COMMON STOCK
PURCHASE AGREEMENT
ADVANCED TISSUE SCIENCES, INC.
AND
XXXXX & NEPHEW SNATS, INC.
JANUARY 14, 1998
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. Purchase and Sale of Stock 1
1.1 Sale and Purchase of the Shares 1
1.2 Closing 1
SECTION 2. Representations and Warranties of the Company 1
2.1 SEC Filings 1
2.2 Absence of Certain Changes 2
2.3 Organization, Good Standing and Qualification 2
2.4 Authorization 2
2.5 Capitalization 2
2.6 Valid Issuance of Stock 3
2.7 Governmental Consents 3
2.8 Litigation, etc. 3
2.9 Subsidiaries 3
2.10 No Conflict with Other Instruments 3
2.11 Patents, Trademarks and Regulatory Approvals 3
SECTION 3. Purchaser Representations and Warranties 4
3.1 Authorization 4
3.2 Purchase Entirely for Own Account 4
3.3 Disclosure of Information 5
3.4 Investment Experience 5
3.5 Restricted Securities 5
3.6 Further Limitations on Disposition 5
3.7 Legends 5
SECTION 4. Registration Rights 6
Definitions 6
4.1 Demand Rights 6
(a) Registration 6
(b) Underwriting 6
(c) Limitations 7
4.2 PiggyBack Rights 7
(a) Notice of Registration 7
(b) Underwriting 8
4.3 Obligations of the Company 8
4.4 Furnish Information 10
4.5 Expenses of Company Registration 10
4.6 Indemnification 10
4.7 Reports Under Securities Exchange Act of 1934 12
4.8 Assignment of Registration Rights 12
4.9 Amendment of Registration Rights 12
4.10 Termination of Registration Rights 12
i
TABLE OF CONTENTS
-----------------
Page
----
SECTION 5. Covenants 13
5.1 Limitation on Sale of Stock 13
5.2 Permitted Transfer 13
SECTION 6. Miscellaneous 13
6.1 Survival of Warranties 13
6.2 Successors and Assigns 13
6.3 Governing Law 13
6.4 Counterparts 13
6.5 Titles and Subtitles 14
6.6 Assignment 14
6.7 Notices 14
6.8 Finder's Fee 15
6.9 Expenses 15
6.10 Amendments and Waivers 15
6.11 Severability 15
6.12 Aggregation of Stock 16
EXHIBIT A
Schedule of Exceptions (Section 2)
EXHIBIT B
Definition of Material Changes (Section 5.1)
ii
INDEX TO DEFINITIONS
--------------------
Section
-------
Act 1.2
Affiliate 4.8
Agreement Intro.
Effective Date Intro.
Closing 1.2
Company Intro.
Dermagraft Agreements 5.1
Exchange Act 4.6(a)
Heads of Agreement 5.1
Holder 4
Non-participating Holders 4.2(b)
Permitted Sale Date 5.1
Purchase Price 1.1
Purchaser Intro.
Register, Registered, and Registration 4
Registrable Securities 4
Registration Expenses 4.5
Schedule of Exceptions 2 & Exhibit A
SEC 1.2
SEC Filings 2
Subject Wound Care Applications 2.11
Stock 1.1
Violation 4.6(a)
i
COMMON STOCK
PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
January 14, 1998 (the "Effective Date") by and between Advanced Tissue
Sciences, Inc., a Delaware corporation (the "Company"), and Xxxxx & Nephew
SNATS, Inc., a Delaware corporation (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
SECTION 1. Purchase and Sale of Stock
--------------------------
1.1 Sale and Purchase of the Shares. Pursuant to the terms
-------------------------------
hereof and in reliance upon the representations and agreements contained
herein, at the Closing (as hereinafter defined), the Company will issue and
sell to Purchaser, and Purchaser will purchase from the Company, US
$20,000,000 (the "Purchase Price") of the Company's Common Stock, $0.01 par
value (the "Stock"). The aggregate number of shares of Stock which the
Purchaser shall purchase shall be _______________________________________, at
a per share price of $______________.
1.2 Closing. Payment for and delivery of the Stock shall take
-------
place at a closing to be held at the offices of the Company three (3)
business days after the Effective Date (which time and place are designated
as the "Closing"). At the Closing the Company shall deliver to Purchaser a
certificate representing the Stock against payment to the Company of the
Purchase Price by Purchaser by bank wire transfer of immediately available
funds to an account designated by the Company payable to the Company's order.
The Stock will not be registered with the U.S. Securities and Exchange
Commission ("SEC") under the U.S. Securities Act of 1933, as amended (the
"Act") unless and until registration occurs pursuant to Section 4 hereof.
SECTION 2. Representations and Warranties of the Company. Subject to and
---------------------------------------------
except as disclosed in the SEC Filings (defined in Section 2.1 hereof) and/or
in the Schedule of Exceptions attached hereto as Exhibit A, the Company hereby
represents and warrants to Purchaser that as of the Effective Date:
2.1 SEC Filings. The Company has previously furnished to
-----------
Purchaser true and complete copies (with material exhibits) of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "1996 Annual Report"); (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 (the
"Quarterly Reports"); (iii) proxy statements relating to all meetings of its
stockholders (whether annual or special) since December 31, 1996; (iv) all
other reports and registration statements (except registration statements on
Form S-8) filed by the Company with the SEC
since December 31, 1996; and (v) audited financial statements for the fiscal
years ended and as of December 31, 1994, 1995 and 1996. As of their
respective dates, the SEC Filings (as hereinafter defined) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Since December 31, 1996, the Company has filed with the SEC all reports and
registration statements and all other filings required to be filed with the
SEC under the rules and regulations of the SEC. The audited financial
statements and unaudited interim financial statements of the Company included
or incorporated by reference in the 1996 Annual Report and the Quarterly
Reports, respectively, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may
be indicated therein or in the notes thereto, and with respect to the
unaudited interim financial statements, except as to normal year-end auditing
adjustments and the absence of notes) and fairly present the financial
position of the Company and its subsidiaries as at the dates thereof and the
results of their operations, cash flows and changes in financial position for
the periods then ended. As used in this Agreement, "SEC Filings" means the
reports, registration statements, proxy statements and audited financial
statements of the Company referred to in clauses (i) through (v) of the first
sentence of this Section 2.1.
2.2 Absence of Certain Changes. Except as set forth in the SEC
--------------------------
Filings and/or the Schedule of Exceptions, since December 31, 1996, there has
not been any material adverse change, outside the ordinary course of
business, in the assets, condition, affairs or prospects of the Company and
its subsidiaries, financial or otherwise.
2.3 Organization, Good Standing and Qualification. The Company
---------------------------------------------
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as currently proposed
to be conducted. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties or financial
condition.
2.4 Authorization. This Agreement constitutes a valid and
-------------
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms. The Company has all the requisite corporate power
and is duly authorized to execute and deliver this Agreement, and all
corporate actions on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and consummation of the transactions contemplated hereby have been
taken.
2.5 Capitalization. The authorized capital stock of the
--------------
Company consists of 100,000,000 shares of Common Stock, of which 37,674,983*
shares are issued and outstanding, as of the Effective Date, and 1,000,000
shares of Preferred Stock, of which no shares are issued and outstanding as
of the Effective Date. All such issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and non-assessable. Except
as set forth in notes to the SEC Filings, there are no preemptive or other
outstanding rights, options, warrants, conversion rights or agreements for
the purchase or acquisition from the Company of any shares
2
of its capital stock or other securities of the Company. All of the
outstanding shares of Common Stock and the Preferred Stock have been duly and
validly issued in compliance with federal and state securities laws.
2.6 Valid Issuance of Stock. The Stock, when issued, sold and
-----------------------
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly authorized and validly issued, fully paid and non-
assessable and, based in part upon the representations of Purchaser in this
Agreement, will be issued in compliance with all applicable federal and state
securities laws.
2.7 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices required or
permitted to be filed with Nasdaq, the SEC and with certain state securities
commissions after the Closing, which notices will be filed on a timely basis.
2.8 Litigation, etc. There is no action, suit, proceeding or
---------------
investigation, pending or threatened, (i) which questions the validity of
this Agreement or any other agreement contemplated hereby or the right of the
Company to enter into such agreements, or (ii) which might result, either
individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company and its subsidiaries,
financial or otherwise, or (iii) which is against the Company or any employee
or officer of or consultant to the Company or any of its subsidiaries, by
reason of the past employment or consulting relationships of any employee,
officer or consultant of the Company.
2.9 Subsidiaries. The Company does not presently own or
------------
control, directly or indirectly, and has no stock or other interest as owner
or principal in, any other corporation or partnership, joint venture,
association or other business venture or entity, other than as listed
on the Schedule of Exceptions.
2.10 No Conflict with Other Instruments. The execution,
----------------------------------
delivery and performance of this Agreement will not result in any violation
of, be in conflict with, or constitute a default under, with or without the
passage of time or the giving of notice: (i) any provision of the Company's
Certificate of Incorporation or By-laws; (ii) any provision of any judgment,
decree or order to which the Company or any of its subsidiaries is a party or
by which it is bound; (iii) any material contract, obligation or commitment
to which the Company or any of its subsidiaries is a party or by which it is
bound; or (iv) to the Company's knowledge, any statute, rule or governmental
regulation applicable to the Company or any of its subsidiaries.
2.11 Patents, Trademarks and Regulatory Approvals.
--------------------------------------------
The Company owns or has sufficient rights in the ATS Technology and the
Dermagraft(R) trademark, free and clear of any liens or encumbrances, to
conduct the business of the Company as contemplated by the
3
Dermagraft Agreements and the Heads of Agreement (as referenced in Section
5.1 hereof). The Company is not aware of any existing or threatened
infringement action or claim of invalidity or adverse ownership with respect
to the ATS Technology and the Dermagraft(R) trademark for use in conjunction
with the Subject Wound Care Applications (as defined in the Heads of
Agreement) or of any facts which indicate that any such action or claim is
likely to be instituted or asserted. The Company has disclosed to Purchaser
or its Affiliates all relevant information known to the Company and believed
by the Company to be significant and requested by Purchaser or its Affiliates
concerning the Company's efforts to obtain regulatory approvals for the
Subject Wound Care Applications products. The Company has not knowingly
withheld any significant relevant information known to the Company which the
Company believes Purchaser would reasonably want to know concerning the
Company's efforts to obtain regulatory approvals for the Subject Wound Care
Applications products. In seeking regulatory approvals, the Company has not
knowingly submitted to any regulatory body any material information regarding
the Subject Wound Care Applications products which is known to the Company to
be false or misleading, and the Company has not knowingly omitted to submit
to any regulatory body any information known to the Company to be necessary
to make submitted information not misleading. Purchaser understands,
however, that the ATS Technology involves technologies which have not been
approved by any regulatory agency (other than an approval of the
Dermagraft-TC product for specified uses in the United States and Dermagraft
for specified uses in Canada), and that the Company cannot guarantee the
safety or usefulness of any Subject Wound Care Applications products.
THE COMPANY MAKES NO WARRANTIES OTHER THAN AS SET FORTH IN THIS
SECTION 2.11 CONCERNING THE ATS TECHNOLOGY, INCLUDING WITHOUT LIMITATION, THE
COMPANY MAKES NO EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. EXCEPT AS SET FORTH IN THIS SECTION 2.11, THE
COMPANY MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF THE
ATS TECHNOLOGY PATENT RIGHTS, OR THAT ANY PRODUCT WILL BE FREE FROM AN
INFRINGEMENT ON PATENTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY
WAY INFRINGING ATS TECHNOLOGY PATENT RIGHTS.
SECTION 3. Purchaser Representations and Warranties. Purchaser hereby
----------------------------------------
represents and warrants as of the Effective Date:
3.1 Authorization. This Agreement constitutes a valid and
-------------
legally binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms. Purchaser has all the requisite corporate power
and is duly authorized to execute and deliver this Agreement, and all
corporate action on the part of the Purchaser, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby has
been taken.
3.2 Purchase Entirely for Own Account. This Agreement is made
---------------------------------
with Purchaser in reliance upon Purchaser's representation to the Company,
which by such Purchaser's
4
execution of this Agreement Purchaser confirms, that the Stock to be received by
Purchaser will be acquired for investment for Purchaser's own account, not as
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Purchaser has no present intention of selling or
granting any participation in, or otherwise distributing the same. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any of the Stock. Purchaser understands that the Stock to be
purchased by it has not been registered under the Act by reason of a specific
exemption from the registration provisions of the Act which depends upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein.
3.3 Disclosure of Information. Purchaser has had an
-------------------------
opportunity to ask questions of the Company regarding the terms and
conditions of the private placement of the Stock and has received
satisfactory answers to all such questions. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section
2 of this Agreement.
3.4 Investment Experience. Purchaser is an "accredited
---------------------
investor" as defined in Rule 501(a) promulgated under the Act. Purchaser is
able to bear the economic risk of its investment in the Company, including
the entire loss of such investment. Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Stock, and Purchaser has had
the opportunity to evaluate the merits and risks of its investment in the
Stock.
3.5 Restricted Securities. Purchaser understands that the
shares of Stock, when issued and sold pursuant to this Agreement, will be
"restricted securities" under Rule 144 under the Act, and must be held by
Purchaser indefinitely unless subsequently registered under the Act or an
exemption from such registration is available. In this connection, Purchaser
represents that it is familiar with Rule 144 of the Act as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Purchaser agrees not to make
any disposition of all or any portion of the Stock except in accordance with
Section 5.1 hereof.
3.7 Legends. It is understood that the certificates evidencing
the Stock may bear one or more of the following legends: (a) "These
securities have not been registered under the Securities Act of 1933, as
amended (the "Act"). They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to
Rule 144 or 144A of such Act or registration under the Act is unnecessary in
order for such transfer to comply with the Act." (b) Anylegend, if any, that
may be required by the Commissioner of Corporations of the State of
5
California or required pursuant to any state, local or foreign laws governing
such securities.
SECTION 4. Registration Rights
-------------------
Definitions. For purposes of this Section 4: (a) The term
-----------
"register," "registered," and "registration" refer to a registration effected
by preparing and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or document; (b) The term "Registrable Securities"
means (1) the Stock and (2) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in
which such person's rights are not derived by assignment under this Section 4;
(c) The term "Holder" means Purchaser or any assignee thereof in accordance
with Section 4.8 hereof; (d) The term "Permitted Sale Date" is defined in
Section 5.1 hereof.
4.1 Demand Rights.
-------------
(a) Registration. After the earlier of the Permitted
------------
Sale Date or 28 months after the Effective Date, if the Company receives a
written request from Purchaser that the Company register all of the
Registrable Securities, then the Company shall:
(i) within ten (10) days after receipt thereof, give
written notice of such request to all other Holders known to the Company; and
(ii) subject to the limitations of Section 4.1 hereof,
use its diligent efforts to prepare and file with the SEC as soon as
practicable, and in any event within sixty (60) days after receipt of such
request, a registration statement under the Securities Act which shall
include all Registrable Securities which the participating Holders request
the Company to register pursuant to a written request delivered to the
Secretary of the Company and received by such Secretary within twenty (20)
days after the Company mails notice to the other Holders pursuant to
Section 4.1(a)(i) hereof.
(b) Underwriting. In connection with a registration
------------
effected pursuant to this Section 4.1, if the participating Holders intend to
distribute some or all of the Registrable Securities covered by their
requests through an underwritten public offering, then the underwriter will
be selected by the participating Holders and shall be reasonably acceptable
to the Company. The participating Holders and the Company shall enter into
an underwriting agreement in customary form with the selected underwriter.
If any Holder declines to execute such underwriting agreement, then such
Holder shall not have any right to include any Registrable Securities in such
underwriting. Notwithstanding any other provision of this Section 4.1(b), if
the underwriter advises the participating Holders and the Company in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all of
6
the participating Holders thereof, in proportion to the amount of Registrable
Securities of the Company held by each participating Holder; provided,
however, that the number of shares of Registrable Securities owned by the
Holder who initiated the request for the demand registration shall not be
reduced until all other Holders have been eliminated entirely. The
registration statement filed pursuant to the request of the participating
Holders may include other Company securities held by persons with registration
rights and may also include securities of the Company being sold by the
Company for its own account, provided that if more than 50% of the shares sold
in such offering are for the account of the Company, then such registration
shall not be counted for the purpose of the limitation set forth in Section
4.1(c)(ii).
(c) Limitations. The Company shall not be obligated to
-----------
effect, or to take any action to effect, any registration pursuant to this
Section 4.1:
(i) In any jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting
such registration, qualification, or compliance, unless the Company is already
subject to service of process in such jurisdiction and except as may be
required by the Act.
(ii) After the Holders have registered Registrable
Securities pursuant to this Section 4.1 on one occasion; provided, however,
that if all of the participating Holders notify the Company in writing that
they withdraw their request to register their Registrable Securities pursuant
to this Section 4.1 prior to the filing of the registration statement in
connection with such registration, and they pay the Registration Expenses
(as defined below) in connection with such registration, then such
registration shall not be counted for purposes of this limitation.
(iii) At any time during the period beginning when
the Company has commenced registration procedures (whether by means of
holding discussions with an underwriter or commencing preparation of the
registration statement) with respect to the filing of another registration
statement (other than on Form S-8 or S-4) of the Company with the SEC which
it in good faith expects to file within thirty (30) days and ending the
earliest of (A) the abandonment of such other offering; or (B) 180 days after
the effective date of such other registration statement relating to the other
offering.
(iv) If the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be
detrimental to the Company and its stockholders for a registration statement
to be effected at such time, in which event the Company shall have the right
to defer the filing of the registration statement for a period of not more
than 120 days and for not more than once in any 12-month period.
4.2 PiggyBack Rights.
----------------
(a) Notice of Registration. Anytime after the Permitted
----------------------
Sale Date, if
7
(but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock or other securities
under the Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan), the Company shall, at
such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within 20 days after mailing of
such notice by the Company in accordance with Section 6.7 hereof, the Company
shall, subject to the provisions of Section 4.2(b) hereof, cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered. No Holder shall have any rights under
this Section 4.2 unless it is the owner of at least 50,000 shares of Common
Stock.
(b) Underwriting. If the registration of which the
------------
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to this Section 4.2(a) hereof. In such event,
the right of any Holder to registration pursuant to Section 4.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other
Holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section 4.2, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may exclude some or all Registrable Securities
from such registration and underwriting. The Company shall so advise all
Holders (except those Holders who have indicated to the Company their decision
not to distribute any of their Registrable Securities through such
underwriting) ("Non-participating Holders"), and the number of shares of
Registrable Securities that may be included in the registration and
underwriting shall be allocated among such Holders in proportion, as nearly as
practicable, to the respective amounts of Company securities owned by such
Holders at the time of filing the registration statement; provided, however,
that all Registrable Securities proposed to be sold for the account of
the Non-participating Holders (or their transferees) shall be excluded from
the registration and underwriting prior to any reduction in the number of
Registrable Securities proposed to be sold for the account of other Holders.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so withdrawn
from such underwriting shall also be withdrawn from such registration;
provided, however, that, if by the withdrawal of such Registrable Securities a
greater number of Registrable Securities held by other Holders may be included
in such registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used above in determining the
underwriter limitation.
8
4.3 Obligations of the Company. Whenever required under this
--------------------------
Section 4 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, if based upon a demand
from a Holder, keep such registration statement effective until all of the
shares of Stock have been sold.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 4, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 4, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for
9
the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
4.4 Furnish Information. It shall be a condition precedent to
-------------------
the obligations of the Company to a particular selling Holder to take any
action pursuant to this Section 4 that such selling Holder shall furnish to
the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such selling Holder's
Registrable Securities.
4.5 Expenses of Company Registration. The Company shall bear
--------------------------------
and pay all expenses (the "Registration Expenses") incurred in connection
with any registration, filing or qualification of Registrable Securities with
respect to the registrations pursuant to Section 4.1 and 4.2 hereof,
including (without limitation) all registration, filing and qualification
fees, printers costs, company attorneys' fees, and accounting fees relating
or apportionable thereto, and up to $5,000 for the fees and disbursements of
one counsel for the selling Holders selected by them, but excluding
underwriting discounts and commissions relating to Registrable Securities.
4.6 Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 4:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and directors of each
Holder, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities (joint or several)
to which they may become subject under the Act, the Exchange Act or other
federal, state and securities' law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Act, the Exchange Act or
any state securities law; and the Company will reimburse each such Holder,
officer or director, underwriter or controlling person for any legal or other
expenses as incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
the indemnity agreement contained in this subsection 4.6(a) shall
10
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, officer, director, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter and any
other Holder selling securities in such registration statement or any of its
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, or underwriter or
controlling person, or other such Holder or director, officer or controlling
person, may become subject, under the Act, the Exchange Act, or other federal
or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses as incurred by the Company
or any such director, officer, controlling person, underwriter or controlling
person, other Holder, officer, director, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 4.6(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
subsection 4.6(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under
this Section 4.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4.6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 4.6, but the omission so to deliver written notice to the
indemnifying party
11
will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 4.6.
(d) The obligations of the Company and Holders under this
Section 4.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 4, and otherwise.
4.7 Reports Under Securities Exchange Act of 1934. With a
---------------------------------------------
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after the
Closing;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, on an annual basis or otherwise, upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144, the Act and the Exchange Act, or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to any such
SEC rule or regulation.
4.8 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 4 may be
assigned by the Purchaser only to an "Affiliate" of Purchaser and, and only
where (i) such transfer is effected in accordance with applicable federal and
state securities laws, (ii) such Affiliate becomes a party to this Agreement
or agrees in writing to be subject to the terms hereof to the same extent as
if it were an original purchaser hereunder and (iii) the Company is, within a
reasonable time after such transfer, furnished with written notice of the
name and address of such Affiliate and the securities with respect to which
such registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by such Affiliate is restricted under
the Act. "Affiliate" for purposes of this Section 4.8 shall mean any
corporation or other entity controlling, controlled by, or under common control
with Purchaser.
4.9 Amendment of Registration Rights. Any provision of this
--------------------------------
Section 4 may be amended and the observance thereof may be waived (either
generally or in a particular
12
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon the holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and
the Company.
4.10 Termination of Registration Rights. The Company's
----------------------------------
obligations pursuant to this Section 4 shall terminate seven (7) years from
the Effective Date.
SECTION 5. Covenants.
---------
5.1 Limitation on Sale of Stock. Purchaser hereby agrees that
---------------------------
it will not sell any of the shares of the Stock prior to the "Permitted Sale
Date," which shall be the earlier of (i) a Material Default by the Company or
its Affiliates under the Dermagraft Agreements (as defined in that certain
Heads of Agreement dated of even date between the Company and Purchaser and
their Affiliates); or (ii) thirty (30) months after the Effective Date hereof;
or (iii) the occurrence of one or more of the specific material changes in
the Company as specified on Exhibit B attached hereto, and then only after
dissemination to the public of information regarding such occurrence(s) which
dissemination shall be made promptly following such occurrence. After the
Permitted Sale Date, Purchaser will be entitled to sell or transfer any or
all of the shares of the Stock in any manner that it shall determine,
provided that such transfer or sale is in accordance with the federal
securities laws, and provided, further, that Purchaser shall notify in
writing the Company of Purchaser's intention to effect sales at least two
business days prior to the first sale effected in any thirty-day period as
specified in Section 4 hereof; provided, however, Purchaser shall coordinate
any such sale made in the public stock market through a nationally recognized
underwriting firm reasonably acceptable to the Company. These limitations on
sale of the Stock shall be applicable on any Holder until the Stock is sold
in the public stock market.
5.2 Permitted Transfer. As an exception to the transfer
------------------
restrictions set forth in Section 5.1 hereof, Purchaser may transfer the
Stock to an Affiliate of Purchaser, so long as the Affiliate agrees in
writing to be bound by all of the provisions of this Agreement.
SECTION 6. Miscellaneous.
-------------
6.1 Survival of Warranties. The warranties, representations
----------------------
and covenants of the Company contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing
and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Purchaser.
6.2 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party
13
other than the parties hereto or their respective permitted successors and
assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Delaware.
6.4 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in
--------------------
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Assignment. This Agreement may not be assigned or otherwise
----------
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
written consent of the other party; provided, however, that either the
Company or the Purchaser may, without such consent, assign this Agreement and
its rights and obligations thereunder (a) in connection with the transfer or
sale of all or substantially all of its business, if such assets include
substantially all of the assets relating to its performance of its respective
obligations hereunder, (b) to a wholly owned subsidiary or (c) in the event
of its merger or consolidation with another company at any time during the
term of this Agreement. Any purported assignment in violation of the
preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
6.7 Notices. Any notice or report required or permitted to be
-------
given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid,
addressed to such other party at its address indicated below, or to such
other address as the addressee shall have last furnished in writing to the
addressor and shall be effective upon receipt by the addressee.
The Company:
Advanced Tissue Sciences, Inc.
00000 Xxxxx Xxxxxx Xxxxx Xxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Office of the General Counsel
(000) 000-0000
(000) 000-0000 fax
14
The Purchaser:
Xxxxx & Nephew SNATS, Inc.
One Commerce Center, Ste. 788
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: President
Fax: 302/000-0000
with a copy to:
Xxxxx & Nephew plc
0 Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxxxxx
Xxxxxx XX0X0XX
Xxxxxxx
Attn: Company Secretary
Fax: 000-00-000-000-0000
and a copy to:
Xxxxx & Nephew Inc.
0000 X. Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: General Counsel
Fax: 901/000-0000
6.8 Finder's Fee. Each party represents that it neither is
------------
nor will be obligated for any finders' fee or commission in connection with
this transaction. Each party agrees to indemnify and hold harmless the other
party from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the party or any of its officers, partners,
employees or representatives is responsible.
6.9 Expenses. Irrespective of whether the Closing is effected,
--------
each party shall bear its own costs with respect to the negotiation,
execution, delivery and performance of this Agreement. If any action at law
or in equity is necessary to enforce or interpret the terms of this Agreement
or the Company's Certificate of Incorporation, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
6.10 Amendments and Waivers. Except as specified in Section 4.9,
----------------------
any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and Purchaser. Any amendment or waiver effected in
15
accordance with this paragraph shall be binding upon each Holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company; provided, however, that no condition
set forth in Section 5 hereof may be waived, unless the Company consents
thereto.
6.11 Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
6.12 Aggregation of Stock. All shares of Stock held or acquired
--------------------
by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCED TISSUE SCIENCES, INC.
By: _________________________________
Title: ______________________________
XXXXX & NEPHEW SNATS, INC.
By: _________________________________
Title: ______________________________
16
EXHIBIT A
SCHEDULE OF EXCEPTIONS
EXHIBIT B
DEFINITION OF MATERIAL CHANGES
(Section 5.1)
1. ATS publicly announces a proposed merger of ATS with another
company, pursuant to which the former shareholders of ATS will
own less than 75% of the combined voting equity of the merged
entity.
2. ATS sells its voting equity stock to a party such that the party
(and its Affiliates) owns more than 25% of all of the ATS voting
equity stock.
3. ATS sells a component or components of the ATS business over a
rolling 12-month period for consideration in excess of 33% of the
total ATS market capitalization at the time of the public
announcement of the sale. (A licensing transaction for a
strategic alliance in which ATS will continue to be involved is
not a sale for purposes of this section.)
4. The termination of either Xxxxxx X. Xxxxxxxxx or Xxxx X. Xxxxxxxx
as executives of ATS, without a mutually acceptable replacement
executive being hired by ATS, with S&N's acceptance (or
disapproval) to be given based upon S&N's good faith and
reasonable discretion.
5. The share price for ATS common stock falls below $6.00 for two
consecutive days, as shown on last reported sale for the day on
the Nasdaq National Market.
6. The ATS Board of Directors decides, and makes a public
announcement of said decision, to make a fundamental change in
the business of ATS such that ATS focus is no longer principally
in the area of human tissue engineered products.
