064 8,527 10,197 15,134
----------- ----------- ----------- -----------
Net income (loss) $ 315 $ (7,589) $ (2,552) $ (13,516)
=========== =========== =========== ===========
Net income (loss) per common share
- basic and diluted $ .01 $ (.25) $ (.09) $ (.44)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - basic and diluted 29,281,065 30,468,876 29,120,006 30,460,791
=========== =========== =========== ===========
</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
Six Months
Ended June 30,
------------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,552) $(13,516)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 700 869
Amortization of warrants and deferred debt issuance costs
relating to long-term debt - 113
Issuance of treasury stock for purchase of technology - 900
Changes in assets and liabilities:
Other current assets (709) (747)
Accounts payable 288 (562)
Accrued expenses 201 298
Deferred rent payable (21) -
-------- --------
Cash used in operating activities (2,093) (12,645)
-------- --------
Cash flows from investing activities:
Capital expenditures (456) (3,690)
Purchases of investments (14,166) (19,000)
Sales/maturities of investments 6,536 15,439
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Cash used in investing activities (8,086) (7,251)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 20,000
Deferred debt issuance costs - (575)
Proceeds from sale of preferred stock, net 19,117 -
Proceeds from sale of common stock 6,000 -
Proceeds from exercise of stock options 915 218
Purchase of treasury stock - (748)
-------- --------
Cash provided by financing activities 26,032 18,895
-------- --------
Increase (decrease) in cash and cash equivalents 15,853 (1,001)
Cash and cash equivalents, beginning of period 333 5,052
-------- --------
Cash and cash equivalents, end of period $ 16,186 $ 4,051
======== ========
</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 six
months ended June 30, 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. 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, June 30, 1999
1998 (unaudited)
------------ -------------
<S> <C> <C>
Raw Materials $ 300 $316
Work in Process 430 464
----- ----
$ 730 $780
===== ====
</TABLE>
3. Other Current Assets:
---------------------
Included in other current assets is a net receivable due from Novartis
of approximately $213,000 at December 31, 1998 and $471,000 at June 30, 1999.
Cash payments were collected subsequent to June 30, 1999.
6
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4. 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 is
amortized as a non-cash charge to interest expense over the life of the
debentures using the effective interest rate method.
In May 1999, we filed a registration statement for 2,096,333 shares of
common stock, of which 2,046,333 relates to the conversion of the debentures,
payment of interest and exercise of the warrants. All shares have been reserved
for issuance. The Securities and Exchange Commission declared this registration
statement effective on May 27, 1999.
Debt issuance costs are included in other assets and are amortized to
interest expense over the life of the debentures using the effective interest
rate method.
5. Commitments:
-----------
Lease Obligations
We occupy our current premises under a lease that expires on September 30,
2004. This lease has three options to extend the term for an additional five
years per option. We have provided written notice to the landlord of our intent
to lease all of the remaining space at this primary facility starting November
1, 1999. Taxes, insurance and operating expenses are our responsibility under
the terms of the lease. We also have a second lease for warehouse and office
space that expires on October 31, 1999. In January 1999, we entered into a
noncancelable operating lease for certain office equipment.
In May 1999, we entered into a lease for approximately 65,000 square feet
of additional office and warehouse space in Canton, Massachusetts at an annual
average base rent of approximately $442,598, plus operating expenses. This lease
has three options to extend the term for an additional five years per option.
7
<PAGE>
Future minimum lease payments are as follows (in thousands):
1999 $ 791
2000 1,240
2001 1,261
2002 1,281
2003 1,267
Thereafter 1,038
------
$6,878
======
Construction-in-Progress
At June 30, 1999, we had approximately $2,978,000 in construction in
progress relating to expansion of our main facility. Additionally, we have
committed approximately $2.1 million for this build-out. The total project cost
is estimated at about $5.9 million.
Interest cost incurred during the period of construction in progress
relating to expansion of our main facility is capitalized. The interest cost
capitalized for the six months ended June 30, 1999 was $58,000. No interest was
capitalized in 1998.
Series C Preferred Stock Commitment
At June 30, 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.
Purchase of Technology
In April 1999, we purchased certain equipment 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. In May 1999, we filed a
registration statement registering all 50,000 of 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 the twenty consecutive trading days immediately prior to
the earlier of the date we receive FDA approval of an Investigational Device
Exemption for a liver assist device or January 1, 2003. We will have no
obligation to make such future cash payment if at any time during the period
between April 2000 and the date such cash payment is otherwise payable by us,
the value of the shares of common stock issued to Baxter is equal to or greater
than $1,000,000. Total consideration is $1,000,000 of which $900,000 is a one-
time, non-cash charge for the three and six months ended June 30, 1999, with the
remainder of this purchase capitalized to property and equipment.
8
<PAGE>
6. 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. During the first half of 1999, we repurchased 70,000 shares
of common stock for an aggregate purchase price of approximately $748,000 and
reissued 50,000 shares of common stock related to the purchase of technology
(see "Purchase of Technology" note). We had in treasury 40,000 shares of common
stock at a cost of $391,000 and 60,000 shares of common stock at a cost of
$600,000, at December 31, 1998 and June 30, 1999, respectively.
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
from Novartis of $93,000 and $232,000 for the three and six months ended June
30, 1999 relating to our initiation of these programs. This amount is included
in "Product sales to related party, royalties and other income".
8. Research, Development and Operations:
------------------------------------
In addition to research and development, this cost category includes
expenses of our manufacturing and related operating support departments and
costs to manufacture products for research and for sale as we continue our
expansion.
<TABLE>
<CAPTION>
For the For the
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Research and development $ 2,176 $ 2,878 $ 4,451 $ 5,666
Operations and production 1,697 2,690 3,335 4,995
------- ------- ------- -------
Total research, development
and operations $ 3,873 $ 5,568 $ 7,786 $10,661
======= ======= ======= =======
</TABLE>
9
<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 for the treatment of venous leg ulcers, a type
of chronic wound. Apligraf is the only 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. Novartis expects to initiate product introduction among key
physicians in select European countries in the fall of 1999.
Apligraf(R) is a registered trademark of Novartis.
10
<PAGE>
The next large potential market for Apligraf is expected to be diabetic
foot ulcers. The Apligraf pivotal trial in diabetic foot ulcers has been
completed and the data are being analyzed. We plan to present these data at a
medical meeting in August and to submit a PMA supplement for diabetic foot
ulcers to the FDA within the next six months. An eighteen-patient study
of Apligraf in the treatment of epidermolysis bullosa, a genetic skin disease,
has been completed under an investigator-sponsored investigational device
exemption (IDE). The data from this study have been submitted to the FDA. Data
have also been presented and/or published with Apligraf in the treatment of
burns, wounds due to dermatologic surgery and donor site wounds. A pivotal trial
to assess the effect of Apligraf on the cosmetic outcome of wounds due to skin
cancer removal is underway.
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 were $938,000 and $1,618,000 for the three and six months
ended June 30, 1999 compared to $5,379,000 and $7,645,000, for the same periods
in 1998. Research and development support under the collaborative agreement with
Novartis was $4,750,000 and $6,750,000 for the three and six months ended June
30, 1998. No research and development support payments were earned in the first
half of 1999 under this agreement. Product sales to related party, royalties and
other income increased to $624,000 and $1,111,000 for the three and six months
ended June 30, 1999, compared to $308,000 and $502,000, for the same periods in
1998 due to increased sales of product to Novartis and Novartis funding of
certain programs. We expect Apligraf commercial sales to increase. Interest
income was $314,000 and $507,000 for the three and six months ended June 30,
1999, compared to $321,000 and $393,000 for the same periods in 1998. The six
month 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 $5,568,000 and $10,661,000 for the three and six months ended June
30, 1999, compared to $3,873,000 and $7,786,000 for the same periods 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. Activities for this period that account for
the increased costs also include expansion of Apligraf operations, the Apligraf
diabetic ulcer and cosmetic outcome pivotal trials, the VITRIX(TM) soft tissue
replacement preclinical program, and the liver assist device research program.
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 increase and our margins to improve. We expect to continue
to expand manufacturing operations and advance the product pipeline during 1999.
11
<PAGE>
General and administrative expenses: Our G&A expenses increased to
-----------------------------------
$1,654,000 and $3,168,000 for the three and six months ended June 30, 1999,
compared to $1,191,000 and $2,411,000 for the same period in 1998. The increase
was primarily due to personnel additions and increased professional fees.
Other costs and expenses: Included in costs and expenses is a one-time,
------------------------
non-cash charge of $900,000 relating to the purchase of technology. Interest
expense was $405,000 for the three and six months ended June 30, 1999 due to the
issuance of convertible debentures in March 1999.
As a result of the net effect described, we incurred a net loss of
$7,589,000, or $.25 per share (basic and diluted), and $13,516,000, or $.44 per
share (basic and diluted), for the three and six months ended June 30, 1999,
respectively, compared to net income of $315,000, or $.01 per share (basic and
diluted), and a net loss of $2,552,000, or $.09 per share (basic and diluted),
for the comparable 1998 periods. 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 June 30, 1999, we had cash, cash equivalents and investments in the
aggregate amount of $20,401,000 and working capital of $19,112,000, 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 six months ended June 30, 1999 was
$12,645,000, compared to $2,093,000 for the six months ended June 30, 1998,
primarily for financing our ongoing research, development and manufacturing
operations.
Capital Spending
Capital expenditures were $3,690,000 and $456,000 during the six months
ended June 30, 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 have committed approximately $2.1 million 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.
12
<PAGE>
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 six months ended June 30, 1999,
financing activities provided additional cash and working capital of $18,895,000
primarily 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 $218,000. Financing activities provided cash of
approximately $26,032,000 for the six months ended June 30, 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 $6,000,000 from
Novartis; and the exercise of stock options of $915,000.
At June 30, 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.
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. We will need additional capital
within the next year to continue under our current plan. 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.
13
<PAGE>
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.
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 and nearly
complete. 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. Contingency plans and related cost estimates will be continually
refined as additional information becomes available.
14
<PAGE>
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;
. Risk of manufacturing disruptions or production failures;
. 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.
15
<PAGE>
ORGANOGENESIS INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
We held our Annual Meeting for Stockholders on May 14, 1999. At the meeting,
Messrs. Richard S. Cresse, Albert Erani, Bjorn R. Olsen, Ms. Marguerite A.
Piret, David T. Rovee, Anton E. Schrafl and Herbert M. Stein, were re-elected as
Directors. The vote with respect to each nominee is set forth below:
Vote For Vote Withheld
-------- -------------
Mr. Cresse 27,875,700 493,627
Mr. Erani 27,872,991 496,336
Dr. Olsen 27,872,607 496,720
Ms. Piret 27,875,943 493,384
Dr. Rovee 27,872,569 496,758
Dr. Schrafl 27,875,943 493,384
Mr. Stein 27,875,700 493,627
In addition, the stockholders authorized the following:
. An increase in the number of authorized shares of common stock from
40,000,000 to 80,000,000 shares, by a vote of 27,669,495 shares for,
622,265 shares against, 77,567 shares abstaining and 2,084,973 shares non-
voting;
. An amendment to our 1991 Employee Stock Purchase Plan to extend the plan
for an additional five years and to adjust the number of shares authorized
to be issued under each offering period to 30,000; by a vote of 12,780,923
shares for, 882,339 shares against, and 143,578 shares abstaining;
. An amendment to our 1995 Stock Option Plan to increase the number of shares
of common stock available for issuance pursuant to options granted from
2,929,688 to 5,000,000; by a vote of 12,034,104 shares for, 1,608,147
shares against, and 164,588 shares abstaining;
. The ratification of the selection by the Board of Directors of
PricewaterhouseCoopers LLP as our independent accountants for the 1999
fiscal year; by a vote of 28,220,644 shares for, 88,533 shares against,
60,150 shares abstaining and 2,084,973 shares non-voting.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Restated Certificate of Incorporation of the Company as amended
10(m) Lease Agreement between North Queen Street LP and the Company,
dated as of May 21, 1999
10(n) First Amendment to Lease Agreement between North Queen Street
LP and the Company, dated as of June 18, 1999
10(o) Asset Purchase Agreement between the Company and Baxter
Healthcare Corporation, dated as of April 14, 1999
27 Financial Data Schedule (filed with electronic submission only)
(b) No current reports on Form 8-K were filed during the quarter ended June 30,
1999.
17
<PAGE>
ORGANOGENESIS INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Organogenesis Inc.
(Registrant)
Date: August 16, 1999 /s/ Herbert M. Stein
--------------- --------------------
Herbert M. Stein, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: August 16, 1999 /s/ Donna Abelli Lopolito
--------------- -------------------------
Donna Abelli Lopolito, Vice President Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
18
<PAGE>
ORGANOGENESIS INC.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
3(i) Restated Certificate of Incorporation of the Company as amended
10(m) Lease Agreement between North Queen Street LP and the Company,
dated as of May 21, 1999
10(n) First Amendment to Lease Agreement between North Queen Street LP
and the Company, dated as of June 18, 1999
10(o) Asset Purchase Agreement between the Company and Baxter
Healthcare Corporation, dated as of April 14, 1999
27 Financial Data Schedule (filed with electronic submission only)
19
<PAGE>
EXHIBIT 3(I)
RESTATED
CERTIFICATE OF INCORPORATION
OF
ORGANOGENESIS INC.
Pursuant to Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware
We, the undersigned, Eugene Bell and Crispin B. Weinberg, President and
Secretary, respectively, of Organogenesis Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the provisions of the
Delaware Corporation Law, the Certificate of Incorporation of which was filed in
the office of the Secretary of State of the State of Delaware on May 6, 1985, DO
HEREBY CERTIFY THAT this Restated Certificate of Incorporation has been duly
adopted by the holders of a majority of the issued and outstanding shares of the
Common Stock and by the holders of a majority of the issued and outstanding
shares of the Series A Preferred Stock of the Corporation in accordance with the
provisions of Sections 228, 242 and 245 of the Delaware Corporation Law and
written notice of such adoption has been given to all stockholders who have not
so consented in writing.
FIRST. The name of the Corporation is: Organogenesis Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act of activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is 10,000,000 shares of Common Stock, $.01 par value per
share, and 500,000 shares of Preferred Stock, $1.00 par value per share.
The following is a statement of the designations and powers, preferences
and rights, and the relative, participating, optional or other special rights,
and the qualifications, limitations ad restrictions granted to or imposed upon
the respective classes of shares of capital stock of the Corporation or the
holders thereof:
<PAGE>
A. Common Stock
- -- ------------
The voting and dividend rights, and the rights in the event of the
liquidation of the Corporation, of the holders of the Common Stock are subject
to and qualified by such rights of the holders of the Preferred Stock of any
series as the Board of Directors may designate upon the issuance of the
Preferred Stock of any series.
The holders of the Common Stock are entitled to one vote for each share
held at all meetings of stockholders. There shall be no cumulative voting.
Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors and subject
to any preferential dividends rights of any then outstanding Preferred Stock.
Upon the dissolution or liquidation of the Corporation, whether voluntary
or involuntary, holders of Common Stock will be entitled to receive pro rata all
net assets of the Corporation available for distribution after payment of
creditors and of any preferential liquidation rights of any then outstanding
Preferred Stock.
No holder of shares of the Common Stock shall be entitled as such, as
a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever of the Corporation, or of
securities convertible into stock of any class, whether now or hereafter
authorized, or whether issued for cash or other consideration or by way of
dividend.
B. Preferred Stock
- -- ---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purpose of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of shares thereof, to determine and fix such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special
2
<PAGE>
rights and qualifications, limitations or restrictions thereof, including
without limitation thereof, dividend rights, conversion rights, redemption
privileges and liquidations preferences, as shall be stated and expressed in
such resolutions, all to the full extent now or hereafter permitted by the
General Corporation Law of Delaware. Without limiting the generality of the
foregoing, the resolutions providing for the issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. No vote of the holders of the Preferred Stock or Common Stock shall be a
prerequisite to the issuance of any series of any shares of the Preferred Stock
authorized by and complying with the conditions of this Certificate of
Incorporation, the right to have such vote being expressly waived by all present
and future holders of the capital stock of the Corporation.
No holder of shares of the Preferred Stock shall be entitled as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class whatsoever of the Corporation, or of securities
convertible into stock of any class, whether now or hereafter authorized, or
whether issued for cash or other consideration or by way of dividend.
C. Series A Convertible Preferred Stock
- -- ------------------------------------
1. Designation. One Hundred Twenty-Four Thousand Nine Hundred Ninety-Five
-----------
shares of the authorized Preferred Stock of the Corporation are hereby
designated "Series A Convertible Preferred Stock" (hereafter "Series A Preferred
Stock"). The powers, designations, preferences and relative, participating,
optional or other special rights of, and the qualifications, limitations or
restrictions upon, the Series A Preferred Stock shall be as set forth in this
Part C of Article FOURTH of this Restated Certificate of Incorporation.
2. Dividends. In each fiscal year of the Corporation, the holders of shares of
---------
Series A Preferred Stock shall be entitled to receive, before any cash dividends
shall be declared and paid upon or set aside for the Common Stock in such fiscal
year, when and as declared by the Board of Directors of the Corporation out of
the funds legally available for that purpose, dividends payable in cash in an
amount per share for such fiscal year at least equal the product of (i) the per
share amount, if any, of the cash dividend declared, paid or set aside for the
Common Stock during such fiscal year, multiplied by (ii) the number of whole
shares of Common Stock into which each such share of Series A Preferred Stock is
then convertible.
3
<PAGE>
3. Liquidation, Dissolution or Winding Up.
- -- --------------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series A Preferred Stock (such Common
Stock and other stock being collectively referred to as "Junior Stock") by
reason of their ownership thereof, an amount equal to $3.00 per share (subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares). If upon
any such remaining assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series A
Preferred Stock the full amount to which they shall be entitled, the holders of
shares of Series A Preferred Stock and any class or series of stock ranking on
liquidation on a parity with the Series A Preferred Stock shall share ratably in
any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to be
paid to the holders of Senior Preferred Stock, Series A Preferred Stock and any
other class or series of stock of the Corporation ranking on liquidation on a
parity with the Series A Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) The merger or consolidation of the Corporation into or with
another corporation (except if the Corporation is the surviving entity), or the
sale of all or substantially all of the assets of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of the Section 3.
4. Voting. Each holder of outstanding shares of Series A Preferred
------
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares
4
<PAGE>
of Series A Preferred Stock held by such holder are convertible (as adjusted
from time to time pursuant to Section 5 hereof), at each meeting of stockholders
of the Corporation (and written actions of stockholders in lieu of meetings)
with respect to any and all matters presented to the stockholders of the
Corporation for their action or consideration. Except as provided by law or by
the provisions establishing any other series of Series Preferred Stock, holders
of Series A Preferred Stock an of any other outstanding series of Series
Preferred Stock shall vote together with the holders of Common Stock as a single
class.
5. Optional Conversion. The holders of the Series A Preferred Stock
-------------------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
----------------
be convertible, at the option of the holder thereof, at any time and from time
to time, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $3.00 by the Conversion Price (as defined below) in
effect at the time of conversion. The conversion price at which shares of Common
Stock shall be deliverable upon conversion of Series A Preferred Stock without
the payment of additional consideration by the holder thereof (the "Conversion
Price") shall initially be $3.00. Such initial Conversion Price, and the rate at
which shares of Series A Preferred Stock may be converted into shares of Common
Stock, shall be subject to adjustment as provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall
-----------------
be issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Series A Preferred Stock to
convert shares of Series A Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
A Preferred Stock, at the office of the transfer agent for the Series A
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series A
Preferred Stock represented by such certificate or
5
<PAGE>
certificates. Such notice shall state such holder's name or the names of the
nominees in which each holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The Corporation shall,
as soon as practicable after the Conversion Date, issue and deliver at such
office to such holder of Series A Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share.
(ii) The Corporation shall at all times when the Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any accrued and unpaid dividends on the
Series A Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series A Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor and payment of any
accrued and unpaid dividends thereon. Any shares of Series A Preferred Stock so
converted shall be retired and cancelled and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series A Preferred Stock accordingly.
(d) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after
6
<PAGE>
June 25, 1986 (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before
that subdivision shall be proportionately decreased. If the Corporation shall at
any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. An
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(e) Adjustment for Certain Dividends and Distributions.
--------------------------------------------------
In the event the Corporation at any time, or from time to time after the
Original Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event the Conversion Price then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of the close
of business on such record date and thereafter the Conversion Price shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions.
(f) Adjustments for Other Dividends and Distributions.
-------------------------------------------------
In the event the Corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, then
and in each such event provision shall be made so that the holders of such
series of Preferred Stock shall receive upon conversion thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation
7
<PAGE>
that they would have received had their Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period giving application
to all adjustments called for during such period, under this paragraph with
respect to the rights of the holders of the Preferred Stock.
(g) Adjustment for Reclassification, Exchange, or Substitution.
----------------------------------------------------------
If the Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.
(h) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is treated as a
liquidation pursuant to Subsection 3(c)), each share of Series A Preferred Stock
shall thereafter be convertible into the kind and amount of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such Series A Preferred
Stock would have been entitled upon such consolidation, merger or sale; and, in
such case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions in this Section 5
set forth with respect to the rights and interest thereafter of the holders of a
Series A Preferred Stock, to the end that the provisions set forth in this
Section 5 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(i) No impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms
8
<PAGE>
to be observed or performed hereunder by the Corporation, but will at all times
in good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(k) Notice of Record Date. In the event:
---------------------
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock
or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock or a stock divided
or stock distribution thereon), or of any consolidation or
merger of the Corporation into or with another corporation,
or of the sale of all or substantially all of the assets of
the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least
9
<PAGE>
ten days prior to the record date specified in (A) below or twenty days before
the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision or
combination, 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, distribution, subdivision or combination are to be
determined, or
(B) the date on which such reclassification, consolidation, merger,
sale dissolution, liquidation or winding up is expected to become
effective, 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 or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
6 Automatic Conversion.
--------------------
(a) All outstanding shares of Series A Preferred Stock shall
automatically be converted, without future action by the Corporation or the
holders of such shares, into shares of Common Stock at the then effective
conversion rate pursuant to Section 5, simultaneously with the closing of a
public offering of shares of securities of the Corporation, resulting in at
least $5,000,000 of net proceeds to the Corporation, pursuant to a registration
statement filed by the Corporation under the Securities Act of 1933, as amended
(other than an offering registered on Form S-8 or any similar form).
(b) All holders of record of shares of Series A Preferred Stock will
be given at least three days' prior written notice of the date fixed and the
place designated for conversion of all such shares of Series A Preferred Stock
pursuant to this Section 6. Such notice will be sent by first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series A Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). On or before the date fixed for conversion,
each holder of shares of Series A Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 6. On the date fixed for conversion, all rights with respect to the
Series A Preferred Stock so converted, including the rights, if any, to receive
notices and vote, will terminate, except only the rights
10
<PAGE>
of the holders thereof, upon surrender of their certificate or certificates
therefor, to receive certificates for the number of shares of Common Stock into
which such Series A Preferred Stock has been converted, and payment of any
accrued but unpaid dividends thereon. If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the date of such
automatic conversion and the surrender of the certificate or certificates for
Series A Preferred Stock, the Corporation shall cause to be issued and delivered
to such holder, or on his or its written order, a certificate or certificates
for the number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in Subsection 5(b) in
respect of any fraction of a share of Common Stock otherwise issuable upon such
conversion.
(c) All certificates evidencing shares of Series A Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and cancelled and the
shares of Series A Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
FIFTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be written ballot.
2. The Board of Directors is expressly authorized to adopt, amend
or repeal the By-Laws of the Corporation.
SIXTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
11
<PAGE>
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class or creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
SEVENTH. (A) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer, of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgements, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or hers heirs,
executors and administrators; provided, however, that, except as provided in
-------- -------
paragraph (B) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
-------- -------
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which
12
<PAGE>
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
(B) If a claim under paragraph (A) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not me the applicable standard of
conduct.
(C) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Section shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
(D) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the
13
<PAGE>
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
EIGHTH. A director of this corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and the Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
14
<PAGE>
EXECUTED at Cambridge, Massachusetts on October 27, 1986.
Attest:
/S/ CRISPIN B. WEINBERG /S/ EUGENE BELL
- ----------------------- -----------------
Crispin B. Weinberg, Eugene Bell, President
Secretary
15
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
ORGANOGENESIS INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
Organogenesis Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution was duly
adopted, pursuant to Section 242 of the General Corporation Law of the State of
Delaware, setting forth an amendment to the Certificate of Incorporation of the
Corporation and declaring said amendment to be advisable. The stockholders of
the Corporation duly approved said proposed amendment in accordance with Section
242 of the General Corporation Law of the State of Delaware. The stockholders
resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Restated Certificate of Incorporation
--------
of the Corporation be and hereby is deleted and the following Article FOURTH is
inserted in lieu thereof.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 20,000,000 shares of Common Stock, $.01 par value per
share, and 1,000,000 shares of Preferred Stock, $1,00 par value per share.
16
<PAGE>
The following is a statement of the designations and powers, preferences
and rights, and the relative, participating, optional or other special rights,
and the qualifications, limitations and restrictions granted to or imposed upon
the respective classes of shares of capital stock of the Corporation or the
holders thereof:
Preferred Stock
- ---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purpose of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without
limiting the generality of the foregoing, the resolutions providing for the
issuance of any series of Preferred Stock may provide that such series shall be
superior or rank equally or be junior to the Preferred Stock of any other series
to the extent permitted by law. No vote of the holders of the Preferred Stock
or Common Stock shall be a prerequisite to the issuance of any series of any
shares of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
No holder of shares of the Preferred Stock shall be entitled as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class whatsoever of the Corporation, or of securities
convertible into stock of any class, whether now or hereafter authorized, or
whether issued for cash or other consideration or by way of dividend.
17
<PAGE>
Common Stock
- ------------
The voting and dividend rights, and the rights in the event of the
liquidation of the Corporation, of the holders of the Common Stock are subject
to and qualified by such rights of the holders of the Preferred Stock of any
series as the Board of Directors may designate upon the issuance of the
Preferred Stock of any series.
The holders of the Common Stock are entitled to one vote for each share
held at all meetings of stockholders. There shall be no cumulative voting.
Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors and subject
to any preferential dividends rights of any then outstanding Preferred Stock.
Upon the dissolution or liquidation of the Corporation, whether voluntary
or involuntary, holders of Common Stock will be entitled to receive pro rata all
net assets of the Corporation available for distribution after payment of
creditors and of any preferential liquidation rights of any then outstanding
Preferred Stock.
No holder of shares of the Common Stock shall be entitled as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class whatsoever of the Corporation, or of securities
convertible into stock of any class, whether now or hereafter authorized, or
whether issued for cash or other consideration or by way of dividend.
IN WITNESS WHEREOF, Organogenesis Inc. has caused this Certificate of Amendment
to be signed by Eugene Bell, its President, and attested by Crispin B. Weinberg,
its Secretary, this 16 day of October, 1990.
ATTEST:
/S/ CRISPIN B. WEINBERG /S/ EUGENE BELL
- ----------------------- ---------------
Crispin B. Weinberg, Eugene Bell, President
Secretary
18
<PAGE>
CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE
OF INCORPORATION
OF
ORGANOGENESIS INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter referred to as the "Corporation")
is
ORGANOGENESIS INC.
2. The Restated Certificate of Incorporation of the Corporation, filed with the
Secretary of State of the State of Delaware on October 27, 1986, as amended
on October 18, 1990, is hereby further amended by deleting the first
paragraph of Article FOURTH in its entirety and replacing it with the
following paragraph in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 40,000,000 shares of
Common Stock, par value $0.01 per share, and 1,000,000 shares of Preferred
Stock, $1.00 par value per share.
3. The aforesaid Amendment of the Restated Certificate of Incorporation of the
Corporation was duly adopted pursuant to the applicable provisions of Sections
211 and 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by and attested by its duly authorized officers this 9th
day of August, 1996.
ORGANOGENESIS INC.
By: /S/ HERBERT M. STEIN
--------------------
Name: Herbert M. Stein
Title: Chief Executive Officer
ATTEST:
/S/ DONNA L. ABELLI
- -------------------
Donna L. Abelli
Secretary
19
<PAGE>
CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE
OF INCORPORATION
OF
ORGANOGENESIS INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter referred to as the "Corporation")
is
ORGANOGENESIS INC.
2. The Restated Certificate of Incorporation of the Corporation, filed with the
Secretary of State of the State of Delaware on October 27, 1986, as
amended on October 18, 1990 and on August 13, 1996, is hereby further
amended by deleting the first paragraph of Article FOURTH in its entirety
and replacing it with the following paragraph in lieu thereof:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 80,000,000 shares of
Common Stock, par value $0.01 per share, and 1,000,000 shares of Preferred
Stock, $1,00 par value per share.
3. The aforesaid Amendment of the Restated Certificate of Incorporation of the
Corporation was duly adopted pursuant to the applicable provisions of
Sections 211 and 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by and attested by its duly authorized officers this 30th
day of June, 1999.
ORGANOGENESIS INC.
By: /S/ HERBERT M. STEIN
--------------------
Name: Herbert M. Stein
Title: Chief Executive Officer
ATTEST:
/S/ DONNA L. ABELLI
- -------------------
Donna L. Abelli
Secretary
20
<PAGE>
EXHIBIT 10(M)
LEASE AGREEMENT
ARTICLE I
Reference Data
--------------
1.1 Subjects Referred To.
--------------------
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1.
DATE: May 21, 1999
PREMISES: Approximately 36,798 square feet of space shown crosshatched on
the plan attached hereto as Exhibit A ("Plan"), located in the
building ("Building") commonly known and numbered as 85 John
Road, Canton, Massachusetts, together with the use, in common
with others, of the common areas of the Building, including, but
not limited to, bathrooms, entryways, sidewalks, driveways and
parking areas. Tenant shall have, as appurtenant to the Premises
the right to use 110 parking spaces in the parking lot adjoining
the Building, in that area designated as "Organogenesis Parking"
on the Plan. The land ("Land") upon which the Building is located
is described on the Plan. The Land and the Building are
hereinafter sometimes collectively referred to as the "Property."
LANDLORD:
North Queen Street LP, a limited partnership.
ORIGINAL ADDRESS OF LANDLORD:
5 Campanelli Circle
Canton, Massachusetts 02021
LANDLORD'S CONSTRUCTION REPRESENTATIVE:
William Conroy
TENANT: Organogenesis, Inc., a Delaware corporation.
<PAGE>
ORIGINAL ADDRESS OF TENANT:
150 Dan Road
Canton, MA 02021
TENANT'S CONSTRUCTION REPRESENTATIVE:
Dan Rufo
TERM: Five (5) years and four (4) months plus any portion of a month
during which the Commencement Date shall occur if such date shall
not be the first day of the month.
COMMENCEMENT DATE:
The date of execution of this Lease.
RENT COMMENCEMENT DATE:
August 5, 1999
ANNUAL FIXED RENT RATE:
MONTHLY
YEAR ANNUAL FIXED RENT RENT
---- ----------------- -------------
Initial Term $221,130.00 $18,427.50
Option periods 95 % of Market Rent
determined in accordance with Section 4.1.1
ADDITIONAL
RENT:
All sums required to be paid under this lease by Tenant other
than Fixed Rent.
2
<PAGE>
PERMITTED USES:
Office, warehouse and distribution uses permitted under the zoning
by-law of the Town of Canton, Massachusetts. Tenant may use the
Premises for any other use which is both permitted under the
zoning by-law of the Town of Canton, Massachusetts and also
consistent with other uses in the Building, provided that Tenant
obtains an occupancy permit for such other use.
PUBLIC LIABILITY LIMITS:
Two Million Dollars ($2,000,000.00) per occurrence/Three Million
Dollars ($3,000,000.00) annual aggregate
TENANT'S PROPORTIONATE SHARE: 35%
OPERATING YEAR:
Each twelve (12) month period following the Commencement Date, or
any portion of which period occurs during the term of this Lease.
OPERATING STATEMENT:
A written statement prepared by the Landlord or its agent, setting
forth Landlord's computation of the sum payable by Tenant for
Operating Expenses for a specified Operating Year.
TAX YEAR:
Each twelve (12) month period following the Commencement Date, or any
portion of which period occurs during the term of this Lease.
1.2 Exhibits. The exhibits listed below in this section are incorporated in
--------
this Lease by reference and are to be construed as a part of this Lease:
EXHIBIT A
---------
Plan showing the Premises, including any appurtenances thereto.
EXHIBIT A-1
-----------
Description of the Land upon which the Building is located.
3
<PAGE>
EXHIBIT B
---------
Description of Tenant's Work, including plans and specifications.
EXHIBIT C
---------
Description of Signs
1.3 Table of Articles and Sections
------------------------------
ARTICLE I - Reference Data
- --------- --------------
1.1 Subjects Referred To........................................... 1
1.2 Exhibits....................................................... 3
1.3 Table of Article and Sections.................................. 4
ARTICLE II - Premises and Term
- ---------- -----------------
2.1 Premises....................................................... 7
2.2 Term........................................................... 7
ARTICLE III - Improvements
- ----------- ------------
3.1 Performance of work............................................ 8
3.2 Acceptance of the Premises..................................... 8
3.3 Construction Representatives................................... 8
ARTICLE IV - Rent
- ------- -- ----
4.1 The Fixed Rent................................................. 8
4.2 Additional Rent................................................10
4.2.1 Real Estate Taxes
4.2.2 Betterment Assessments
4.2.3 Tax Payment
4.2.4 Operating Expenses
4
<PAGE>
ARTICLE V - Insurance and Utilities
- --------- -----------------------
5.1 Insurance.....................................................13
5.2 Utilities.....................................................14
ARTICLE VI - Additional covenants
- ---------- --------------------
6.1 Affirmative Covenants.........................................15
6.1.1 Perform Obligations
6.1.2 Use
6.1.3 Repair and Maintenance
6.1.4 Compliance with Law
6.1.5 Payment for Tenant's Work
6.1.6 Indemnity
6.1.7 Landlord's Right to Enter
6.1.8 Personal Property at Tenant's Risk
6.1.9 Payment of Landlord's Cost of Enforcement
6.1.10 Yield Up
6.1.11 Estoppel Certificate
6.2 Negative Covenants............................................17
6.2.1 Assignment, Subletting, etc.
6.2.2 Overloading, Nuisance, etc.
6.2.3 Installation, Alterations or Additions
6.3 Landlord's Repair Obligations.................................18
6.4 Hazardous Materials...........................................18
ARTICLE VII-Casualty or Taking
- ----------- ------------------
7.1 Termination...................................................19
7.2 Restoration...................................................19
7.3 Award.........................................................20
5
<PAGE>
ARTICLE VII - Defaults
- ----------- --------
8.1 Events of Default.............................................20
8.2 Remedies......................................................21
8.3 Remedies Cumulative...........................................22
8.4 Landlord's Right to Cure Defaults.............................22
8.5 Effective of Waivers of Default...............................22
8.6 No Waiver, etc. ..............................................22
8.7 No Accord and Satisfaction....................................23
ARTICLE IX - Mortgagee's Rights
- ---------- ------------------
9.1 Superiority of Lease..........................................23
9.2 Subordination.................................................23
ARTICLE X - Miscellaneous Provisions
- --------- ------------------------
10.1 Notices from One Party to the Other...........................24
10.2 Quiet Enjoyment...............................................24
10.3 Lease not to be Recorded......................................24
10.4 Limitation of Landlord's Liability............................24
10.5 Acts of God...................................................24
10.6 Landlord's Default............................................25
10.7 Brokerage.....................................................25
10.8 Approvals and Consent.........................................25
10.9 Applicable Law and Construction...............................25
ARTICLE II
Premises and Term
-----------------
6
<PAGE>
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby hires from
--------
Landlord, subject to and with the benefit of the terms, covenants, conditions
and provisions of this Lease, the Premises.
2.2 Term. TO HAVE AND TO HOLD for the Term beginning on the Commencement Date.
----
2.3 Options to Extend. Tenant shall have the option to extend the Term for
-----------------
three (3) periods of five (5) years each, to follow consecutively after the
Term, so long as Tenant is not in default, beyond any applicable cure periods,
of any of the material provisions of this Lease commencing at the time of the
exercise of any of the options hereunder and for the period of time continuing
to the expiration of the Term or the then existing Extended Term. Such options
shall be exercised by notice from Tenant to Landlord given not less than nine
(9) months prior to the expiration of the Term or the then existing Extended
Term and upon the giving of such notice, the Lease and the Term hereof shall
automatically be extended for an additional period of five (5) years without the
necessity for the execution of any other instrument in confirmation thereof
except for a document memorializing the Annual Fixed Rent (as hereinafter
defined) for the Extended Term. Except for any option to extend which has
theretofore been exercised and the rent payable during any such extension
period, which shall be determined in the manner provided in Section 4.1.1 below,
such extension shall be upon all the same terms, conditions and provisions
herein contained. References in this Lease to the Term hereof shall be deemed to
include any Extended Term for which the original term may be so extended.
2.4 Authority. Landlord and Tenant each hereby represents to the other that it
---------
has the right and authority to enter into this Lease and that those signatories
executing this Lease on behalf of Landlord or Tenant, as the case may be, have
full power and authority to execute this Lease.
2.5 Rider A, First Right to Lease.
------------------------------
FIRST RIGHT TO LEASE
--------------------
If, during the Term of this Lease, Landlord desires to lease all or a portion of
the Building, not included in the Premises (the "First Refusal Space"), Landlord
shall so notify Tenant setting forth Landlord's reasonable estimate of the then
fair market rent for the First Refusal Space (in its then as is condition), and
the other terms and conditions on which Landlord is willing to so lease the
First Refusal Space, and including a form of amendment to this Lease by which
the First Refusal Space would be added to the Premises. Tenant may, by giving
Landlord notice within fifteen (15) business days after receipt of Landlord's
notice, elect to lease the First Refusal Space on the terms and conditions set
forth in Landlord's notice. If Tenant shall so elect, Tenant shall within twenty
(20) days after such election enter into an amendment to this lease
incorporating the terms and conditions set forth in Landlord's notice. If Tenant
shall fail to make such election within such fifteen (15) business day period,
or to enter into such lease within such twenty (20) day period, Tenant shall be
deemed to have elected not to lease the First Refusal Space, and Landlord shall
thereafter be free to lease the First Refusal Space to a third party.
However, if Tenant disagrees with Landlord's determination of fair market rental
and if subsequently Landlord leases the First Refusal Space to a third party at
a rental rate less than was set forth in Landlord's notice, then Tenant shall
have a Right of First Refusal on the same terms and conditions as the third
party, which right must be exercised within fifteen (15) business days of
notification by Landlord.
LANDLORD: TENANT:
/S/ WILLIAM CONROY /S/ DONNA ABELLI LOPOLITO
- ------------------ -------------------------
7
<PAGE>
ARTICLE III
Improvements
------------
3.1 Performance of Work and Approval of Tenant's Work. Exhibit B ("Tenant's
------------------------------------------------- ---------
Work") shall be subject to Landlord's prior approval, which shall not be
unreasonably withheld or delayed. At the time of Landlord's approval of Exhibit
B, Landlord shall notify Tenant as to the portion of Tenant's Work (which may
include all of Tenant's Work) that Tenant will be required to remove upon
termination of this Lease pursuant to Section 6.1.10.. Tenant shall cause to be
performed the work required by Exhibit B at Tenant's risk and expense provided,
--------
however, that no work shall be done or fixtures or equipment installed by Tenant
- -------
in such manner as to unreasonably interfere with Landlord's work, if any, at the
Premises. Tenant agrees to employ for Tenant's Work one or more responsible
contractors whose labor will work without unreasonable interference with other
labor working on the Premises and to cause such contractors employed by Tenant
to carry Workmen's Compensation Insurance in accordance with statutory
requirements and Comprehensive Public Liability Insurance covering such
contractors on or about the Premises in amounts at least equal to the limits set
forth in Section 1.1 and to submit certificates evidencing such coverage to
Landlord prior to the commencement of such work.
3.2 Acceptance of the Premise. All Tenant's Work shall be done in a
-------------------------
good and workmanlike manner employing good materials and so as to conform to all
applicable building and zoning laws. Tenant may not make any material changes in
Tenant's Work described on Exhibit B hereto without the prior written approval
of Landlord.
3.3 Condition of the Premises. Tenant, having performed such due diligence as
-------------------------
Tenant desired, accepts the Premises in "as is'1 condition, subject to latent
defects not readily ascertainable. Landlord represents that on the date of
execution of this Lease, the Building conform with the State Building Code, and
that Landlord has not received any written notice of any zoning code violation.
3.4 Construction Representatives. Each party authorizes the other to rely, in
----------------------------
connection with plans and construction, upon approval and other actions on the
party's behalf by any Construction Representative of the party named in Section
1.1 or any person hereafter designated in substitution or addition by written
notice to the party relying.
ARTICLE IV
Rent
----
4.1 The Fixed Rent. Tenant covenants and agrees to pay rent ("Fixed Rent"),
--------------
commencing on the Rent Commencement Date, to Landlord at the Original Address of
Landlord or such other place as Landlord may by notice in writing to Tenant from
time to time direct, at the Annual Fixed Rent Rate, in the equal installments
("Monthly Rent") of one-twelfth (1/12th) thereof in advance on the first day of
each calendar month included in the Term; and for any
8
<PAGE>
portion of a calendar month at the beginning or end of the Term, at the rate
then payable in advance for such portion. Rent not paid within ten (10) days of
the date when due shall be subject to a late charge of five (5%) percent,
provided, however, that such late charge will not be imposed on the first two
(2) occasions in any Lease Year when Rent is not paid within ten (10) days of
the due date.
4.1.1 Option Period Rent. If Tenant shall extend the Term by
------------------
exercising its options pursuant to Section 2.3 above, the Annual Fixed Rent Rate
during each five year Extended Term shall be ninety-five percent (95%) of Market
Rent, as defined below, commencing as of the first day of the option period in
question, but in no event shall the Annual Fixed Rent Rate for any option period
be less than the Annual Fixed Rent in effect for the last year of the original
Term.
Market Rent" shall be computed as of the applicable date at the then effective
current rentals being charged to new tenants for comparable buildings and
locations within the Greater South Shore Area, taking into account and giving
effect to, in determining comparability, without limitation, such considerations
as size, location of premises, lease term, and real estate tax and operating
expenses.
Landlord shall initially, at least sixty (60) days prior to the
commencement of the option period in question, designate the Market Rent and
shall furnish comparable data in support of such designation. If Tenant
disagrees with Landlord's designation of the Market Rent, then Tenant shall have
the right, by written notice given within twenty-one (21) days after Tenant has
been notified of Landlord's designation, to submit such Market Rent to
arbitration as follows. Market Rent shall be determined by arbitrators, one to
be chosen by Tenant, one to be chosen by Landlord and a third to be selected, if
necessary, as below provided. All arbitrators selected under this paragraph
shall be experienced real estate appraisers with substantial experience similar
with properties in the Greater South Shore Area. If within twenty (20) days
after Tenant's notice, the parties agree upon a single arbitrator or, if one
party fails to select an arbitrator, the arbitrator selected by the other, then
such arbitrator shall be the sole arbitrator and Market Rent shall be determined
by such arbitrator. The unanimous written decision of the two first chosen (or
the decision of the first, if a second arbitrator is not chosen) without
selection and participation of a third arbitrator, or otherwise the written
decision of a majority of the three arbitrators chosen and selected as provided
herein, shall be conclusive and binding upon Landlord and Tenant. Landlord and
Tenant shall each notify the other of its chosen arbitrator within twenty-one
(21) days following the call for arbitration and, unless such two arbitrators
shall have reached a unanimous decision within thirty (30) days after their
designation, then they shall so notify the then President of the Greater South
Shore Real Estate Board and request him or her to select an impartial third
arbitrator to act hereunder. Such third arbitrator and the first two chosen
shall hear the parties and their evidence and render their decision within
thirty (30) days following the conclusion of such hearing and notify Landlord
and Tenant thereof. Landlord and Tenant shall bear the expense of the third
arbitrator (if any) equally. If the dispute between the parties as to Market
Rent has not been resolved before the commencement of Tenant's obligations to
pay rent based upon such Market
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Rent, then Tenant shall pay rent under the Lease in respect of the Premises
based upon the Market Rent designated by Landlord until either the agreement of
the parties as to the Market Rent or the decision of the arbitrators, as the
case may be, at which time Tenant shall pay any underpayment of rent to Landlord
or Landlord shall refund any overpayment of rent to Tenant.
4.2 Additional Rent. Tenant covenants and agrees to pay, as additional rent,
---------------
Tenant's Proportionate Share of all Real Estate Taxes and Operating Expenses,
with respect to the Land and Building, so that the Fixed Rent shall be net to
Landlord, as follows:
4.2.1 Real Estate Taxes. Real Estate Taxes shall mean all taxes levied or
-----------------
assessed by, or becoming payable to the municipality or any governmental
authority having jurisdiction of the Property for each tax period wholly
included in the Term; provided that for any fraction of a tax period included in
the Term at the end thereof, Tenant shall pay to Landlord, Tenant's
Proportionate Share of the fraction of taxes so levied or assessed or becoming
payable which is allocable to such included period. Nothing contained in this
Lease shall, however, require Tenant to pay any franchise, corporate, estate,
inheritance, succession, capital levy or transfer tax of Landlord, or any
income, profits or revenue tax or charge upon the rent payable by Tenant under
this Lease; provided, however, that if, at any time during the Term, under the
laws of the United States or any state of political subdivision thereof in which
the Premises are situated, there shall be adopted some other method of taxation
on real estate as a substitute in whole or in part for taxes on real estate as
now constituted such as tax on the Fixed Rent, Additional Rent or the other
charges payable by Tenant hereunder by whatever name called is levied, assessed
or imposed against Landlord or the Fixed Rent or Additional Rent or other
charges payable hereunder to Landlord, (which substitute tax on the Fixed Rent,
Additional Rent, or other charges or other substitute method of taxation are
hereinafter collectively referred to as "Substitute Taxes"), Tenant, to the
extent that such Substitute Taxes are means of raising revenue from real estate
shall pay Tenant's Proportionate Share of Substitute Taxes within thirty (30)
days after invoice. In the event that any such Substitute Taxes shall be based
upon the income of Landlord, then Tenant's obligation with respect to the
aforesaid Substitute Taxes shall be limited to the amount thereof as computed at
the rates that would be payable if the rent reserved hereunder were the sole
taxable net income of Landlord.
4.2.2 Betterment Assessments. Real Estate Taxes shall include each installment
----------------------
of all public, special or betterment assessments levied or assessed by or
becoming payable to any municipality or other governmental authority having
jurisdiction of the Property, for each installment period wholly included in the
Term; provided that Landlord shall have elected to pay such assessment in
installments over the longest period permitted by law.
4.2.3 Tax Payment. Tenant shall pay to Landlord, as additional rent hereunder,
-----------
an amount (the "Tax Payment") equal to Tenant's Proportionate Share of Real
Estate Taxes for any Tax Year, any part of which shall occur during the term of
this Lease. A copy of the final tax bill of the Town of Canton or other taxing
authority imposing Real Estate Taxes on the Land or the Building shall be
sufficient evidence of the amount of Real Estate Taxes.
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Commencing on the Rent Commencement Date, with respect to each Tax Year
occurring in whole or in part during the term of this Lease, Tenant shall pay to
Landlord the Tax Payment, in equal monthly installments during the calendar year
in which such tax Year commences, in the manner herein described. At any time
during the calendar year (but not more frequently than quarterly) in which a Tax
Year commences, Landlord may furnish to Tenant a written estimate (a "Tax
Estimate") setting forth Landlord's reasonable estimate of the Real Estate Tax
Payment for such Tax Year ("Estimated Tax Payment"). Such estimate shall be
determined by landlord by applying to the most recently announced assessed value
of the Land and Building (whether final or otherwise) such tax rate as Landlord
shall anticipate is the tax rate to be finally determined for such Tax Year.
Subject to adjustment as hereinafter provided, Tenant shall pay Landlord on the
first day of each month during each calendar year occurring in whole or in part
during the term hereof, an amount equal to one-twelfth (1/12th) of the Estimated
Tax Payment for the Tax Year commencing during such calendar year. If Landlord
furnishes a Tax Estimate for the Tax Year subsequent to the commencement of the
calendar year in which such Tax Year begins, then (a) until the first day of the
month following the month in which the Tax Estimate is furnished to Tenant,
Tenant shall continue to pay to Landlord on the first day of each month an
amount equal to the monthly sum payable by Tenant to Landlord with respect to
the previous Tax Year, (b) within fifteen (15) days after the Tax Estimate is
furnished to Tenant, Landlord shall give notice to Tenant stating whether the
amount previously paid by Tenant to Landlord during such calendar year was
greater or less than the installments of the Estimated Tax Payment to be paid
during such calendar year in accordance with the Tax Estimate, and (i) if there
shall be a deficiency, Tenant shall pay the amount thereof within thirty (30)
days after demand therefor, or (ii) if there shall have been an overpayment,
Landlord shall credit the amount thereof against the next monthly installments
of the Additional Rent payable under this Lease or at Tenant's option promptly
refund the amount of such overpayment , and (c) on the first day of the month
following the furnishing to Tenant of the Tax Estimate, and monthly thereafter
until the rendering to Tenant of a Tax Statement (hereinafter defined) for such
Tax Year, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12) of
the amount shown on such Tax Estimate. At any time during or after such Tax
Year, (x) Landlord shall furnish to Tenant a written statement (a "Tax
Statement") which shall include a copy of the tax bill from the Town setting
forth the Tax Payment for such Tax Year, and stating whether the sum of the
installments previously paid by Tenant to Landlord pursuant to the Tax Estimate
or otherwise for such Tax Year in accordance with the Tax Statement was greater
or less than the installments of the Estimated Tax Payments, and, (y) any
deficiency or overpayment shall be disposed of in the manner of a deficiency or
overpayment in Estimated Tax Payment, and (z) on the first day of the month
following the month in which the Tax Statement is furnished to Tenant, and
monthly thereafter until a new Tax Estimate or Tax Statement is furnished to
Tenant, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of
the Tax Payment shown on the Tax Statement.
4.2.4. Operating Expenses shall mean the costs and expenses actually paid by
------------------
Landlord for costs for common electricity servicing the common areas of the
Building, snow removal, landscaping of the non-tenanted areas of the Building
and the Land, premiums paid for fire and casualty, boiler, sprinkler, and
liability insurance with respect to the Land and the Building,
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Canton Commerce Center Common Area Maintenance Payments, management fees or, if
no managing agent is employed by the Landlord, a sum in lieu thereof which is
not in excess of the prevailing rate for management fees in similar buildings in
the County where the Building is located and any other charges properly
allocable to the repair, ownership, management, maintenance or operation of the
Land and Building, including but not limited the expenses of providing all
services which Landlord is obligated to provide under this lease. Landlord and
Tenant agree that management fees (and if no managing agent is employed by the
Landlord, the amount in lieu thereof) shall not exceed three (3%) percent of the
gross rents.
4.2.4.1 Commencing on the Rent Commencement Date, for each Operating Year,
any part of which shall occur during the term of this Lease, Tenant shall pay an
amount (the "Operating Payment") equal to Tenant's Proportionate Share of the
Operating Expenses for such Operating Year; provided, however, that if the Rent
-------- -------
Commencement Date shall occur other than on the first day of an Operating Year
or if the term of this Lease shall expire or be sooner terminated on other than
the last day of an Operating Year, then the Operating Payment in respect thereof
shall be prorated to correspond to that portion of such Operating Year occurring
within the Term of this Lease.
4.2.4.2 At any time during each Operating Year (but not more frequently
than quarterly), Landlord may furnish to Tenant a written statement (an
"Estimate Statement") setting forth Landlord's reasonable estimate of the
Operating Payment for such Operating Year (the "Estimated Payment"). Tenant
shall pay to Landlord on the first day of each month during each Operating Year
an amount equal to one twelfth (1/12th) of the Estimated Payment. If Landlord
furnishes an Estimate Statement for an Operating Year subsequent to the
commencement thereof, then (i) until the first day of the month following the
month in which the Estimate Statement is furnished to Tenant, Tenant shall
continue to pay to Landlord on the first day of each month an amount equal to
the monthly sum payable by Tenant to Landlord with respect to the previous
Operating Year, (ii) promptly after the Estimate Statement is furnished to
Tenant, Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Operating Year was greater
or less than the installment of the Estimated Payment to be paid for the current
Operating Year, and (a) if there shall be a deficiency, Tenant shall pay the
amount thereof within thirty (30) days after demand therefor, or (b) if there
shall have been an overpayment, Landlord shall credit the amount thereof against
the next monthly installments of the Additional Rent payable under this Lease or
at Tenant's option promptly refund the amount of such overpayment; and (iii) on
the first day of the month following the month in which the Estimate Statement
is furnished to Tenant, and monthly thereafter throughout the remainder of the
Operating Year, Tenant shall pay to Landlord an amount equal to one-twelfth
(1/12th) of the Estimated Payment shown on the Estimated Statement. Landlord
may, not more than twice during each Operating Year, furnish to Tenant a revised
Estimate Statement; if a revised Estimate Statement is furnished to Tenant, the
Estimated Payment for such Operating Year shall be adjusted in the same manner
as provided in the preceding sentence.
4.2.4.3 At any time during or after each Operating Year, Landlord shall
furnish to Tenant an annual statement (the "Annual Statement") for such
Operating Year. If the Annual Statement
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shows that the Estimated Payment (or other payments) for such Operating Year
exceed the Operating Payment which should have been paid for Operating Year,
Landlord shall credit the amount of such excess against the next monthly
installment of Additional Rent payable under this Lease; if the Annual Statement
for such Operating Year shows that the Estimated Payment for such Operating Year
was less than the Operating Payment (or other payments) which should have been
paid for such Operating Year, Tenant shall pay the amount of such deficiency
within thirty (30) days after receipt of the Annual Statement. Landlord will
endeavor to deliver the Annual Statement to Tenant within sixty (60) days after
the end of the Operating Year, but Landlord's failure to deliver the Annual
Statement within such sixty (60) day period shall not affect Landlord's rights
hereunder.
4.2.4.4 Each annual Statement shall be conclusive and binding upon Tenant
unless, within ninety (90) days after receipt thereof, Tenant shall notify
Landlord that it disputes the correctness of the Annual Statement, specifying
the particular respects in which the Annual Statement is claimed to be
incorrect. If such notice is sent, Tenant or its designee may, audit Landlord's
books and records. During the pendency of such examination, Tenant shall make
all payments claimed by Landlord to be due, such payments to be without
prejudice to Tenant's position. If as the result of such examination Tenant
disputes Landlord's accounting, Tenant shall give Landlord notice thereof and,
if such dispute has not been resolved by agreement within sixty (60) days after
Tenant's notice of such dispute, then either party may submit the matter to
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
ARTICLE V
Insurance and Utilities
-----------------------
5.1 Insurance. Landlord and Tenant shall each take out and maintain during the
---------
term the following insurance coverage:
5.1.1 Landlord shall maintain throughout the Term fire and extended
casualty insurance on the Building in an amount which shall not be less than one
hundred (100%) percent of the replacement cost thereof (excluding the Land,
footings and foundations) and such other insurance as is customary for a
commercial property such as the Property.
5.1.2 Tenant shall maintain comprehensive liability insurance indemnifying
Tenant against all claims and demands for any injury to person or property which
may be claimed to have occurred on the Premises or on the sidewalk, parking area
or ways adjoining the Premises, in amounts which shall, at the beginning of the
Term, be at least equal to the limits set forth in Section 1.1, and, from time
to time during the Term, shall be for such higher limits, if any, as are
customarily carried in the area in which the Premises are located on
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property similar to the Premises and used for similar purposes; and worker's
compensation insurance with statutory limits covering all of Tenant's employees
working on the Premises Such insurance shall name Landlord as an additional
insured.
5.13 Insurance required under the provisions of Section 5.1.1 shall, in
case of loss, be first payable to the holder(s) of any mortgages on the Premises
under a standard mortgagee's clause. In the event provision for any such
insurance is to be by a blanket insurance policy, the policy shall allocate a
specific and sufficient amount of coverage to the Premises.
5.1.4 All insurance which is carried by either party with respect to the
Premises, whether or not required, shall include provisions which either
designate the other party as one of the insureds or deny to the insurer
acquisition by subrogation of rights of recovery against the other party to the
extent such rights have been waived by the insured party prior to occurrence of
loss or injury, insofar as, and to the extent that such provisions may be
effective without making it impossible to obtain insurance coverage from
responsible companies qualified to do business in the state in which the
Premises are located (even though extra premium may result therefrom). If at the
request of one party, this non-subrogation provision is waived, then the
obligation of reimbursement shall cease for such period of time as such waiver
shall be effective, but nothing contained in this subsection shall derogate from
or otherwise affect releases elsewhere herein contained of either party for
claims. Each party shall be entitled to have duplicates or certificates of any
policies containing such provisions. Each party hereby waives all rights of
recovery against the other for loss or injury against which the waiving party is
protected by insurance containing said provisions, reserving, however, any
rights with respect to any excess of loss or injury over the amount recovered by
such insurance. Tenant shall not be deemed to acquire as insured under any
insurance carried on the Building any right to participate in the adjustment of
loss or to receive insurance proceeds with respect to the Building and agrees
upon request promptly to endorse and deliver to Landlord any checks or other
instruments paid to Tenant under Landlord's insurance in payment of loss with
respect to the Building in which Tenant is named as payee.
5.2 Utilities. Landlord shall provide (i) hot and cold drinking water,
---------
water for lavatory and office cleaning purposes, and sewer for the Premises; and
(iii) access to the Premises seven days a week, 24 hours each day. Tenant shall
furnish and shall pay all charges and costs with respect to heating, ventilating
and air conditioning for the Premises. Tenant shall pay directly to the proper
authorities charged with the collection thereof all charges for electricity,
telephone, janitorial services, and other utilities or services used or consumed
on the Premises and separately metered, whether called charge, tax, assessment,
fee or otherwise, all such charges to be paid as the same from time to time
become due. Landlord shall permit its electric feeder, risers and wiring serving
the Premises to be used by the Tenant. Except as may otherwise be provided in
Exhibit B for the installation thereof, it is understood and agreed that Tenant
shall make its own arrangements for the utilities to be paid for by Tenant and
that Landlord shall be under no obligation to furnish heating, ventilating or
air conditioning or any utilities to the Premises and Landlord shall not be
liable for any interruption or failure in the
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supply of any such utilities to the Premises, unless such interruption or
failure results from the gross negligence or wilful misconduct of Landlord. If
such interruption in the supply of any utilities occurs in the common areas,
Landlord will use its best efforts to effectuate the proper repairs, but there
shall be no abatement of Fixed Rent or Additional Rent.
ARTICLE VI
Additional Covenants
--------------------
6.1 Affirmative Covenants. Tenant covenants at its expense at all times during
---------------------
the Term and such further time as Tenant occupies the Premises or any part
thereof the following:
6.1.1 Perform Obligations. To perform promptly all of the obligations of
-------------------
Tenant set forth in this Lease; and to pay when due the Fixed Rent and
Additional Rent and all charges, rates and other sums which by the terms of this
lease are to be paid by Tenant
6.1.2 Use. To use the Premises only for the Permitted Uses, and from time
---
to time to procure all licenses and permits necessary therefor, including but
not limited to the initial Certificate of Occupancy, which shall be delivered by
Tenant to Landlord when Tenant has constructed Tenant's Work.
6.1.3 Repair and Maintenance. Except as otherwise provided in Article VII,
----------------------
to keep the Premises in the same order, condition and repair as they are in on
the Commencement Date, subject to reasonable use and wear. It is agreed that the
exception of reasonable use and wear shall not apply so as to permit Tenant to
keep the Premises and the use reasonably made thereof in less than good and
tenantlike repair.
6.1.4 Compliance with Law. To make all repairs, alterations, additions or
-------------------
replacements to the Premises required by any law or ordinance or any order or
regulation of any public authority and applicable to the Premises as a result of
the particular business to be conducted by Tenant; to keep the Premises equipped
with all safety appliances so required; and to comply with the orders and
regulations of all governmental authorities, except that Tenant may defer
compliance so long as the validity of any such law, ordinance, order or
regulation shall be contested by Tenant in good faith and by appropriate legal
proceedings, if Tenant first gives the Landlord appropriate assurance against
any loss, cost or expense on account thereof. Tenant shall make any alterations
or modifications to the Premises which may be required to comply with the
Americans with Disabilities Act and other laws applicable to the use of the
Premises. Landlord to ensure that Base Building common areas comply.
6.1.5 Payment for Tenant's Work. To pay promptly when due the entire cost
-------------------------
of any work to the Premises undertaken by Tenant so that the Premises shall at
all times be free of liens for labor and materials; to procure all necessary
permits before undertaking such work; to do all of such work in a good and
workmanlike manner, having first complied with the provisions of Section 6.2.3
hereof, employing materials of good quality and complying with all
governmental requirements and to save Landlord harmless and indemnified from all
injury, loss, claims or damage to any person or property occasioned by or
growing out of such work.
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6.1.6 Indemnity. To assume exclusive control of the Premises and all tort
---------
liabilities incident to the control or leasing thereof, and to defend, indemnify
and save Landlord harmless from all injury, loss, claim or damage to or of any
person or property while on the Premises or on the rest of the Property unless
arising from any gross negligence of Landlord; and to defend, indemnify and save
Landlord harmless from all injury, loss, claim or damage to or of any person or
property anywhere occasioned by any omission, fault, neglect or other misconduct
of Tenant.
6.1.7 Landlord's Right to Enter. To permit Landlord and its agents to
-------------------------
enter into and examine the Premises at reasonable times upon prior reasonable
notice (except in cases of emergency, when Landlord shall have immediate access
to the Premises) and to show the Premises to a prospective purchaser of the
Property, a lender or prospective lender of Landlord, and within the last nine
(9) months of the Term to prospective tenants.
6.1.8 Personal Property at Tenant's Risk. That all of the furnishings,
----------------------------------
fixtures, equipment, effects, inventory and property of every kind, nature and
description of Tenant and of all persons claiming by, through or under Tenant
which, during the continuance of this Lease or any occupancy of the Premises by
Tenant or anyone claiming under Tenant, may be on the Premises, shall be at the
sole risk and hazard of Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the leakage or bursting
of water pipes, steam pipes, or other pipes, by theft or from any other cause,
no part of said loss or damage is to be charged to or to be borne by Landlord,
except that Landlord shall in no event be indemnified or held harmless or
exonerated from any liability to Tenant or to any other person, for any injury,
loss, damage or liability to the extent prohibited by law.
6.1.9 Payment of Landlord's Cost of Enforcement. If suit is brought to
-----------------------------------------
enforce this Lease, the losing party shall pay the counsel fees of the
successful party.
6.1.10 Yield Up. At the expiration of the Term or earlier termination of
--------
this Lease: to surrender all keys to the Premises, to remove all of its trade
fixtures and personal property in the Premises, to remove such installations
made by it as Landlord may request and all Tenant's signs wherever located, to
repair all damage caused by such removal and to yield up the Premises (including
all installations and improvements made by Tenant except for trade fixtures and
such of said installations or improvements as Landlord shall agree that Tenant
shall not be required to remove), broom-clean and in the same good order and
repair in which Tenant is obliged to keep and maintain the Premises by the
provisions of this Lease, subject to reasonable wear and tear and damage by
fire, casualty or taking. It is agreed that the exception of reasonable use and
wear shall not apply so as to permit Tenant to keep the Premises and the use
reasonably made thereof in less than good and tenantlike repair. Notwithstanding
the foregoing, Tenant shall not be required to remove any installation for which
Landlord shall have given its approval upon installation if at the time of such
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approval Landlord shall not have notified Tenant of the need to remove the same
upon termination of this Lease. Any property not so removed shall be deemed
abandoned and may be removed and disposed of by Landlord in such manner as
Landlord shall determine and Tenant shall pay Landlord the entire cost and
expense incurred by Landlord in effecting such removal and disposition and in
making any incidental repairs and replacements to the Premises and for use and
occupancy during the period after the expiration of the Term and prior to
Tenant's performance of its obligations under this Section. Tenant shall further
indemnify Landlord against all loss, cost and damage resulting from Tenant's
failure or delay in surrendering the Premises as above provided.
6.1.11 Estoppel Certificate. Upon not less than ten (10) business days
--------------------
prior written request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect and that Tenant has no defenses, offsets or counterclaims
against its obligations to pay the Fixed Rent and Additional Rent and any other
charges and to perform its other covenants under this Lease (or, if there have
been any modifications that the same is in full force and effect as modified and
stating the modifications and, if there are any defenses, offsets or
counterclaims, setting them forth in reasonable detail), and the dates to which
the Fixed Rent and Additional Rent and other charges have been paid. Any such
statement delivered pursuant to this Section 6.1.11 may be relied upon by any
prospective purchaser or mortgagee of the Premises, or any prospective assignee
of any such mortgage. Landlord agrees to provide Tenant with a similar estoppel
certificate within ten (10) business days after receipt of a written request for
the same from Tenant.
6.2 Negative Covenants. Tenant covenants at all times during the Term and such
------------------
further time as Tenant occupies the Premises or any part thereof as follows:
6.2.1 Assignment. Subletting. etc. Not to assign, transfer, mortgage or
----------------------------
pledge this Lease or to sublease (which term shall be deemed to include the
granting of concessions and licenses and the like) all or any part of the
Premises or suffer or permit this Lease or the leasehold estate hereby created
or any other rights arising under this Lease to be assigned, transferred or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the occupancy of the Premises by anyone other than
Tenant without the prior written approval of Landlord, such approval not to be
unreasonably withheld or delayed; provided however that Tenant may assign this
Lease or sublet any portion or all of the Premises without Landlord's approval
(but with written notice to Landlord) to any corporation, partnership, trust,
association or other business organization directly or indirectly controlling or
controlled by Tenant or to any successor by merger, consolidation or acquisition
of all or substantially all of the assets of Tenant. Except as permitted in the
preceding sentence, any attempted assignment, transfer, mortgage, pledge,
sublease or other encumbrance without the prior written consent of Landlord
shall be void. If Landlord shall consent to any assignment or sublease, Tenant
shall, upon receipt thereof, pay Landlord one-half (1/2) of the excess, if any,
of (i) the sum of all Fixed Rent and Additional Rent paid under the sublease or
assignment by the sublessee or assignee to the Tenant less (ii) (X) that part of
the Fixed Rent and Additional Rent hereunder allocated to the subleased space
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and accruing for the corresponding period during the term of the sublease and
(Y) (a) any reasonable and customary brokerage, legal and other customary fees
incurred by the Tenant in connection with such subletting, (b) the costs, if
any, actually incurred by the Tenant to prepare the subleased premises for the
sublessee's occupancy (but not the cost of Tenant's Work), including, any cash
allowance in lieu of work, (c) any rent concession granted to any sublessee, and
(d) any architectural legal, engineering, accounting fees paid or incurred in
connection with such subletting. Tenant shall commence payment of Landlord share
of such excess once Tenant has recouped its costs in (i) and (ii). No
assignment, transfer, mortgage, sublease or other encumbrance, whether or not
approved, and no indulgence granted by Landlord to any assignee or sublessee,
shall in any way impair the continuing primary liability (which after an
assignment shall be joint and several with the assignee) of Tenant hereunder,
and no approval in a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's approval in the case of any other assignment or
subletting.
6.2.2 Overloading. Nuisance. etc. Not to injure, overload, deface or
---------------------------
otherwise harm the Premises; nor commit any nuisance; nor permit the emission of
any objectionable noise or odor; nor make, allow or suffer any waste; nor make
any use of the Premises which is improper, offensive or contrary to any law or
ordinance or which will invalidate any of Landlord's insurance: nor conduct any
auction, fire, "going out of business" or bankruptcy sales.
6.2.3 Installation. Alterations or Additions. Not to make any structural
--------------------------------------
installations, structural alterations or additions in, to or on the Premises
without on each occasion obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed after presentation to
Landlord of plans and specifications for such alterations or additions.
Alterations made by Tenant to the Premises shall remain the Tenant's property
until the lease expiration.
6.3 Landlord's Repair Obligations. Landlord shall be responsible for any
-----------------------------
necessary repairs or replacements to the roof, structural walls, foundation,
parking areas, and sidewalks. Landlord will make any necessary repairs to the
common areas. Notwithstanding the foregoing, if any repair or replacement is
required as a result of the negligence of the Tenant or any of its agents,
employees or invitees, the entire cost of such repair or replacement shall be
borne by Tenant.
6.4 Hazardous Materials. The Tenant shall not store (except in compliance with
-------------------
all laws, ordinances, and regulations pertaining thereto), or dispose of any oil
or hazardous material on the Premises (the term hazardous material being defined
by Massachusetts General Laws, Chapter 21E, as amended). (b) Landlord represents
and warrants that Landlord knows of no hazardous materials which have been used,
stored, generated or disposed of on or about the Premises. Tenant shall
indemnify, defend and hold harmless the Landlord from any and all claims, causes
of action, administrative actions, administrative penalties, damages, fines,
judgments, penalties, costs, liabilities or losses (collectively,
"Ramifications") arising by reason of the presence, use, storage, generation or
disposal of hazardous materials by the Tenant on or about the Premises during
the Term (including without limitation, any and all costs associated with the
removal and clean-up of hazardous materials, damages caused by loss or
restriction of rentable or useable space, and any and all sums paid for
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settlement of claims, attorneys' fees, consultant and expert fees arising during
or after the expiration of the Term or any extension thereof). Landlord agrees
similarly to indemnify and hold harmless Tenant with respect to any
Ramifications arising from hazardous materials at the Premises (including the
Property) prior to the Commencement Date and from any occurrence in common areas
or from any act or omission of Landlord or Landlord's agents. In the event that
either party makes a claim to the other party for indemnification hereunder, the
indemnifying party, shall be permitted to retain counsel, engineers and other
professionals as the indemnifying party may determine to be reasonably necessary
to cure a violation of this Section 6.4 and fulfill any indemnification
obligations hereunder. As long as the indemnifying party shall be proceeding in
good faith to honor its indemnification obligations hereunder, it shall not be
responsible to indemnify the indemnified party for legal fees or additional
engineers or other professionals. The provisions of this Section 6.4 shall
survive termination of the Lease.
ARTICLE VII
Casualty or Taking
------------------
7.1 Termination. (a) In the event that (i) access to the Building or (ii) more
-----------
than twenty-five percent (25%) of the Premises or more than twenty-five (25%)
percent of Tenant's parking shall be taken by any public authority or for any
public use ("Taking") then (unless Landlord shall elect to provide substituted
access and parking, as the case may be) this Lease may be terminated by Landlord
or Tenant by the giving of written notice by the electing party to the other
within thirty (30) days after the occurrence of the Taking. (b) In the event
that more than twenty-five (25%) percent of the Premises shall be destroyed or
damaged by fire or casualty ("Casualty") Landlord shall retain a duly licensed
architect, engineer or contractor to assess the damage and to provide a written
determination, (which shall be provided to Tenant within fifteen (15) days after
the date of Casualty) as to whether the damage can be repaired within one
hundred and twenty (120) days of such Casualty. If such duly licensed architect,
engineer or contractor selected by Landlord shall reasonably determine that it
will require in excess of one hundred twenty (120) days from the date of such
Casualty to restore the Premises, then this Lease may be terminated at the
election of either Landlord or Tenant by written notice to the other within
twenty (20) days after receipt of such determination. Such election may be made
notwithstanding the divestment of the entire interest of the electing party. If
notwithstanding a determination that the Premises can be restored within one
hundred and twenty (120) days, the Premises are not restored within such time,
then Tenant may, within thirty (30) days after the expiration of such one
hundred twenty (120) day period, terminate this Lease by written notice to
Landlord.
7.2 Restoration. In the event of a Taking or Casualty and neither party elects
-----------
to terminate this Lease as provided in Section 7.1, this Lease shall continue in
force and a just proportion of the rent reserved, based upon the amount of
unusable space, shall be suspended or abated until the Premises, or what may
remain thereof, shall be put by Landlord in its preexisting condition for use
(in the event of a Taking, proper condition), which Landlord covenants to do
with reasonable diligence, subject to zoning and building laws then in
existence.
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7.3 Award. Irrespective of the form in which recovery may be had by law, all
-----
rights to damages or compensation shall belong to Landlord in all cases, except
that Tenant shall have the right to pursue and receive payment of any special,
separate award for Tenant's improvements to the Premises and Tenant's moving
expenses. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and covenants to deliver such further assignments thereof as Landlord
may from time to time request.
7.4 Insurance Proceeds. The obligation of the Landlord under any of the
------------------
provisions of this Article VII under which the Landlord is obligated to repair
or restore shall be applicable only with respect to that portion of insurance or
eminent domain proceeds which are actually paid over to Landlord, as to
insurance, by Landlord's insurer, and (as long as Landlord has maintained one
hundred [100%] replacement insurance [not including the Land, footings and
foundations], Landlord shall have no liability for any amounts in excess
thereof. The parties understand and contemplate that recovery of insurance or
eminent domain proceeds is customarily as accomplished only after extended
delays. The Landlord shall have no responsibility with respect to any portion of
the insurance or eminent domain proceeds that may be applied by any mortgagee or
ground lessee to its debt or to such ground lease, or for such reasonable
compensation as may be paid to insurance adjusters and attorneys. All periods
set forth in this Article VII within which Landlord is obligated to repair or
restore shall be deemed to be automatically extended (without the necessity for
any written instrument) during such time as Landlord is endeavoring to obtain
insurance or eminent domain proceeds, and for Acts of God. Notwithstanding the
provisions of this Section 7.4, if Landlord shall be obligated to restore under
Section 7.1 or 7.2, and Landlord has not started restoration within four (4)
months of the fire or casualty, Tenant shall have the right to cancel and
terminate this Lease upon thirty (30) days written notice to Landlord.
ARTICLE VIII
Defaults
--------
8.1 Events of Default. (a) If Tenant shall default in the performance of any
-----------------
of its obligations to pay the Fixed Rent or Additional Rent hereunder and if
such default shall continue for seven (7) days after written notice from
Landlord designating such default (provided, however, once Landlord shall have
given Tenant two (2) notices of late payment within any twelve (12) month period
Landlord shall no longer be required to notify Tenant of any such late payment
prior to there being a default hereunder) or if within thirty (30) days after
written notice from Landlord to Tenant specifying any other default or defaults
Tenant has not commenced diligently to correct the default or defaults so
specified or has not thereafter diligently pursued such correction to
completion, or (b) if any assignment shall be made by Tenant or any guarantor of
Tenant for the benefit of creditors, or (c) if Tenant's leasehold interest shall
be taken on execution, or (d) if a lien or other involuntary encumbrance is
filed against Tenant's leasehold interest or
20
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Tenant's other property, including said leasehold interest, and is not
discharged or bonded within thirty (30) days thereafter or (e) if a petition is
filed by Tenant or any guarantor of Tenant for adjudication as a bankrupt, or
for reorganization or an arrangement under any provision of the Bankruptcy Act
as then in force and effect, or (f) if an involuntary petition under any of the
provisions of said Bankruptcy Act is filed against Tenant or any guarantor of
Tenant and such involuntary petition is not dismissed within sixty (60) days
thereafter, then, and in any of such cases, Landlord and the agents and servants
of Landlord lawfully may, in addition to and not in derogation of any remedies
for any preceding breach of covenant, immediately or at any time thereafter and
without demand or notice and with or without process of law (forcibly, if
necessary) enter into and upon the Premises or any part thereof in the name of
the whole or mail a notice of termination addressed to Tenant at the Premises,
and repossess the same as of Landlord's former estate and expel Tenant and those
claiming through or under Tenant and remove its and their effects in accordance
with applicable law without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used for arrears of
rent or prior breach of covenant, and upon such entry or mailing as aforesaid
this Lease shall terminate, Tenant hereby waiving all statutory rights
(including without limitation rights or redemption, if any, to the extent such
rights may be lawfully waived) and Landlord, without notice to Tenant, may store
Tenant's effects, and those of any person claiming through or under Tenant at
the expense and risk of Tenant, and, if Landlord so elects, may sell such
effects at public auction or private sale and apply the net proceeds to the
payment of all sums due to Landlord from Tenant if any, and pay over the
balance, if any, to Tenant. All amounts due Landlord under this Lease and not
paid when due shall bear interest at the prime rate then in effect at BankBoston
plus two (2%) percent per annum until paid.
8.2 Remedies. In the event that this Lease is terminated under any of the
--------
provisions contained in Section 8.1 or shall be otherwise terminated for breach
of any obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, (a) the excess of the total rent reserved for the residue of the
Term over the then market rental value of the Premises for said residue of the
Term discounted to present value at the prime rate then in effect at Ba'1kBoston
or its successor. In calculating the rent reserved there shall be included the
Fixed Rent and Additional Rent. (b) In the alternative, at Landlord's election,
Tenant further covenants as an additional and cumulative obligation after any
such termination to pay punctually to Landlord all the sums and perform all the
obligations which Tenant covenants in this Lease to pay and to perform in the
same manner and to the same extent and at the same time as if this Lease had not
been terminated. In calculating the amounts to be paid by Tenant pursuant to the
next preceding sentence Tenant shall be credited with any amount paid to
Landlord as compensation as in this Section 8.2 provided and also with the net
proceeds of any rent obtained by Landlord by reletting the Premises, after
deducting all Landlord's reasonable expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
and expenses of preparing the Premises for such reletting, it being agreed by
Tenant that Landlord may (i) relet the Premises or any part or parts thereof,
for a term or terms which may at Landlord's option be equal to or less than or
exceed the period which would otherwise have constituted the balance of the Term
and may grant such concessions and free rent as Landlord in its sole judgment
21
<PAGE>
considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable or necessary to relet the same, and no action of
Landlord in accordance with the foregoing or failure to relet or to collect rent
under reletting shall operate or be construed to release or reduce Tenant's
liability as aforesaid. In addition to sums due under clauses (a) or (b), Tenant
shall pay Landlord's reasonable fees for legal services in enforcing the
provisions of this Section 8.2.
In lieu of any other damages or indemnity and in lieu of full recovery by
Landlord of all sums payable under all the foregoing provisions of this Section
8.2, Landlord may by written notice to Tenant, within sixty (60) days after this
Lease is terminated under any of the provisions contained in Section 8.1 or is
otherwise terminated for breach of any obligation of Tenant and before such full
recovery, elect to recover, and Tenant shall thereupon pay, as liquidated
damages, an amount equal to the aggregate of the Fixed Rent and Additional Rent
accrued in the twelve (12) months ended next prior to such termination plus the
amount of rent of any kind accrued and unpaid at the time of termination and
less the amount of any recovery by Landlord under the foregoing provisions of
this Section 8.2 up to the time of payment of such liquidated damages. Nothing
contained in this Lease shall, however, limit or prejudice the right of Landlord
to prove for and obtain in proceedings for bankruptcy or insolvency by reason of
the termination of this Lease, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which, the damages are to be proved, whether or not the amount be greater,
equal to, or less than the amount of the loss or damages referred to above.
8.3 Remedies Cumulative. Any and all rights and remedies which Landlord may
-------------------
have under this Lease, and at law and equity, shall be cumulative and shall not
be deemed inconsistent with each other, and any two or more of all such rights
and remedies may be exercised at the same time insofar as permitted by law.
8.4 Landlord's Right to Cure Defaults. Landlord may, but shall not be
---------------------------------
obligated to, cure, at any time, after providing reasonable notice to Tenant,
any default by Tenant under this Lease; and whenever Landlord so elects, all
costs and expenses incurred by Landlord, including reasonable attorneys' fees,
in curing a default shall be paid by Tenant to Landlord on demand, together with
interest thereon at the rate of two (2%) percent per annum in excess of the base
rate of interest announced from time to time by BankBoston (or any successor)
from the date of payment by Landlord to the date of payment by Tenant.
8.5 Effect of Waivers of Default. Any consent or permission by Landlord to any
----------------------------
act or omission which otherwise would be a breach of any covenant or condition
herein, or any waiver by Landlord of the breach of any covenant or condition
herein, shall not in any way be held or construed (unless expressly so declared)
to operate so as to impair the continuing obligation of any covenant or
condition herein, or otherwise, except as to the specific instance, operate to
permit similar acts or omissions.
22
<PAGE>
8.6 No Waiver. etc. The failure of either party to seek redress for violation
--------------
of, or to insist upon the strict performance of, any covenant or condition of
this Lease shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation. The receipt by Landlord of
rent with knowledge of the breach of any covenant of this Lease shall not be
deemed to have been waiver of such breach by Landlord, or by Tenant, unless such
waiver be in writing signed by the party to be charged. No consent or waiver,
express or implied, by Landlord or Tenant to or of any breach of any agreement
or duty shall be construed as a waiver or consent to or of any other breach of
the same or any other agreement or duty.
8.7 No Accord and Satisfaction. No acceptance by Landlord of a lesser sum
--------------------------
than the Fixed Rent, Additional Rent or any other charge then due shall be
deemed to be other than on account of the earliest installment of such rent or
charge due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or other charge be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
ARTICLE IX
Mortgagee's Rights
------------------
9.1 Superiority of Lease. Unless Landlord exercises the option set forth in
--------------------
Subsection 9.2 below, this Lease shall be superior to and shall not be
subordinated to any mortgage or other voluntary lien or other encumbrance on the
Property. Until it shall enter and take possession of the Property for the
purpose of foreclosure the holder of a mortgage shall have only such rights of
Landlord as are necessary to preserve the integrity of this Lease as security.
Upon entry and taking possession of the Property for the purpose of foreclosure
such holder shall have all the rights of Landlord. No such holder of a mortgage
shall be liable either as mortgagee or as assignee, to perform, or be liable in
damages for failure to perform, any of the obligations of Landlord unless and
until such holder shall enter and take possession of the Property for the
purpose of foreclosure. Upon entry for the purpose of foreclosure, such holder
shall be liable to perform all of the obligations of Landlord, subject to and
with the benefit of the provisions of Section 10.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a conveyance under
said provisions to the owner of the equity of the Property. No Fixed Rent,
Additional Rent or any other charge shall be paid more than thirty (30) days
prior to the due dates thereof and payments made in violation of this provision
shall (except to the extent that such payments are actually received by a
mortgagee in possession or in the process of foreclosing its mortgage) be a
nullity as against such mortgagee and Tenant shall be liable for the amount of
such payments to such mortgagee. No mortgagee shall be obligated for Tenant's
Security Deposit except to the extent that such Security Deposit is actually
received by a mortgagee in possession or in the process of foreclosing its
mortgage. Tenant agrees on request of Landlord to execute and deliver from time
to time any documents which may be necessary to implement the provisions of this
Section 9.1.
23
<PAGE>
9.2 Subordination. Landlord shall have the option to subordinate this Lease
-------------
to any mortgage or deed of trust of the Property. Any such mortgage to which
this Lease shall be subordinated may contain such terms, provisions and
conditions as the holder deems usual or customary. At Landlord's request at any
time and from time to time, Tenant shall confirm such subordination in writing
in recordable form. At the time of such subordination, Landlord shall deliver to
Tenant an agreement with the mortgagee to the effect that as long as Tenant is
not in default under this Lease, such mortgagee shall not seek to dispossess
Tenant. In the event that such mortgagee acquires possession or title to the
Premises, Tenant will attorn to such mortgagee and its successors-in-title.
ARTICLE X
Miscellaneous Provisions
------------------------
10.1 Notices from One Party to the Other. All notices required or permitted
-----------------------------------
hereunder shall be in writing and shall be deemed duly served if delivered in
hand or to a nationally recognized overnight carrier service or when mailed by
registered or certified mail return receipt requested postage prepaid addressed,
in any event, if to Tenant, at the Original Address of Tenant until the
Commencement Date and thereafter to the Premises or to such other address as
Tenant shall have last designated by notice in writing received by Landlord and,
if to Landlord at the Original Address of Landlord or such other address as
Landlord shall have last designated by notice in writing to Tenant as
hereinabove provided.
10.2 Quiet Enjoyment. Landlord agrees that upon Tenant's paying the rent and
---------------
performing and observing the agreements, conditions and other provisions on its
part to be performed and observed under the Lease, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the Term of this
Lease without any manner of hindrance or molestation from Landlord, subject,
however, to the terms of this Lease.
10.3 Lease not to be Recorded. Tenant agrees that it will not record this
------------------------
Lease. Both parties shall, upon the request of either, execute and deliver a
notice or short form of this Lease in such form, if any, as may be permitted by
applicable statute. Such notice or short form of lease shall not contain the
amount of Fixed Rent or Additional Rent.
10.4 Limitation of Landlord's Liability. No owner of the Property shall be
----------------------------------
liable under this Lease except for breaches of Landlord's obligations occurring
while owner of the Property, and if Landlord is a trust, limited liability
company or a corporation, Landlord's obligations hereunder shall not be binding
upon the Trustees of said Trust individually nor upon the shareholders or
beneficiaries of said Trust nor the managers or members of such limited
liability company or on the officers or directors of such corporation, as the
case may be, but only upon the Trustees as trustees and upon their trust estate
or upon the limited liability company or upon the corporation.
10.5 Acts of God. In any case where either party hereto is required to do any
-----------
act, delays caused by or resulting from Acts of God, war, civil commotion, fire,
flood or other casualty, labor difficulties, shortages of labor, materials or
equipment, government regulations, unusually severe weather, or other causes
beyond such party's reasonable control shall not be counted in determining the
time during which work shall be completed, whether such time be designated by a
fixed date, a fixed time or "a reasonable time", and such time shall be deemed
to be extended by the period of such delay.
24
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10.6 Landlord's Default. Landlord shall not be deemed to be in default in the
------------------
performance of any of its obligations hereunder unless it shall fail to perform
such obligations and such failure shall continue for a period of thirty (30)
days or such additional time as is reasonably required to correct any such
default after written notice has been given by Tenant to Landlord specifying the
nature of Landlord's alleged default. Tenant shall have no right to terminate
this Lease for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim (other than a compulsory counterclaim)
against any rent due hereunder unless or until Tenant shall obtain a judgment
from a court of competent jurisdiction establishing the default of Landlord.
10.7 Brokerage. Landlord and Tenant each warrant and represent to the other
---------
that it has dealt with no broker in connection with the consummation of this
Lease other than McCall & Almy and Fallon, Hines & O'Connor, to whom Landlord
shall be responsible for the payment of a commission, if any, pursuant to a
separate written agreement. In the event of any other brokerage claims against
either party predicated upon dealings by the other, the party involved in such
dealings agrees to defend the same and indemnify and hold the other party
harmless against any such claim.
10.8 Signs. Landlord will add Tenant's name to the parking lot sign, at
-----
Tenant's expense. The Building sign shown on Exhibit C hereof shall be Tenant's
responsibility. All signs are subject to the zoning and sign by-laws and rules
and regulations of the Town of Canton.
10.9 Approvals and Consent. Whenever the consent or approval of either party is
---------------------
required hereunder. the same shall not be unreasonably withheld or delayed.
10.10 Security Deposit. Simultaneously with the execution of this Lease, Tenant
----------------
has placed a non-interest bearing security deposit with Landlord in the amount
of $25,591.61. The purpose of this deposit is to guaranty the full, prompt and
faithful performance by Tenant of all of the terms and conditions of this Lease,
including but not limited to the payment of Fixed Rent and Additional Rent. In
the event of any default by Tenant after notice and applicable cure periods if
any, said security deposit or any part thereof may be used by Landlord to pay
any such payment or perform any obligations of Tenant and Tenant shall
immediately replace the amount of the security deposit so used. Said security
deposit shall be deposited in an account maintained by Landlord in which
security deposits of various tenants (in addition to Tenant) are held. Landlord
shall not be obligated to pay to Tenant any interest on said security deposit.
Said security deposit shall not be deemed to be Fixed Rent or Additional Rent.
10.11 Applicable Law and Construction. This Lease shall be governed by and
-------------------------------
construed in accordance with the laws of the Commonwealth of Massachusetts, and,
if any provisions of this Lease shall to any extent be invalid, the remainder of
this Lease shall not be affected thereby. There are no oral or written
agreements between Landlord and Tenant affecting this Lease which are not set
25
<PAGE>
forth in this document. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant. The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease. Unless
repugnant to the context, the words "Landlord" and "Tenant" appearing in this
Lease shall be construed to mean those named above and their respective heirs,
executors, administrators, successors and assigns, and those claiming through or
under them respectively.
WITNESS the execution hereof under seal on the day and year first above
written.
Landlord: North Queen Street LP.
North Queen Street, LLC, General Partner
By: /S/ WILLIAM CONROY
------------------
William Conroy, Managing Member
Tenant: Organogenesis, Inc.
By: /S/ DONNA ABELLI LOPOLITO
-------------------------
Its duly authorized CFO
26
<PAGE>
EXHIBIT B
Description of Tenant's Work
To be submitted and approved in accordance with the attached side letter dated
May 21, 1999.
27
<PAGE>
EXHIBIT C
- ---------
Description of Signs
To be submitted and approved in accordance with the attached side letter dated
May 21, 1999.
28
<PAGE>
EXHIBIT 10(N)
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "First Amendment") is made as of the
18th day of June, 1999, by and between North Queen Street LP, a Massachusetts
limited partnership, having a principal address of 5 Campanelli Circle, Canton'
Massachusetts 02021 ("Landlord") and Organogenesis Inc., a Delaware corporation
having a principal address of 150 Dan Road, Canton, Massachusetts 02021
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated May21,
1999 (the "Lease") for certain premises consisting of approximately 36,798
square feet of space located in a building (the "Building") commonly known and
numbered as 85 John Road, Canton, Massachusetts as more fully described in the
Lease (the "Premises"); and
WHEREAS, Landlord and Tenant desire to amend the terms and conditions of
the Lease in order to, among other things, add an additional 28,772 square feet
of space (the "Expansion Premises") to the Premises and to allow for a tenant
improvement allowance of $58,000 with respect to Tenant's build-out of the
Expansion Premises.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. Except as set forth herein, the Lease shall remain unchanged and
-----------
in full force and effect. All initial capitalized terms used herein shall
have the meanings ascribed to them in the Lease unless otherwise defined or
modified herein. All references to the "Lease" shall be deemed to be
references to the Lease as amended by this First Amendment.
2. PREMISES. All references to the "Premises" shall hereafter be deemed to
--------
include the Expansion Premises unless otherwise specifically set forth herein
this First Amendment. Tenant shall have as appurtenant to the Premises the
right to use 250 parking spaces in the parking lot adjoining the Building, in
the areas referred to as "Organogenesis Parking" as shown on Exhibit A of the
---------
Lease and the area adjacent thereto, to the extent required to obtain 250
parking spaces in total.
3. COMMENCEMENT DATE. The Commencement Date for the Expansion Premises shall be
------------ ----
the date of execution of this First Amendment
4. RENT COMMENCEMENT DATE. The Rent Commencement Date for the Expansion Premises
---- ------------ ----
shall be September 1, 1999.
5. ANNUAL FIXED RENT. Annual Fixed Rent for the Expansion Premises during the
------ ----- ----
Initial Term of the Lease shall be equal to $194,211.00. Monthly Rent for the
Expansion Premises during the Initial Term of the Lease shall be equal to
$16,184.25. The Annual Fixed Rent for the Expansion Premises for the Option
Periods shall be equal to 95% of the Market Rent determined in accordance
with Section 4.1.1 of the Lease.
<PAGE>
6. TENANT'S PROPORTIONATE SIIARE. From and after the Rent Commencement Date, all
-------- ------------- ------
references to "Tenant's Proportionate Share" shall mean a percentage equal to
70.0%.
7. LOCATION OF EXPANSION PREMISES. Exhibit A-2 sets forth the location of the
------------------------------- -----------
Expansion Premises.
8. TENANT'S WORK. Exhibit B-1 sets forth the description of the Tenant's Work as
-------- ----
applicable to the Expansion Premises. References to "Tenant's Work" shall
include work by Tenant with respect to the Expansion Premises and shall be
governed by Article III of the Lease.
9. TENANT IMPROVEMENT ALLOWANCE. On the Rent Commencement Date, Landlord shall
------ ----------- ---------
pay to Tenant an amount equal to $58,000.00 as a "Tenant Improvement
Allowance" with respect to the Expansion Premises.
WITNESS the execution hereof as of the day and year first above written.
LANDLORD:
NORTH QUEEN STREET LP
By: North Queen Street, LLC, its
general partner
By: /S/ WILLIAM CONROY
------------------
William Conroy, its Managing
Member
Dated: 6/18/99
TENANT:
ORGANOGENESIS INC.
By: /s/ DONNA ABELLI LOPOLITO
-------------------------
Name: Donna Abelli Lopolito
---------------------
Its: CFO
---
Dated: 6/10/99
2
<PAGE>
EXHIBIT A-2
-----------
EXPANSION PREMISES
3
<PAGE>
EXHIBIT B-1
-----------
TENANT'S WORK - EXPANSION PREMISES
To be submitted and approved in accordance with the side letter attached to the
Lease dated May 21, 1999.
4
<PAGE>
EXHIBIT 10(O)
[EXECUTION COPY]
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of the 14th day of
April,1999, by and between Organogenesis Inc., a Delaware corporation (the
"Buyer"), and Baxter Healthcare Corporation, a Delaware corporation (the
"Seller").
Whereas, the Seller owns certain patents (the "Patents") and equipment (the
"Physical Assets") relating to liver assist devices; and
Whereas, the Seller desires to sell, or otherwise transfer to the Buyer the
Patents and Physical Assets, and the Buyer wishes to purchase the Patents and
Physical Assets, free of any Encumbrance, as hereinafter defined;
Now, therefore, in consideration of the promises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I: DEFINITIONS
1.01 Certain Defined Terms. As used in this Agreement, the following terms
---------------------
shall have the following meanings:
"Action" means any claim, action, suit, arbitration, mediation, inquiry,
proceeding or investigation by or before any Governmental Authority (or
arbitrator or mediator, as the case may be), whether at law or in equity.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Additional Payment" has the meaning as specified in Section 2.02(c).
"Agreement" or "this Agreement" means this Asset Purchase Agreement dated
the date hereof between Buyer and Seller, as amended, modified or supplemented
from time to time in accordance with the provisions hereof.
<PAGE>
"Ancillary Agreements" means Assignment of Patents, Bill of Sale and
Assignment, Registration Rights Agreement and Lock-up Agreement, and Bader
Agreement.
"Assignment of Patents" means the Assignment of Patents substantially in
the form of Exhibit A attached hereto between the Seller and the Buyer to be
entered into on the Closing Date.
"Bader Agreement" means the agreement granting Seller rights in and to
certain Patents, which agreement is attached hereto as Exhibit I.
"Basket Amount" has the meaning specified in Section 9.04 of this
Agreement.
"Bill of Sale" means the Bill of Sale and Assignment substantially in the
form of Exhibit B attached hereto between the Seller and the Buyer to be entered
into on the Closing Date.
"Buyer" has the meaning specified in the recitals to this Agreement.
"Buyer's Shares" means the 50,000 shares of Common Stock of the Buyer
issued to the Seller on the Closing Date pursuant to Section 2.02 of this
Agreement.
"Closing" has the meaning specified in Section 2.03 of this Agreement
"Closing Date" has the meaning specified in Section 2.03 of this Agreement.
"Common Stock" means Common Stock, par value $.01 per share, of the Buyer.
"Control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Damages" has the meaning specified in Section 9.02 of this Agreement.
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"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement, or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"End Date" has the meaning specified in Section 2.02(c) of this Agreement.
"End Date Value" means the aggregate value of the Buyer's Shares subject to
calculation computed by multiplying the relevant number of shares by the average
of the daily closing prices of the Common Stock during the twenty (20)
consecutive day trading period occurring immediately prior to the End Date.
"FDA" means the U.S. Food and Drug Administration.
"GAAP" means United States generally accepted accounting principles and
practices in effect from time to time applied consistently throughout the
periods involved.
"Governmental Authority" means any United States federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"Indemnified Party" has the meaning specified in Section 9.03 of this
Agreement.
"Indemnifying Party" has the meaning specified in Section 9.03 of this
Agreement.
"Lock-up Agreement" means the Lock-up Agreement substantially in the form
of Exhibit C to be entered into by the Seller on the Closing Date.
"Material Adverse Change" means a material adverse change in the business,
affairs, operations, assets, liabilities, prospects, results of operations or
the condition (financial or otherwise) of the Person indicated or business of
the Person indicated taken as a whole.
"Material Adverse Effect" means any circumstance, change in or effect on
the Person or the business of the Person that, individually or in the aggregate
with any other circumstances, changes in or effects on the Person or business of
the Person
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indicated is, or would be, materially adverse to the business, affairs,
operations, assets, liabilities, prospects, results of operations or the
condition (financial or otherwise) of the Person or business of the Person
indicated taken as a whole.
"Order" means any order, writ, judgment, injunction, decree, demand letter,
stipulation, determination or award issued or entered by or agreed to with any
Governmental Authority.
"Patents" mean the patents, patent applications and other intellectual
property listed on Exhibit D.
---------
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity.
"Physical Assets" means the equipment listed on Exhibit E.
---------
"Pre-Closing covenants" has the meaning specified in Section 9.01 of this
Agreement.
"Purchase Price" has the meaning specified in Section 2.02 of this
Agreement.
"Purchased Assets" has the meaning specified in Section 2.01 of this
Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
substantially in the form of Exhibit F attached hereto between the Buyer and the
Seller to be entered into on the Closing Date.
"Sale Proceeds" shall mean the aggregate gross proceeds received by Seller
from any sales of Buyer's Shares prior to the End Date.
"Securities Act" has the meaning specified in Section 3.08 of this
Agreement.
"Seller" has the meaning specified in the recitals to this Agreement.
"Specified Anniversary" has the meaning specified in Section 9.01 of this
Agreement.
"Subsidiary" means, with respect to any Person, any other Person of which
at least a majority of the capital stock or other ownership interests are at the
time directly or indirectly owned or controlled by such Person.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties,
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additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs, and similar charges.
"Transaction Documents" means this Agreement, the Ancillary Agreements, and
any certificate, instrument, financial statement, report or other document
delivered pursuant to this Agreement, any Ancillary Agreement or the
transactions contemplated hereby or thereby.
"Value of the Buyer's Shares" shall mean the aggregate value of the Buyer's
Shares computed by multiplying 50,000 by the highest of the average of the daily
closing prices of the Common Stock during any 20 consecutive trading day period
beginning on the first date on which Seller has the unrestricted right to offer
and sell publicly the Buyer's Shares and ending on the End Date, as defined in
Section 2.02(c) (as each such closing price is reported on the American Stock
Exchange, Inc. ("AMEX") as reported in The Wall Street Journal, Eastern Edition,
or if not reported thereby, by any other authoritative source.
1.02 Singular/Plural. Unless the context otherwise requires, words defined
herein in the singular include the plural and words defined herein in the plural
include the singular.
1.03 Accounting Terms. Any accounting terms used in this Agreement that
are not specifically defined shall have the meaning customarily given them in
accordance with GAAP.
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1.04 Gender. The use of the masculine or any other pronoun herein when
referring to any Person is for convenience only and shall be deemed to refer to
the particular Person intended regardless of the actual gender of such Person or
whether such Person is a corporate or other entity.
ARTICLE II: PURCHASE AND SALE OF THE PURCHASED ASSETS
2.01 Transfer of Purchased Assets to Buyer. Upon the terms and subject to
the conditions set forth in this Agreement, on the Closing Date, the Seller
shall transfer to the Buyer, free and clear of all Encumbrances, all right,
title and interest in and to the Patents and the Physical Assets (together, the
"Purchased Assets").
2.02 Purchase Price. In consideration of the sale of the Purchased Assets
to Buyer at the Closing, the Buyer shall pay to the Seller an aggregate of
$1,000,000 (the "Purchase Price"), payable as hereinafter set forth.
(a) At the Closing, the Buyer shall deliver to the Seller one or more
certificates representing the Buyer's Shares issued in the name of the Seller.
(b) As soon as practicable on or after the Closing, the Buyer at its
expense shall be responsible for moving the Physical Assets from Seller's
property. Seller at its expense shall provide all reasonable cooperation to
Buyer to facilitate Buyer moving the Physical Assets; provided that Buyer shall
hold Seller harmless from any liability resulting from any assistance rendered
to Buyer in good faith by Seller pursuant to this Section 2.02(b).
(c) Within thirty (30) days of the End Date, the Buyer shall pay to
the Seller an amount (the "Additional Payment") in cash equal to the difference
between One Million Dollars ($1,000,000) and the greater of (i) Sale Proceeds
plus the End Date Value of any remaining unsold Buyer's Shares and (ii) the End
Date Value of all 50,000 Buyer's Shares, whether or not in Buyer's possession at
the End Date; provided, that the obligation of the Buyer to make the Additional
Payment hereunder shall be subject to the following:
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(i) In the event that the Value of the Buyer's Shares has, at
any time during the period between the first anniversary of
the Closing Date and the date the Buyer receives approval
from FDA of an Investigational Device Exemption (IDE) for a
liver assist device, or January 1, 2003, whichever shall
first occur (the "End Date"), been equal to or greater than
$1,000,000, no Additional Payment shall be made by the
Buyer.
2.03 Closing. Subject to the satisfaction or waiver of each of the
conditions set forth in Article VIII of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One
Financial Center, Boston, Massachusetts at 10 o'clock a.m., on March __, 1999,
or such other location, date and time as may be agreed upon by the parties (such
date and time being called the "Closing Date"). At the Closing, the Seller shall
deliver or cause to be delivered to the Buyer (i) each of the documents required
to be delivered by the Seller pursuant to this Agreement, and (ii) any other
assignments or other instruments of transfer reasonably required by the Buyer to
effect legally the transfer of any of the Purchased Assets from the Seller to
the Buyer in form and substance reasonably satisfactory to the Buyer. All books,
data, documents, and other records relating to the Purchased Assets will be
delivered to the Buyer at the principal office of the Buyer in Canton,
Massachusetts, subject to Section 2.02(b) of this Agreement. At the Closing, the
parties shall also deliver or cause to be delivered to the other parties the
certificates, opinions and Ancillary Agreements required to be delivered by the
parties pursuant to Article VIII and the Buyer shall deliver the Buyer's Shares
to the Seller in accordance with Section 2.02(a) above.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Seller hereby represents
and warrants to the Buyer as follows:
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3.01 Organization and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its jurisdiction or organization and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of its assets or properties requires it to be
so licensed or qualified, except where the failure to be so licensed or
qualified would not have a Material Adverse Effect.
3.02 Corporate Power and Authority; Validity. The Seller has the corporate
power and authority to own and hold its assets and properties. The Seller has
the corporate power and authority to execute, deliver and perform this Agreement
and the other Transaction Documents to which it is a party. The execution,
delivery and performance of this Agreement and such other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized and approved by the Seller. This Agreement has been, and
each of the other Transaction Documents to be executed and delivered by the
Seller will be, duly executed and delivered by the Seller. This Agreement
constitutes, and each such other Transaction Document when so duly executed and
delivered will constitute, the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its respective terms except as
enforceability may be subject to the application of general equitable principles
and to bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights.
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3.03 No Conflict. Neither the execution and delivery by the Seller of this
Agreement and the other Transaction Documents to which it is a party, the
consummation by the Seller of the transactions contemplated hereby or thereby,
nor the performance by the Seller of this Agreement and such other Transaction
Documents in compliance with the terms and conditions hereof and thereof, will
(i) violate, conflict with or result in any breach of its Certificate of
Incorporation or bylaws, (ii) require by or on behalf of the Seller any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, (iii) violate, conflict with or result in a breach,
default or termination (or give rise to any right of termination, cancellation
or acceleration of the maturity of any payment date of any of the obligations of
the Seller or increase or otherwise affect the obligations of the Seller) under
any law, rule, regulation or any governmental permit, license or Order or any of
the terms, conditions or provisions of any mortgage, indenture, note, license,
agreement or other instrument or obligation to which the Seller is a party or by
which the Seller or any of its assets are bound or affected or (iv) result in
the creation of any Encumbrance upon any of the Purchased Assets.
3.04 Taxes. (a) None of the Purchased Assets is tax-exempt use property
within the meaning of Section 169(h) of the Code. None of the Purchased Assets
is property that is or will be required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986.
(b) There are no liens with respect to Taxes upon any of the Purchased
Assets.
(c) The Buyer shall not have any liability for any Taxes imposed on or
related to income related to the ownership or operation of the Purchased Assets
prior to the Closing Date.
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3.05 Litigation. There is no Action pending or, to the knowledge of the
Seller, threatened against, contemplated or affecting the transactions
contemplated hereby (whether or not the Seller is a party or prospective party
thereto). There are no outstanding Orders involving or affecting the
transactions contemplated hereby. There is no Action by the Seller pending or
threatened against others with respect to or relating in any way to the
Purchased Assets.
3.06 Physical Assets. With respect to the Physical Assets included in the
Purchased Assets, (i) the Seller has good and marketable title free and clear of
all Encumbrances. To the best of Seller's actual knowledge as at the Closing
Date, the manufacture, use, or sale of the Physical Assets by Buyer shall not
infringe any patent except the Patents, and shall not violate any other
intellectual property right of any Person. OTHERWISE, SELLER MAKES NO
REPRESENTATIONS WHATSOEVER AS TO THE PHYSICAL ASSETS. THE PHYSICAL ASSETS ARE
EXPERIMENTAL IN NATURE AND ARE PROVIDED "AS IS", WITHOUT WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED. OTHER THAN AS STATED ABOVE, SELLER MAKES NO REPRESENTATION
OR WARRANTY THAT THE USE OF THE PHYSICAL ASSETS WILL NOT INFRINGE ANY PATENT OR
OTHER PROPRIETARY RIGHT. SELLER ASSUMES NO LIABILITY FOR DIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE USE OF THE PHYSICAL ASSETS. With
respect to the Physical Assets, except for the representations and warranties
contained herein or in any other Transaction Document, all such Physical Assets
shall be sold and transferred "as is where is" and all other implied warranties
existing under applicable laws with respect thereto are disclaimed by the
Seller.
3.07 Patents. (a) The Seller has delivered or made available to the Buyer
true and complete copies (or descriptions) of all Patents and of the Bader
Agreement. All
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rights of the Seller in and to the Patents will be duly and
validly transferred to the Buyer pursuant to the terms of this Agreement, free
of all Encumbrances.
(b) The Seller is not in default under any license, contract or other
agreement pertaining to the Patents, and to the knowledge of the Seller, there
are no defaults by any other party to any, such license, contract or other
agreement relating to the Patents. The Seller has not granted any person or
entity any right to use any of the Patents for any purpose.
(c) None of the Seller's rights in the Patents is involved in any
interference or opposition proceeding, and, to the knowledge of the Seller, no
such proceeding is pending or threatened.
3.08 Purchase For Investment Status. (a) The Seller is acquiring the
Buyer's Shares for its own account for investment only and not with a view to
the distribution or public offering thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"); provided, however, that this
representation is made without prejudice to the right of the Seller to
distribute the Buyer's Shares to its stockholders, subject to the compliance by
the Seller of the applicable requirements of the Securities Act.
(b) The Seller is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D.
(c) The Seller understands that the Buyer's Shares are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Buyer is relying
in part upon the truth and accuracy of, and such Seller's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Seller set forth herein in order to determine the availability of such
exemptions and the eligibility of the Seller to acquire the Buyer's Shares.
(d) The Seller and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Buyer and
materials relating to the offer and sale of the Buyer's Shares which have been
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requested by the Seller. The Seller and its advisors, if any, have been
afforded the opportunity to ask questions of the Buyer. Neither such inquiries
nor any other due diligence investigations conducted by the Seller or its
advisors, if any, or its representatives shall modify, amend or affect the
Seller's right to rely on the Buyer's representations and warranties contained
in Article IV below.
(e) The Seller understands that no Governmental Authority has passed on or
made any recommendation or endorsement of the Buyer's Shares or the fairness or
suitability of the investment in the Buyer's Shares nor has any Governmental
Authority passed upon or endorsed the merits of the sale of the Buyer's Shares.
(f) The Seller understands that except as provided in the Registration
Rights Agreement and in Section 6.03 hereto: (i) the Buyer's Shares have not
been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) the Seller shall have
delivered to the Buyer an opinion of counsel, in a generally acceptable form, to
the effect that the Buyer's Shares may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) the Buyer's Shares can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the Securities
Act (or a successor rule thereto) ("Rule 144"); (ii) any sale of the Buyer's
Shares made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Buyer's Shares under circumstances in which the Seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Securities Exchange
Commission thereunder; and (iii) neither the Buyer nor any other person is under
any obligation to register the Buyer's Shares under the Securities Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder, except as set forth in Section 6.03.
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(g) The Seller understands that 25,000 of the Buyer's Shares will be
subject to a Lock-up Agreement executed by the Seller and dated as of the
Closing Date.
(h) The Seller understands that the certificates or other instruments
representing the Buyer's Shares, except as set forth below, shall bear
restrictive legends in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
LEGEND A
--------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
LEGEND B
--------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT BY
THE REGISTERED HOLDER HEREOF NOT TO OFFER, PLEDGE, SELL, CONTRACT TO SELL, SELL
ANY OPTION OR CONTRACT TO PURCHASE, PURCHASE ANY OPTION OR CONTRACT TO SELL,
GRANT ANY OPTION, RIGHT OR WARRANT TO PURCHASE, LEND OR OTHERWISE TRANSFER OR
DISPOSE OF SUCH SECURITIES ("THE LOCK-UP AGREEMENT") FOR A PERIOD OF 360 DAYS
FOLLOWING THE DATE OF ISSUANCE OF THIS CERTIFICATE. SUCH LOCK-UP AGREEMENT
EXPIRES BY ITS TERMS ON ________, 2000, 360 DAYS FOLLOWING THE DATE OF ISSUANCE
OF THIS CERTIFICATE.
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Legend A set forth above shall be removed and the Buyer shall issue a
certificate without such legend to the holder of any Buyer's Shares upon which
it is stamped, if (i) any of the Buyer's Shares are registered for sale under
the Securities Act, (ii) in connection with a sale transaction, such holder
provides the Buyer with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of any of the Buyer's
Shares may be made without registration under the Securities Act, or (iii) any
of the Buyer's Shares can be sold pursuant to Rule 144 without any restriction
as to the number of securities acquired as of a particular date that can then be
immediately sold. The Seller acknowledges, covenants and agrees to sell any of
the Buyer's Shares represented by a certificate(s) from which such legend has
been removed, only pursuant to (i) a registration statement effective under the
Securities Act, or (ii) advice of counsel that such sale is exempt from
registration required by Section 5 of the Securities Act. In the event the
above Legend A is removed from any of the Buyer's Shares, the Buyer may, upon
reasonable advance notice to the holder, require that such legend be placed on
any of the Buyer's Shares that cannot then be sold pursuant to an effective
registration statement or Rule 144(k) under the Securities Act (or any successor
rule thereto). Notwithstanding anything to the contrary, certificate(s)
representing fifty percent (50%) of the Buyer's Shares will only bear
restrictive Legend A and will not bear restrictive Legend B.
3.09 No Warranties of Future Performance. The Seller understands that no
warranties of future performance of the Buyer have been or are being made by the
Buyer irrespective of any forecasts, budgets or other financial information
provided by the Buyer to the Seller or their representatives.
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3.10 Broker's Fee. No Person has or will have, as a result of the
execution, delivery and performance by the Seller of this Agreement or the
Ancillary Agreements, any right, interest or claim against or upon the Buyer or
any other Person for any commission, fee or other compensation as finder or
broker or in any similar capacity.
3.11 Disclosure. This Agreement, including, without limitation, the
schedules and exhibits hereto and the certificates or other instruments or
documents made or delivered in connection herewith or therewith, taken as a
whole, does not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained herein or therein not
misleading in view of the circumstances under which they were made.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.01 Organization and Qualification. The Buyer is duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership or leasing
of its assets or properties requires it to be so licensed or qualified, except
where the failure to be so licensed or qualified would not individually, or in
the aggregate, have a Material Adverse Effect on the business or operations of
the Buyer.
4.02 Capitalization. As of the date hereof, the authorized capital stock
of the Buyer consists of 40,000,000 shares of Common Stock, of which
approximately 30,454,300 shares are issued and outstanding and 1,000,000 shares
of Preferred Stock, of which 140 shares are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 4.02, no shares of Common Stock
or Preferred Stock are
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subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Buyer. Except as disclosed in Schedule
4.02, as of the date hereof, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Buyer or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Buyer or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Buyer or
any of its subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Buyer or any of its
subsidiaries. Except as disclosed in Schedule 4.02, as of the date hereof, there
are no outstanding debt securities and there are no agreements or arrangements
under which the Buyer or any of its subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement). The Buyer has furnished to the Seller true and
correct copies of the Buyer's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), and the Buyer's
By-laws, as in effect on the date hereof (the "By-laws").
4.03 Corporate Power and Authority; Validity. The Buyer has the corporate
power and authority to (i) own and hold its properties and (ii) execute, deliver
and perform this Agreement and the other Transaction Documents to which it is a
party. All corporate (including stockholder, if applicable) action necessary
for the execution, delivery and performance by the Buyer of this Agreement and
such other Transaction Documents and the consummation by the Buyer of the
transactions contemplated hereby and thereby has been duly taken, and any
applicable preemptive rights with respect to issuance of the Buyer's Shares have
been waived. This Agreement has been, and each of the other Transaction
Documents when executed and delivered by the Buyer will be, duly executed and
delivered by such party,. This Agreement constitutes, and each such Transaction
Documents when
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duly executed and delivered by the Buyer will be, the valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
respective terms, except as enforceability may be subject to the application of
general equitable principles and to bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights.
4.04 No Conflict. Neither the execution and delivery by the Buyer of this
Agreement and the other Transaction Documents to which it is to be a party, the
consummation by the Buyer of the transactions contemplated hereby or thereby,
nor the performance by the Buyer of this Agreement and such other Transaction
Documents in compliance with the terms and conditions hereof and thereof, will
(i) violate, conflict with or result in any breach of its Certificate of
Incorporation, as amended, or By-laws, (ii) require by or on behalf of the Buyer
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, (iii) violate, conflict with or
result in a breach, default or termination (or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the obligations of the Buyer or increase or otherwise affect the
obligations of the Buyer) under any law, rule, regulation, governmental permit,
license or any Order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument or obligation
to which the Buyer is a party or by which the Buyer or any of its respective
assets are bound or affected or (iv) result in the creation of any Encumbrance
upon the assets of the Buyer. Except as disclosed in Schedule 4.04, neither the
Buyer nor its subsidiaries is in violation of any term of or in default under
the Certificate of Incorporation 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 statue,
rule or regulation applicable to the Buyer or its subsidiaries which violation
or default would have a Material Adverse Effect on the business, operations,
financial condition or results of operations of the Buyer and any of its
subsidiaries, individually or taken as a whole.
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The business of the Buyer and its subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance or regulation of any
Governmental Authority which violation would have a Material Adverse Effect on
the business, operations, financial condition or results of operations of the
Buyer and any of its subsidiaries, individually or taken as whole. Except as
specifically contemplated by this Agreement and as required under the Securities
Act, the Buyer is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental or regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by this Agreement, or the Transaction
Documents. Except as disclosed in Schedule 4.04, all consents, authorizations,
orders, filings and registrations which the Buyer is required to obtain pursuant
to the preceding sentence have been obtained or effected on or prior to the date
hereof. The Buyer is not in violation of the listing requirements of the
American Stock Exchange. The Buyer and its subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing or to delisting
of the Common Stock by the American Stock Exchange.
4.05 Broker's Fees. No Person has or will have, as the result of the
execution, delivery and performance by the Buyer of this Agreement or the
Ancillary Agreements, any right, interest or claim against or upon the Seller or
any other Person for any commission, fee or other compensation as finder, broker
or in any similar capacity.
4.06 Status of the Buyer's Stock. Each of the Buyer's Shares issued to the
Seller pursuant to this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
4.07 SEC Documents; Financial Statements. Since December 31, 1996, the
Buyer has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities
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Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof or on the Closing Date, as the case may be, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"Designated SEC Documents"). The Buyer has delivered to the Seller or its
representative true and complete copies of the Designated SEC Documents and the
Risk Factors attached hereto as Exhibit G (the "Risk Factors"). As of their
respective dates, the Designated SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the Designated SEC Documents, and none of
the Designated SEC Documents, at the time they were filed with the SEC, nor the
Risk Factors contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Buyer included in the Designated SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i)) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Buyer as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
4.08 Absence of Certain Changes. Except as expressly set forth in Schedule
4.08 and in the Designated SEC Documents, since December 31, 1997, there has
been no Material Adverse Change and no material adverse development in the
business,
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properties, operations, financial condition, results of operations or
prospects of the Buyer and its subsidiaries taken as a whole. The Buyer has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Buyer or its subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
4.09 Litigation. Except as set forth on Schedule 4.09, attached hereto,
there is no Action pending or, to the knowledge of the Buyer, threatened
against, contemplated or affecting the transactions contemplated hereby (whether
or not the Buyer is a party or prospective party thereto). There are no
outstanding Orders involving or affecting the Buyer, or the transactions
contemplated hereby.
4.10 Disclosure. This Agreement, including, without limitation, the
schedules and exhibits hereto and the certificates or other instruments or
documents made or delivered by the Buyer in connection herewith or therewith,
taken as a whole, does not contain any untrue statement of a material fact or
omit any material fact necessary to make the statements contained herein or
therein not misleading in view of the circumstances under which they were made.
4.11 No Warranties of Future Performance. The Buyer understands that no
warranties of future performance of the Purchased Assets being acquired from the
Seller have been or are being made by the Seller irrespective of any forecasts,
budgets or other financial information provided by the Seller to the Buyer or
its representatives.
ARTICLE V: COVENANTS OF THE SELLER
In addition to the covenants contained in other sections of this Agreement,
the Seller hereby covenants and agrees as follows:
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5.01 Cooperation. The Seller shall use its best efforts in good faith to
perform and fulfill all conditions and obligations to be fulfilled or performed
by it hereunder, to the end that the transactions contemplated hereby will be
fully and timely consummated.
5.02 No Solicitation. The Seller shall not, and shall not permit any of
the Seller's officers, directors, employees, agents or representatives to,
solicit, initiate or encourage inquiries or proposals, or conduct any
negotiations, concerning any acquisition or purchase of all or any substantial
portion of the Purchased Assets of the Seller. The Seller shall immediately
advise the Buyer of the receipt of any such inquiry of proposal.
5.03 Access. The Seller shall, upon reasonable request and notice and at
reasonable times, give the Buyer, its attorneys, accountants and other
authorized representatives access to the assets and properties of the Seller
(including all books of account, general, financial, tax and personnel records,
invoices shipping records, supplier lists, patents, trademarks and other
intellectual property, correspondence and other documents, records and files and
all computer software programs and files), for the reasonable and legitimate due
diligence inquiries of the Buyer. Without limiting the generality of the
foregoing, the Seller agrees that during the period commencing on the Closing
Date and continuing for up to three (3) years thereafter, the Seller shall cause
its then employed personnel who had been involved in the development of the
Purchased Assets to provide to Buyer up to an aggregate of one hundred (100)
hours of support and consulting services with respect to the Purchased Assets.
ARTICLE VI: COVENANTS OF THE BUYER
6.01 Cooperation. The Buyer shall use its best efforts in good faith to
perform and fulfill all conditions and obligations to be fulfilled or performed
by it hereunder, to the end that the transactions contemplated hereby will be
fully and timely consummated.
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6.02 Compliance. The Buyer shall use reasonable efforts to assist the
Seller in complying with the applicable requirements under the Securities Act in
connection with any permitted transfer of the Buyer's Shares by the Seller by
providing such information concerning the Buyer as is required by applicable
law.
6.03 Put Right. The Buyer shall file a registration statement registering
25,000 of the Buyer's Shares (including any securities issued with respect to
such shares and any securities into which such shares may be converted or
recapitalized, the "Initial Shares") under the Securities Act for immediate
salability prior to May 30, 1999 as provided in the Registration Rights
Agreement. In the event that such registration statement is not effective on or
before September 30, 1999, the Buyer agrees, until such time as the Initial
Shares are registered for sale, to purchase on the date which is thirty (30)
days from the date of any written request of the Seller (each, a "Put Repurchase
Date"), the number of Initial Shares specified in such request for a purchase
price per share equal to the twenty (20) day average of the daily closing prices
of the Common Stock on the American Stock Exchange, or other national securities
exchange or market on which it is listed or quoted, for the twenty (20)
consecutive trading days prior to the applicable Put Repurchase Date; provided,
however, that, notwithstanding the foregoing, it is hereby agreed that the Buyer
shall not be obligated to repurchase from the Seller pursuant to this Section
6.03 less than 5,000 shares nor more than 10,000 shares in any thirty (30) day
period.
ARTICLE VII: CERTAIN POST-CLOSING COVENANTS
In addition to the covenants contained in other sections of this Agreement,
the Seller hereby covenants and agrees as follows:
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7.01 Certain Post-Closing Covenants. With respect to the period following
------------------------------
the Closing:
(a) In case at any time any further action is necessary or desirable to
carry out the purposes of this Agreement, each of the parties hereto will take
such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party.
(b) In the event and for so long as any party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving the
Purchased Assets, each of the other parties shall cooperate with such party's
counsel in the defense or contest, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending party unless the contesting or defending party is
entitled to indemnification therefor under Article IX below.
ARTICLE VIII: CONDITIONS TO CLOSING
8.01 Buyer's Obligation to Close. The obligation of the Buyer to deliver
the Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby is subject to the satisfaction, on
or before the Closing Date, of the following conditions (each of which may be
waived by the Buyer in its sole discretion):
(a) Representations and Warranties to be True and Correct. All of the
representations and warranties of the Seller contained in this Agreement or any
Ancillary Agreement shall be true, correct and complete in all material respects
on and as of the date hereof and on and as of the Closing date, as if made on
and as of the Closing Date.
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(b) Performance. The Seller shall have performed and complied in all
material respects with all covenants and agreements contained herein required to
be performed or complied with by it, prior to or at the Closing Date.
(c) Ancillary Agreements. The Buyer shall have received executed
counterparts of each of the Ancillary Agreements, substantially in the form
hereto attached.
(d) Approval of the Buyer and its Counsel. All actions, proceedings,
consents, instruments and documents required to be delivered by, or at the
behest or direction of, the Seller hereunder or incident to its respective
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Buyer and its counsel.
(e) Government Consent. The parties shall have received all approvals and
actions of or by all Governmental Authorities, if any, necessary to consummate
the transactions contemplated hereby.
8.02 The Seller's Obligation to Close. The obligation of the Seller to
transfer the Purchased Assets to the Buyer, the obligation of the Seller to
deliver the Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby is subject to the satisfaction, on
or before the Closing Date, of the following conditions (each of which may be
waived by the Seller in its sole discretion):
(a) Representations and Warranties to be True and Correct. The
representations and warranties of the Buyer contained in this Agreement or any
Ancillary Agreement shall be true, complete and correct in all material respects
on and as of the date hereof and on and as of the Closing Date, as if made on
and as of such date (except to the extent any such representation or warranty
speaks as of a different date, in which case such representation or warranty
shall still be true, correct and complete as of such different date).
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(b) Performance. The Buyer shall have performed and complied in all
material respects with all covenants and agreements contained herein required to
be performed or complied with by it prior to or at the Closing Date.
(c) Ancillary Agreements. The Seller shall have received executed
counterparts of each of the Ancillary Agreements in substantially the form
attached hereto.
(d) Approval of the Seller and its Counsel. All actions, proceedings,
consents, instruments and documents required to be delivered by, or at the
behest or direction of, the Buyer hereunder or incident to its performance
hereunder, and all other related matters, shall be reasonably satisfactory as to
form and substance to the Seller and its counsel.
(e) Opinion of Counsel. The Seller shall have received the opinion of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Buyer, in
substantially the form of Exhibit H attached hereto.
(f) Delivery of Shares. The Buyer shall have executed and delivered the
Buyer's Shares pursuant to Section 2.02 of this Agreement.
(g) Government Consent. The parties shall have received all approvals and
actions of or by the Governmental Authorities, if any, necessary to consummate
the transactions contemplated hereby.
ARTICLE IX: INDEMNIFICATION
9.01 Survival. All representations and warranties and covenants to be
performed before or at the Closing ("pre-Closing covenants"), contained in this
Agreement, or in any instrument or document furnished in connection with this
Agreement or the transactions contemplated hereby (regardless of whether any
such representation, warranty or pre-Closing covenant is set forth under a
heading captioned "Representations and Warranties", or words of similar import,
or whether contained within in any covenant or other provision in this Agreement
or any such instrument or document), shall survive the Closing and any
investigation at any time made by or on behalf of any party for a period of one
(1) year following the Closing Date. All
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such representations, warranties and pre-Closing covenants shall expire one (1)
year from the Closing Date (the "Specified Anniversary"), except that (i)
claims, if any, asserted in writing on or prior to the Specified Anniversary
identified as a claim for indemnification pursuant to this Article IX shall
survive until finally resolved and satisfied in full, and (ii) claims, if any,
that (A) are based upon fraud by any party hereto, or (B) asset liability for
any Taxes imposed on or with respect to income, and until finally resolved and
satisfied in full if asserted on or prior to such date.
9.02 Indemnification.
---------------
(a) By the Seller. The Seller shall indemnify, defend, and hold harmless
the Buyer and its officers, directors, employees and Affiliates and its
successors and assigns from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense (including,
without limitation, reasonable attorneys', consultants' and accountants' fees
and costs and expenses reasonably incurred in investigating, preparing,
defending against or prosecuting any Action) of any kind or character
(collectively, the "Damages"), arising out of or in any manner incident,
relating or attributable to:
(i) any inaccuracy in any representation or breach of warranty of
the Seller contained in this Agreement or in any Ancillary Agreement;
(ii) any failure by the Seller to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by it under this Agreement or under any Ancillary
Agreement to which it is a party;
(iii) the Seller's ownership, operation or use of the Purchased
Assets prior to Closing;
(iv) any obligation owed by Seller, its Affiliates, or their
officers, directors, employees or agents, at any time, to Dr. Augustinus Bader,
his heirs, successors or assigns.
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(b) By the Buyer. The Buyer shall indemnify, defend, and hold harmless
the Seller and its officers, directors, employees and Affiliates and its
successors and assigns from, against and with respect to any claim, liability,
obligation, loss, damage, assessment, judgment, cost and expense (including,
without limitation, reasonable attorneys', consultants' and accountants' fees
and costs and expenses reasonably incurred in investigating, preparing,
defending against or prosecuting any Action) of any kind or character
(collectively, the "Damages"), arising out of or in any manner incident,
relating or attributable to:
(i) any inaccuracy in any representation or breach of warranty of
the Buyer contained in this Agreement or in any Ancillary Agreement;
(ii) any failure by the Buyer to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by it under this Agreement or under any Ancillary
Agreement to which it is a party;
(iii) ownership, operation or use by the Buyer of the Purchased
Assets after Closing .
9.03 Claims for Indemnification. (a) In the event of the occurrence of any
event which any party asserts is an indemnifiable event pursuant to this Article
IX, the party claiming indemnification (the "Indemnified Party") shall provide
prompt notice to the party required to provided indemnification (the
"Indemnifying Party"), specifying in reasonable detail the facts and
circumstances (to the extent then known) with respect to such claim and the
basis for which indemnification is available hereunder. If such event involves
the claim of any third party the Indemnifying Party shall have the right to
control the defense or settlement of such claim; provided that:
(i) the Indemnified Party shall be entitled to participate in the
defense of such claim at its own expense;
(ii) the Indemnifying Party shall obtain the prior written approval
of the Indemnified Party (which approval shall not be unreasonably withheld or
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delayed) before entering into any settlement of such claim if, pursuant to or as
a result of such settlement, an Order, injunctive or other non-monetary relief
would be imposed against the Indemnified Party;
(iii) the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, any claim which
seeks an Order, injunction or other non-monetary relief against the Indemnified
Party; provided that (1) the Indemnified Party shall provide written notice to
the Indemnifying Party of its election to assume control over the defense of
such claim pursuant to this clause (iii) and (2) the Indemnified Party shall
obtain the prior written approval of the Indemnifying Party (which approval
shall not be unreasonably withheld or delayed) before entering into any
settlement of such claim; and/or
(iv) if the Indemnifying Party is entitled but fails to assume
control over the defense of a claim as provided in this Section 9.03, the
Indemnified Party shall have the right to defend such claim, provided further
that the Indemnified Party shall obtain the prior written approval of the
Indemnifying Party (which approval shall not be unreasonably withheld or
delayed) before entering into any settlement of such claim if, pursuant to or as
a result of such settlement, injunctive or other non-monetary relief would be
imposed against the Indemnifying Party.
(b) In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article IX, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the claim to which such indemnification
relates.
9.04 Indemnification Threshold. (a) No claim which any Indemnified Party
asserts is an indemnifiable claim pursuant to this Article IX for a breach of a
representation or warranty made, or a covenant to be performed, at or before the
Closing, shall be made by such Indemnified Party against an Indemnifying Party
with respect to any item of Damages unless such item, together with the
aggregate
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of all prior Damages of such Indemnified Party, shall exceed $25,000 (the
"Basket Amount"), in which event such Indemnified Party shall be entitled,
subject to the provisions of this Article IX, to make a claim for
indemnification hereunder to the full extent of all Damages, including such
Basket Amount.
(b) Neither the Buyer on the one hand, nor the Seller on the other hand,
shall have any liability, either individually or collectively, for any indemnity
hereunder to the Indemnified Parties, individually and collectively, for any
Damages in excess of an amount equal to the aggregate Purchase Price hereunder.
9.05 Remedies for Breaches Hereof Exclusive. The parties hereto agree that
the exclusive remedies for breaches of representations and warranties, and of
pre-Closing covenants contained herein shall be those set forth in this Article
IX.
ARTICLE X: TERMINATION
10.01 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by mutual written consent of the Buyer and the Seller.
(b) by the Buyer or the Seller if:
(i) any Governmental Authority shall have issued an Order
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby; provided that this Agreement shall not be terminated pursuant to this
paragraph unless the party terminating this Agreement has utilized its
reasonable best efforts to oppose the issuance of such Order;
(ii) the Closing has not occurred on or prior to July 1, 1999 for
any reason other than the breach of any provision of this Agreement by the party
terminating this Agreement; or
(iii) the other party breaches any of its representations, warranties
or covenants contained herein in any material respect.
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Upon the occurrence of any of the events specified in this Section 10.01
(other than subsection (a) above), written notice of such event shall forthwith
be given to the other parties to this Agreement, whereupon this Agreement shall
terminate.
10.02 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.01, this Agreement, except
for the provisions of Article X, shall forthwith become void and be of no
effect. Nothing in this Section 10.02 shall relieve any party to this Agreement
of liability for breach of this Agreement.
ARTICLE XI: MISCELLANEOUS
11.01 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission, (iii) sent by recognized overnight courier,
or (iv) sent by registered or certified mail, return receipt requested, postage
prepaid:
If to the Buyer: Organogenesis Inc.
150 Dan Road
Canton, MA 02021
Attn: Alan W. Tuck, Chief Strategic Officer
Fax: (781) 575-0440
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Neil Aronson, Esq.
Fax: (617) 542-2241
If to the Seller: Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015
Attn: Lee Blumenfeld, M.D.
Fax: (847) 270-5660
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With a copy to: Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015
Attn: Joseph B. Barrett, Esq.
Fax: (847) 270-5660
All notices, requests, consents and other communications hereunder shall be
deemed to have been received (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above or as so
designated, (ii) if made by telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or
otherwise,(iii) if sent by overnight courier, on the next business day following
the day such notice is delivered to the courier service, or (iv) if sent by
registered or certified mail, on the fifth business day following the day such
mailing is made.
11.02 Entire Agreement. The Transaction Documents collectively embody the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in the Transaction Documents shall affect, or be used to interpret, change
or restrict, the express terms and provisions of this Agreement.
11.03 Modifications and Amendments. The terms and provisions of this
Agreement may be amended, modified, supplemented or waived only by written
agreement executed by all parties hereto.
11.04 No Waiver of Rights, Powers and Remedies. No failure or delay by a
party hereto in exercising any right, power or remedy under this Agreement, and
no course of dealing between the parties hereto, shall operate as a waiver of
any such right, power or remedy of the party. No single or partial exercise of
any right, power or remedy under this Agreement by a party hereto, nor any
abandonment or
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discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand. The terms and provisions of this Agreement may be waived,
or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
11.05 Assignment. Neither this Agreement, nor any right or obligation
hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties.
11.06 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their permitted assigns, and
nothing in this Agreement, express or implied, (i) is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by
reason of this Agreement, or (ii) shall be construed to create any rights or
obligations except among the parties hereto, and no Person shall be regarded as
a third-party beneficiary of this Agreement; provided that the provisions of
Article XI shall be enforceable by, and inure to the benefit of, the Person
entitled to the benefit thereunder.
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11.07 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the
internal law of the Commonwealth of Massachusetts, without giving effect to the
conflicts of law principles thereof.
11.08 Severability. In the event that any court of competent jurisdiction
shall finally determine that any provision, or any portion thereof, contained in
this Agreement shall be void or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court determines it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine that any such provision, or potion
thereof, is wholly unenforceable, the remaining provisions of this Agreement
shall nevertheless remain in full force and effect.
11.09 Interpretation. The parties hereto acknowledge and agree that: (i)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
11.10 Headings and Captions. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify, or affect, or be considered in construing or interpreting the
meaning or construction of any of the terms or provisions hereof.
11.11 Enforcement. Each of the parties hereto acknowledges and agrees that
the rights acquired by each party hereunder are unique and that irreparable
damage
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would occur in the event that any of the provisions of this Agreement to be
performed by the other party were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, in addition to any other
remedy to which the parties hereto are entitled at law or in equity, each party
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by the other party and to enforce specifically the terms and
provisions hereof in any federal or state court of competent jurisdiction.
11.12 Expenses. Except as expressly provided herein or in any other
Transaction Document, each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated. Without limiting the foregoing, it is hereby agreed that the
Seller shall be responsible for all sale and transfer tax liability in
connection with the transfer of the Purchased Assets to the Buyer under this
Agreement.
11.13 Publicity. Buyer may publish a press release announcing the closing
of the transactions contemplated hereby in substantially the format attached as
Exhibit J. Otherwise, no party hereto may issue any press release or otherwise
make any public statement with respect to the execution of, or the transactions
contemplated by, this Agreement without the prior written consent of the other
parties hereto, except as may be required by applicable law. Prior to making any
public disclosure so required by applicable law, the disclosing party shall give
the other parties a copy of the proposed disclosure and reasonable opportunity
to prescribe or limit the same.
11.14 Confidentiality. The parties acknowledge and agree that any
information or data it has acquired from the other parties, not otherwise
properly in the public domain, was received in confidence. The parties agree not
to divulge, communicate
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or disclose any such confidential information concerning the subject matter
hereof, including any trade or business secrets and any technical or business
materials that are treated by the disclosing party as confidential or
proprietary, including without limitation information (whether in written, oral
or machine-readable form) concerning: general business operations,; methods of
doing business, servicing clients, client relations, and of pricing and making
charges for services and products; financial information, including costs,
profits and sales; marketing strategies; business forms developed; names of
suppliers, personnel, customers, clients and potential clients; negotiations or
other business contacts with suppliers, personnel, customers, clients and
potential clients; form and content of bids, proposals and contracts; internal
reporting methods; technical and business data, documentation and drawings;
software programs, however embodied; inventions; diagnostic techniques; and
information obtained by or given to the parties about or belonging to third
parties. In the event that this Agreement is terminated and/or the Closing does
not occur, the parties agree to return to the disclosing party any such
confidential information it received, and shall thereafter continue to use its
reasonable best efforts to maintain the confidentiality thereof.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
11.16 Facsimile Signatures. For purposes of this Agreement and any other
Transaction Document required to be delivered pursuant to this Agreement,
facsimiles of signatures shall be deemed to be original signatures. In
addition, if any of the parties sign facsimile copies of this Agreement or any
of the other Transaction Documents, such copies shall be deemed originals.
Page 35
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
BUYER:
ORGANOGENESIS INC.
By:
-------------------------------------------
Name: Herbert M. Stein
Title: Chairman and Chief Executive Officer
SELLER:
BAXTER HEALTHCARE CORPORATION
By:
-------------------------------------------
Name: Kshitij Mohan
Title: Corporate Vice President
Page 36
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A: Assignment of Patents
Exhibit B: Bill of Sale
Exhibit C: Lock-up Agreement
Exhibit D: Patents List
Exhibit E: Physical Assets List
Exhibit F: Registration Rights Agreement
Exhibit G: Risk Factors
Exhibit H: Opinion of Mintz Levin
Exhibit I: Bader Agreement
Exhibit J: Press Release
Page 37
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 4.02: Capitalization
Schedule 4.04: Conflicts
Schedule 4.08: Material Adverse Changes
Schedule 4.09: Litigation
Page 38
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,051
<SECURITIES> 16,350
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 780
<CURRENT-ASSETS> 22,319
<PP&E> 20,734
<DEPRECIATION> 10,208
<TOTAL-ASSETS> 33,491
<CURRENT-LIABILITIES> 3,207
<BONDS> 0
0
0
<COMMON> 305
<OTHER-SE> 12,207
<TOTAL-LIABILITY-AND-EQUITY> 33,491
<SALES> 0
<TOTAL-REVENUES> 1,618
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,516)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,516)
<EPS-BASIC> (.44)
<EPS-DILUTED> (.44)
</TABLE>
