EXHIBIT 10.22
INVESTMENT AGREEMENT
THIS AGREEMENT is entered into as of October 3, 2001, between Advanced
Tissue Sciences, Inc., a Delaware corporation (the "Company"), and Medtronic
Asset Management, Inc., a Minnesota corporation ("MAMI") and Medtronic, Inc., a
Minnesota corporation.
RECITALS:
A. The Company desires to issue and sell to MAMI, and MAMI desires to
purchase shares of the Company's Common Stock, $0.01 par value per share, on the
terms and subject to the conditions set forth in this Agreement (the "Shares").
B. As a condition to MAMI's investment described above, the Company is
willing to grant Medtronic, Inc. certain rights as set forth in this Agreement
and in the License Agreement being entered into simultaneously herewith.
AGREEMENTS:
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Specific Definitions. As used in this Agreement, the following terms
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shall have the meanings set forth or as referenced below:
"Affiliate" of a specified person means a person that directly, or
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indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified. "Control" shall
mean ownership of more than 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and more than 50%
of the voting power in the case of a business entity other than a
corporation. Notwithstanding anything to the contrary contained herein, the
Dermagraft Joint Venture, the NeoCyte Joint Venture, ATS Orthopedics, Inc.,
ATS Dermagraft, Inc., Segenix, Inc. and DermEquip, LLC shall not be deemed
an Affiliate of the Company (collectively, the "Excluded Affiliates").
"Agreement" means this Agreement and all Exhibits hereto.
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"Change of Control" means any transaction or series of related
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transactions (including, without limitation, any reorganization, merger or
consolidation) in which more than 50 percent (50%) of the Company's
outstanding voting stock is transferred to a person or persons different
from those who held the stock immediately prior to such
transaction, or the sale, transfer or other disposition of all or
substantially all of the Company's assets.
"Closing" has the meaning given to such term in Section 2.2.
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"Closing Price" means the average (rounded to the nearest whole cent,
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with the cents rounded up if the third decimal place is 5 or more) of the
"Daily Market Price" of the Company's Common Stock for the 12 consecutive
Nasdaq trading days ending on and including October 2, 2001, appropriately
adjusted for any stock splits or stock dividends during such period. The
"Daily Market Price" shall equal the closing sale price (rounded to the
nearest whole cent) of the Company's Common Stock for such trading day as
reported in the West Coast Edition of the Wall Street Journal.
"Common Stock" means shares of the Company's voting common stock,
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$0.01 par value.
"Company" has the meaning given to such term in the introduction.
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"Company Subsidiaries" means ATS Orthopedics, Inc., a California
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corporation, ATS Dermagraft, Inc., a California corporation, Segenix, Inc.,
a Delaware corporation, and DermEquip, L.L.C., a Delaware limited liability
company.
"Confidential Information" means discoveries, ideas, technology,
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know-how, trade secrets, inventions (whether or not patentable), processes,
formulas, techniques, methodologies, drawings and designs, and unpublished
information or other material nonpublic information disclosed (whether
before or during the term of this Agreement) by one of the parties (the
"Disclosing Party") to the other party (the "Receiving Party") or generated
under this Agreement, excluding information that:
(a) was already in the possession of the Receiving Party prior to its
receipt from the Disclosing Party (provided that the Receiving Party is
able to provide the Disclosing Party with reasonable documentary proof
thereof);
(b) is or becomes part of the public domain by reason of acts not
attributable to the Receiving Party;
(c) is or becomes available to the Receiving Party from a source other
than the Disclosing Party which source, to the Receiving Party's Knowledge,
has rightfully obtained such information and has no obligation of
nondisclosure or confidentiality to the Disclosing Party with respect
thereto; or
(d) has been independently developed by the Receiving Party without
breach of this Agreement or use of any Confidential Information of the
other party.
All Confidential Information disclosed by one party to the other under this
Agreement shall be in writing and bear a legend "Proprietary," "Confidential" or
words of similar import or, if disclosed in any manner other than writing, shall
be preceded by an oral statement indicating that the information is proprietary
or confidential, and shall be followed by transmittal of a
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reasonably detailed written summary of the information provided to the Receiving
Party with identification as Confidential Information designated as above within
30 days.
"Contracting Party" means any person or entity that is neither (i) a
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party to this Agreement nor (ii) an Affiliate or subsidiary of a party to
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
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and all rules and regulations promulgated thereunder.
"FDA" means the United States Food and Drug Administration.
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"Intellectual Property" means Patents and Know-How.
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"Know-How" means all data, technical information, know-how, trade
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secrets and inventions owned by or licensed as of the date hereof other
than inventions covered by the Patent Rights.
"Knowledge" means actual knowledge of a fact. The Knowledge of the
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Company shall include the Knowledge of the Company's directors and
officers.
"License Agreement" means the License Agreement between Medtronic,
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Inc. and the Company of even date herewith.
"Liens" means liens, mortgages, charges, security interests, claims,
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voting trusts, pledges, encumbrances, options, assessments or restrictions
of any nature.
"Material Adverse Effect" means an effect that is reasonably expected
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to be materially adverse to (a) the business, operations, assets or
condition (financial or otherwise) of the Company and the Company
Subsidiaries, taken as a whole, or (b) the ability of the Company or any
Company Subsidiary to perform its obligations under this Agreement and the
License Agreement or any other agreement or instrument to be entered into
in connection with this Agreement.
"Medtronic" means Medtronic Asset Management, Inc. and its Affiliates,
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including without limitation Medtronic, Inc.
"Medtronic Areas of Interest" means the areas of cardiovascular
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(excluding the tissue-engineered vascular graft) (the "Cardiovascular
Area"), endocrine, neurological and spinal.
"Patents" and "Patent Rights" means (a) any U.S. and foreign patents
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and patent applications now owned by or licensed as of the date hereof,
together with any patents that may issue therefrom, (b) all continuation,
divisional, reissue, re-examination and substitution applications that may
be filed based on the foregoing referenced patents or patent applications,
together with any patents that may issue therefrom, and (c) all foreign
applications that may be filed based upon the foregoing referenced U.S.
patents and patent applications, together with all patents which may issue
based thereon.
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"Purchase Price" has the meaning given to such term in Section 2.1
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"SEC" shall mean the United States Securities and Exchange Commission
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or any other federal agency at the time administering the Securities Act or
the Exchange Act.
"SEC Documents" means the following documents filed with the SEC: (i)
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the Company's Annual Report filed on Form 10-K for the year ended December
31, 2000 as filed on Xxxxx 00, 0000, (xx) the Company's Quarterly Report
filed on Form 10-Q for the quarter ended March 31, 2001 as filed on May 10,
2001, (iii) the Company's Quarterly Report filed on Form 10-Q for the
quarter ended June 30, 2001 as filed on August 14, 2001 and (iv) the
Company's Proxy Statement filed on Form 14-A dated April 9, 2001.
"Securities Act" means the Securities Act of 1933, as amended, and all
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rules and regulations promulgated thereunder.
"Shares" has the meaning set forth in the recitals.
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"Study" means a study in a large animal model designed to evaluate the
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link between growth of new blood vessels and improved cardiac function.
1.2 Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(b) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(c) References to an "Exhibit" are, unless otherwise specified, to one
of the Exhibits attached to or referenced in this Agreement, and references
to an "Article" or a "Section" are, unless otherwise specified, to one of
the Articles or Sections of this Agreement.
(d) The term "person" includes any individual, partnership, joint
venture, corporation, trust, unincorporated organization or government or
any department or agency thereof.
(e) The term "dollars" or "$" shall refer to the currency of the
United States of America.
ARTICLE 2
PURCHASE OF SHARES; ADDITIONAL AGREEMENTS
2.1 Purchase of Shares. Subject to the terms and conditions hereof, at the
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Closing, the Company shall sell, issue and deliver to MAMI, and MAMI shall
purchase from the
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Company that number of Shares as shall equal the quotient of Twenty Million
Dollars ($20,000,000)(the "Purchase Price") divided by the Closing Price.
2.2 The Closing. The closing of the purchase of the Shares and the other
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transactions contemplated by this Agreement (the "Closing") shall take place at
such time and date and in such location and manner (e.g., by telecopy exchange
of executed signature pages with originals to follow by overnight courier) as
the parties mutually agree. At Closing, MAMI shall deliver to the Company, by
wire transfer to an account designated by the Company, the Purchase Price, and
the Company shall deliver to MAMI a certificate or certificates registered in
the name of MAMI representing the Shares.
2.3 Purchase Price Protection. The Company will not, for ninety (90) days
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after the Closing without adjusting the Closing Price hereunder accordingly,
sell (x) shares of Common Stock at a price per share of less than the Closing
Price, or (y) rights, options, instruments or warrants to purchase Common Stock
and securities of the Company that are or may become convertible into Common
Stock ("Convertible Securities") at a conversion or exercise price per share
less than the Closing Price; except for (i) shares sold or issued upon
conversion, exercise or triggering of currently outstanding securities or
rights; (ii) the sale or issuance of securities, rights, options or warrants to
purchase securities of the Company under any plan, agreement or arrangement
applicable to employees, directors or consultants; (iii) securities issued as a
result of any stock split, stock dividend or reclassification of Common Stock,
distributable on a pro rata basis to all holders of Common Stock; (iv)
securities issued upon conversion of or with respect to preferred stock of the
Company; (v) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets or other reorganization whereby the Company owns not less than 51% of the
voting power of such other corporation and (vii) securities issued following the
date hereof in connection with licensing, sponsored research, equipment leasing,
equipment financing, corporate partnering or any strategic partner transactions.
In the event that, except as provided herein, the Company shall, during the
period ending ninety (90) days after the Closing, sell any shares of Common
Stock or any instruments that can be converted into or otherwise exchanged for
Common Stock (the "Subsequent Sale") exercisable at a price per share (the
"Subsequent Purchase Price") of less than the Closing Price per share, the
Company shall within ten (10) business days of the Subsequent Sale, pay MAMI, at
the Company's option, in either cash or additional shares of Common Stock the
amount set forth in this Section 2.3. If the Company elects to pay in cash, the
cash amount shall equal the number of Shares times the difference between the
Closing Price and the Subsequent Purchase Price (the "Cash Amount"). If the
Company elects to pay in Common Stock, the number of shares of Common Stock
shall equal the Cash Amount divided by the Subsequent Purchase Price rounded to
the nearest whole share. If the Company issues Common Stock or Convertible
Securities for consideration other than cash, the fair market value of any such
non-cash consideration for purposes of this Section 2.3 shall be determined in
good faith by the Board of Directors of the Company.
2.4 Right to Purchase Additional Shares.
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(a) In the event of an issuance of New Securities (as defined below),
the Company agrees to exercise commercially reasonable efforts to permit
MAMI to purchase all or part of its pro rata share of any New Securities
that the Company may,
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from time to time, propose to sell and issue, subject to the terms and
conditions set forth below; provided that, the Board of Directors of the
Company reasonably determines that such right to purchase does not
jeopardize the success of the respective placement of New Securities.
MAMI's pro rata share, for purposes of this Section 2.4, shall equal a
fraction, the numerator of which is the number of issued and outstanding
shares of Common Stock held by MAMI immediately prior to the issuance of
such New Securities, and the denominator of which is the total number of
shares of Common Stock then issued and outstanding (including any rights,
options or warrants to purchase Common Stock and securities of the Company
that are or may become convertible into Common Stock) immediately prior to
the issuance of such New Securities.
(b) "New Securities" shall mean any Common Stock, any rights, options
or warrants to purchase Common Stock and securities of the Company that are
or may become convertible into Common Stock; provided, however, that the
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term "New Securities" does not include (i) shares of Common Stock issuable
upon conversion, exercise or triggering of currently outstanding securities
or rights; (ii) the sale or issuance of securities, rights, options or
warrants to purchase securities of the Company under any plan, agreement or
arrangement applicable to employees, directors or consultants; (iii)
securities issued as a result of any stock split, stock dividend or
reclassification of Common Stock, distributable on a pro rata basis to all
holders of Common Stock; (iv) securities issued upon conversion of or with
respect to preferred stock of the Company; (v) securities offered pursuant
to a registration statement filed under the Securities Act; (vi) securities
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company owns not less than 51% of the voting power of such
other corporation; (vii) securities issued following the date hereof in
connection with licensing, sponsored research, equipment leasing, equipment
financing, corporate partnering or any strategic partner transactions.
(c) Unless the Board of Directors of the Company reasonably determines
that MAMI's participation as described in Section 2.4(a) above would
jeopardize the success of the respective placement of New Securities, the
Company shall give MAMI written notice of such issuance (the "Issuance
Notice") no later than ten (10) business days following the date of the
issuance, describing the type and number of New Securities issued or
proposed to be issued, the number of New Securities up to which MAMI may
elect to purchase, the price thereof and the general terms of the issuance
and the closing date or proposed closing date of the issuance. Within ten
(10) business days after the Issuance Notice, MAMI may elect to purchase,
at the price and on the terms specified in the Issuance Notice, up to the
number of New Securities set forth in the Issuance Notice by delivering to
the Company notice of the number of securities to be purchased and full
payment for such securities.
(d) In the event that the price or material terms upon which the
Company offers, sells or otherwise issues New Securities or the number of
New Securities to be issued changes for any reason (other than including
the issuance of shares to MAMI) after the Issuance Notice is delivered to
MAMI, the Company shall promptly provide a revised issuance notice to MAMI
reflecting such change(s).
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(e) If the Company issues or proposes to issue any New Securities for
consideration other than cash, MAMI may purchase New Securities pursuant to
the terms hereof for cash at a per share purchase price equal to the face
amount of any cash received for such New Securities plus the fair market
value of the non-cash consideration expressly received for such New
Securities divided by the number of New Securities to be issued. The fair
market value of any such non-cash consideration shall be determined in good
faith by the Board of Directors of the Company.
(f) The rights and obligations of MAMI under this Section 2.4 shall
not be assignable.
(g) Notwithstanding anything to the contrary in this Section 2.4, the
provisions of this Section 2.4 shall be of no further force and effect upon
the earlier to occur of any of the following: (i) the consummation of a
Change of Control, (ii) Medtronic ceases to own at least 2-1/2% of the
Common Stock of the Company on a fully-diluted basis, after the date of the
Closing, or (iii) seven years from the date of the Closing.
2.5 Rights of First Offer/First Negotiation.
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(a) For the purposes of this Section 2.5, a "Proposed Transaction"
shall mean any research, development, manufacturing, original equipment
manufacturing, licensing, distribution, marketing, sales representative,
supply, sale or other transaction, arrangement, or agreement whereby a
Contracting Party would obtain rights to develop and/or commercialize any
of the tissue-engineered products or technologies of the Company, including
such products and technologies incorporating or utilizing Intellectual
Property of the Company, that are within the Medtronic Areas of Interest,
except for (i) the Company's epicardial angiogenesis patch, for which the
rights and obligations thereto shall be governed by Section 2.6 below and
(ii) except when such Proposed Transaction would take place in connection
with a Change of Control.
(b) In the event that:
(i) the Company receives a bona fide offer from a Contracting
Party that it would consider accepting regarding a Proposed
Transaction, or
(ii) the Company determines that it wishes to explore the
possibility of entering into a Proposed Transaction (including,
without limitation, a determination to seek indications of interest
with respect to such a transaction or agreement),
then the Company shall, within 10 days after such event, notify Medtronic,
Inc. in writing of the Company's receipt of such offer described in clause
(i) above or the Company's determination described in clause (ii) above
(the "Company's Notice"). The Company's Notice shall set forth, as
applicable, the material terms and provisions of such offer described in
clause (i) above or, in the case of a determination described in clause
(ii) above, the material terms and provisions upon which the Company would
be willing to enter into any such transaction with Medtronic, Inc.
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(c) During the 45-day period following Medtronic, Inc.'s receipt of
the Company's Notice with respect to any Proposed Transaction (the
"Exclusive Period"), the Company shall negotiate in good faith exclusively
with Medtronic, Inc. regarding the entry into the Proposed Transaction with
Medtronic, Inc. During the Exclusive Period, the Company will not solicit
offers from, negotiate with, or provide information to any Contracting
Party regarding a Proposed Transaction.
(d) If Medtronic, Inc. and the Company fail to reach a mutual
agreement upon the terms and provisions of the Proposed Transaction during
the Exclusive Period, then the Company shall have 120 days from the
expiration of the Exclusive Period in which to negotiate and enter into
definitive agreements for the Proposed Transaction with the Contracting
Party whose bona fide offer was described in the Company's Notice (with
respect to a Proposed Transaction described in paragraph (b)(i) above) or
with any Contracting Party (with respect to a Proposed Transaction
described in paragraph (b)(ii) above); provided, however, that the Company
shall not enter into definitive agreements with any such Contracting Party
with respect to such Proposed Transaction unless the terms and provisions
thereof are, in the aggregate, equal to or more favorable to the Company
than the material terms set forth in the Company's Notice and more
favorable to the Company than the final terms and provisions proposed by
Medtronic, Inc. during the Exclusive Period, if any. If the Company fails
to enter into definitive agreements with respect to such Proposed
Transaction within such 120-day period, then Medtronic, Inc.'s rights under
this Section 2.5 shall be reinstated and the Company may not enter into
such Proposed Transaction without first giving Medtronic, Inc. a new
Company's Notice and complying with the terms of this Section 2.5.
2.6 Epicardial Angiogenesis Patch.
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(a) The Company is prohibited from soliciting offers from, negotiating
with or providing information to any Contracting Party regarding any
transaction, agreement, or other arrangement involving the research,
development, licensing, or commercialization with respect to the Company's
epicardial angiogenesis patch products and technologies, except in
connection with a Change of Control (an "EAP Transaction") until the
Company has completed the Study and has complied with the provisions set
forth in paragraphs (b) and (c) of this Section 2.6.
(b) Upon completion of the Study, the Company shall, within 10 days
after such event, notify Medtronic, Inc. in writing of the Company's
completion of the Study (the "Study Completion Notice"). During the 45-day
period following Medtronic, Inc.'s receipt of the Study Completion Notice
(the "EAP Exclusive Period"), the Company shall negotiate exclusively with
Medtronic, Inc. regarding the entry into an EAP Transaction with Medtronic,
Inc. During the EAP Exclusive Period, the Company will not solicit offers
from, negotiate with, or provide information to any Contracting Party
regarding an EAP Transaction. If Medtronic, Inc. and the Company fail to
reach a mutual agreement upon the terms and provisions of an EAP
Transaction during the EAP Exclusive Period, then the Company shall be
free, subject to the provisions of paragraph (c), to solicit offers from,
negotiate with, or provide information to any Contracting Party regarding
an EAP Transaction.
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(c) Subject to the provisions of paragraphs (a) and (b) of this
Section 2.6, if the Company receives a bona fide offer from a Contracting
Party regarding an EAP Transaction that the Company is willing to accept
("Contracting Party EAP Offer"), then the Company shall, within 10 days
after the receipt of such Contracting Party EAP Offer, provide notice of
such offer to Medtronic, Inc. Such notice shall set forth the material
terms and provisions of such offer (the "EAP Notice"). Within the 30-day
period following Medtronic, Inc.'s receipt of the EAP Notice (the "EAP
Notice Period"), Medtronic, Inc. shall notify the Company if it has a good
faith desire to enter into a transaction or arrangement with the Company on
the same terms and conditions as provided in the EAP Notice. Failure to
respond within the EAP Notice Period shall constitute a rejection of the
Contracting EAP Offer set forth in the EAP Notice. If Medtronic, Inc.
notifies the Company during the EAP Notice Period of its desire to enter
into a transaction or arrangement with the Company, the Company shall
negotiate exclusively and in good faith with Medtronic, Inc. to finalize
the terms of the transaction or arrangement. In the event Medtronic, Inc.
and the Company fail to execute a definitive agreement with respect to such
transaction within thirty (30) days of Medtronic's notice to the Company,
or upon Medtronic, Inc.'s rejection of the Contracting Party EAP Offer,
through lapse of time or notice of such rejection, the Company shall have a
period of 120 days following the expiration of the EAP Notice Period in
which to enter into definitive agreements in accordance with the
Contracting Party EAP Offer set forth in the EAP Notice. If the Company
fails to enter into a definitive agreement on the same terms set forth in
the EAP Notice within such 120-day period, then Medtronic, Inc.'s rights
under this Section 2.6 shall be reinstated and the Company may not enter
into the transaction described in the EAP Notice without first giving a new
EAP Notice and otherwise complying with the terms of this Section 2.6.
2.7 Vascular Graft Initiatives. The Company agrees that prior to entering
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into a definitive agreement with a Contracting Party with respect to funding
initiatives solely for the purposes of funding the further development and
commercialization of tissue-engineered vascular grafts, including, but not
limited to, participation in the creation of a new entity created primarily for
the further development and commercialization of tissue-engineered vascular
grafts, it shall enter into good faith discussions with Medtronic regarding
Medtronic's participation in such initiative.
2.8 Prior Agreements. Notwithstanding anything in Section 2.5 to the
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contrary, the rights of Medtronic, Inc. hereunder with respect to the spinal
area of the Medtronic Areas of Interest are expressly made subject to the
existing right of first offer/first negotiation granted by the Company to Xxxxx
& Nephew plc pursuant to that certain Agreement dated as of May 6, 1994, as
amended to the date hereof, true and correct copies of which Agreement (as so
amended) have been delivered to Medtronic.
2.9 Termination of Certain Rights. The rights of Medtronic described in
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Sections 2.5, 2.6 and 2.7 shall terminate on the date that is seven years after
the date of this Agreement.
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2.10 Board Rights.
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(a) Right to Designate Board Member. The Company shall use
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commercially reasonable efforts to cause one (1) individual designated by
Medtronic and reasonably acceptable to the Company to be nominated to the
Company's Board of Directors, subject to the terms and conditions set forth
in this Section 2.10. If Medtronic intends to designate a nominee, it shall
deliver notice of the name of its proposed nominee to the Company prior to
the date specified in connection with the previous year's annual meeting of
the stockholders for stockholder proposals to be included in the Company's
proxy statement (the first such date after the Closing being December 18,
2001). In the event no designee is given by Medtronic within the time
period specified above, then the Medtronic designee for purposes of this
Section 2.10 shall be the director on the Company's Board of Directors at
that time representing Medtronic; provided, however, that if no designee is
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given by Medtronic within the time period specified above and there is no
representative on the Company's Board of Directors representing Medtronic,
then the Company shall have no obligations under this Section 2.10. Any
representative of Medtronic that is nominated to the Company's Board of
Directors pursuant to this Section 2.10 shall agree to waive all
compensation, including non-statutory stock options, which would otherwise
be automatically granted to non-employee members of the Company's Board of
Directors. In the event that the individual designated by Medtronic and
elected to the Company's Board of Directors pursuant to this Section
2.10(a) resigns from the Company's Board of Directors and Medtronic
designates another nominee to the Company's Board of Directors that is
reasonably acceptable to the Company within fifteen (15) days of such
resignation, then the Company shall use commercially reasonable efforts to
cause such vacancy to be filled with the individual designated by
Medtronic. All rights and obligations provided for in this Section 2.10(a)
shall be subject to applicable securities laws, the right of the
stockholders to elect the directors of the Company and the fiduciary
obligations of the members of the Board of Directors of the Company.
(b) Observer Rights. In the event that no Medtronic nominee or
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Affiliate is elected to the Company's Board of Directors, one individual
designated by Medtronic by notice to the Company and reasonably acceptable
to the Company shall have the right to receive all notices of and attend as
an observer each meeting of the Board of Directors, except that the
representative may be excluded from access to any material or meeting or
portion thereof if the Company believes, upon advice of counsel, that such
exclusion is reasonably necessary to preserve the attorney-client
privilege, or where the observer would have a conflict of interest. Any
representative of Medtronic will agree to hold in confidence and trust and
not use or disclose any confidential information provided to or learned by
him or her in connection with rights under this Section 2.10.
(c) Termination of Rights. The rights granted pursuant to this Section
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2.10 shall terminate upon the earlier to occur of any of the following: (i)
Medtronic ceases to own at least 2-1/2% of the Common Stock of the Company
on a fully-diluted basis, after the date of the Closing, or (ii) any Change
of Control.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth below and except for the specific facts disclosed in
the SEC Documents including without limitation any and all exhibits attached,
listed and/or referenced therein, and to the extent the relevancy or potential
relevancy of such disclosures to the following representations and warranties is
reasonably ascertainable, ATS represents and warrants to MAMI and Medtronic,
Inc. as of the date hereof that:
3.1 Organization, Qualifications and Corporate Power.
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(a) The Company and each Company Subsidiary is a corporation duly
incorporated, validly existing and is in good standing under the laws of
its respective jurisdiction of incorporation and is duly licensed or
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so
licensed or qualified would have a Material Adverse Effect. The Company and
each Company Subsidiary has the corporate power and authority to own and
hold its properties and to carry on its business as now conducted and as
proposed to be conducted. The Company has the corporate power and authority
to execute, deliver and perform this Agreement and the License Agreement,
and to issue, sell and deliver the Shares.
(b) Except for the Company's Subsidiaries, the Dermagraft Joint
Venture, the Neocyte Joint Venture, a Warrant to purchase the common stock
of SkinMedica, Inc and a Warrant to purchase the common stock of Biozhem
Cosmeceuticals, Inc., the Company does not (i) own of record or
beneficially, directly or indirectly, (A) any shares of capital stock or
securities convertible into capital stock of any other corporation, or (B)
any participating interest in any partnership, joint venture or other
non-corporate business enterprise, or (ii) control, directly or indirectly,
any other entity.
3.2 Authorization of Agreements, Etc.
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(a) The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder, and the issuance,
sale and delivery of the Shares have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of
any court or other agency of government, the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") or the
Restated Bylaws of the Company, as amended, or any provision of any
material indenture, agreement or other instrument to which the Company or
any of its properties or assets is bound, or conflict with, result in a
material breach of or constitute (with due notice or lapse of time or both)
a material default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any material Lien
upon any of the properties or assets of the Company.
(b) The Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of
11
Common Stock and will be free and clear of all Liens imposed by or through
the Company. The issuance, sale or delivery of the Shares is not subject to
any preemptive right of stockholders of the Company or to any right of
first refusal, co-sale, or other right in favor of any person that has not
been complied with or duly waived.
(c) Other than such consents, approvals, waivers or authorizations as
have been obtained, no consents, approvals, waivers or authorizations of
any third party are legally or contractually required on the part of the
Company to enter into the transactions contemplated hereby, except for any
notices or filings that may be required by the Nasdaq National Market.
3.3 Validity. Assuming the valid execution of this Agreement by Medtronic,
--------
each of this Agreement and the License Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, similar laws affecting
creditors' rights generally, basic principles of equity or judicial limitations
on the right to specific performance.
3.4 Authorized Capital Stock. The authorized capital stock of the Company
------------------------
consists of (i) 125,000,000 shares of Common Stock, of which 64,227,274 shares
are issued and outstanding as of October 2, 2001, and (ii) 1,000,000 shares of
Preferred Stock, none of which are issued and outstanding as of the date hereof.
As of October 2, 2001, (a) there are issued and outstanding options to purchase
an aggregate 3,355,103 shares of Common Stock and warrants to purchase an
aggregate 725,000 shares of Common Stock, and no other outstanding
subscriptions, warrants, options, convertible securities, or other rights
(contingent or other) to purchase or otherwise acquire Common Stock or other
equity securities of the Company, (b) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of its
securities under the Securities Act, and (c) there are no antidilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Shares. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class of
authorized capital stock of the Company are as set forth in the Company's
Certificate of Incorporation, a copy of which has been provided to Medtronic,
and the Rights Agreement between the Company and Chemical Trust Company of
California (the predecessor in interest to ChaseMellon Shareholder Services,
LLC), dated January 6, 1995, as amended from time to time, (the "Rights
Agreement") and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. Except as provided for in the
Company's Certificate of Incorporation and the Rights Agreement, the Company has
no obligation (contingent or other) to purchase, redeem or otherwise acquire any
of the equity securities or any interest therein or to pay any dividend or make
any other distribution in respect thereof. To the Company's Knowledge as of the
date of Closing, there are no voting trusts or agreements, shareholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company (whether
or not the Company is a party thereto). All of the outstanding securities of the
Company were issued in substantial compliance with all applicable federal and
state securities laws.
12
3.5 Reports and Financial Statements. The Company has filed all forms,
--------------------------------
reports, registration statements, and documents required to be filed by it with
the SEC since January 1, 2001 (such forms, reports, registration statements, and
documents, together with any amendments thereto filed prior to the date hereof,
are referred to as the "Company SEC Filings"). As of their respective dates, the
Company SEC Filings (i) complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) 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 made therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements and unaudited interim
financial statements included or incorporated by reference in the Company SEC
Filings, including but not limited to the Company's audited financial statements
at and for the year ended December 31, 2000, (i) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
or schedules thereto), (ii) complied as of their respective dates in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, and (iii) fairly present
the consolidated financial position of the Company as of the dates thereof and
the income, cash flows, and changes in stockholders' equity for the periods
involved. The Company has filed in a timely manner all reports required to be
filed by it pursuant to Sections 13, 14, or 15(d) of the Exchange Act during the
12-month period immediately preceding the Closing. Since December 31, 2000, the
date of the most recent year-end balance sheet of the Company (the "Balance
Sheet"), (i) there has been no change in the assets, liabilities or financial
condition of the Company from that reflected in such Balance Sheet except for
changes in the ordinary course of business that have not, individually or in the
aggregate, had a Material Adverse Effect and (ii) none of the business,
financial condition, operations or property of the Company has suffered any
Material Adverse Effect by any occurrence or development, individually or in the
aggregate, whether or not insured against. The Company and each Company
Subsidiary does not have any liabilities, contingent or otherwise, other than
(i) the liabilities set forth on the Balance Sheet, (ii) liabilities incurred in
the ordinary course of business subsequent to the date of the Balance Sheet, and
(iii) liabilities of the type not required under generally accepted accounting
principles to be reflected in financial statements of the Company. Such
liabilities not set forth on the Balance Sheet are not, in the aggregate,
material to the financial condition or operating results of the Company.
3.6 Litigation; Compliance with Law. The Company has not received actual
-------------------------------
notice of any, (i) action, suit, claim, proceeding or investigation pending or
threatened against or affecting the Company or any Company Subsidiary, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company or any Company
Subsidiary pending under collective bargaining agreements or otherwise or (iii)
governmental inquiry pending or threatened against or affecting the Company or
any Company Subsidiary (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit) and, to
the Company's Knowledge, there is no basis for any of the foregoing. The Company
and the Company Subsidiaries are not in default with respect to any order, writ,
injunction or decree of any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company or any Company
13
Subsidiary pending or threatened in writing against others. The Company and each
Company Subsidiary has complied with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services for which the failure to comply would have a Material Adverse Effect.
The Company and each Company Subsidiary has all necessary permits, licenses and
other authorizations required to conduct its business as conducted and as
proposed to be conducted which, if not obtained, would have, either individually
or in the aggregate, a Material Adverse Effect.
3.7 Title to Properties. The Company or the Company Subsidiaries have good
-------------------
and marketable title to its properties and assets, and all such properties and
assets are free and clear of all Liens, except for Liens for current taxes not
yet due and payable and minor imperfections of title, if any, not material in
nature or amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations or proposed
operations of the Company or the Company Subsidiaries.
3.8 Leasehold Interests. Each lease or agreement to which the Company or
-------------------
any Company Subsidiary is a party under which it is a lessee of any property,
real or personal, is a valid and existing agreement without any material default
of the Company or any Company Subsidiary thereunder and, to the Company's
Knowledge, without any material default thereunder of any other party thereto.
No event has occurred and is continuing that, with due notice or lapse of time
or both, would constitute a default or event of default by the Company or any
Company Subsidiary under any such lease or agreement or, to the Company's
Knowledge, by any other party thereto which would have a Material Adverse
Effect. The possession of such property by the Company or such Company
Subsidiary has not been disturbed and, to the Company's Knowledge, no claim has
been asserted against the Company or such Company Subsidiary adverse to its
rights in such leasehold interests.
3.9 Taxes. The Company and each Company Subsidiary has timely filed, or
-----
caused to be timely filed, all federal, state and local tax returns for income
taxes, franchise taxes, sales taxes, withholding taxes, property taxes and, to
the Company's Knowledge, all other tax returns of every kind whatsoever required
by law to be filed, and all such tax returns are complete and accurate and in
accordance with all legal requirements applicable thereto. The tax returns of
the Company have never been audited by the Internal Revenue Service or other
governmental authorities and to the Knowledge of the Company there are no
additional tax liabilities for any periods for which such returns have not been
filed.
3.10 Patents, Trademarks, Etc. The Company and each Company Subsidiary owns
------------------------
or possesses licenses or other rights to use all letters patent and patent
applications, trademarks, trade names, service marks and registrations thereof
and applications therefore; copyrights and copyright registrations and
applications; discoveries, ideas, technology, know-how, trade secrets,
processes, formulas, drawings and designs, computer programs and software; and
all amendments, modifications and improvements to any of the foregoing necessary
to or used in the conduct of its business as conducted (the "IP Rights") and the
Company has not received actual notice of a pending or threatened claim to the
effect that the operations of the Company or any Company Subsidiary infringe
upon or conflict with the asserted rights of any other person under any of the
IP Rights, and to the Company's Knowledge there is no basis for any such claim.
The Company has not received actual notice that a claim is pending or threatened
to the effect that
14
any such IP Rights owned or licensed by the Company or any Company Subsidiary,
or which the Company or any Company Subsidiary otherwise has the right to use,
are invalid or unenforceable by the Company or any Company Subsidiary, and to
the Company's Knowledge there is no basis for any such claim (whether or not
pending or threatened). Neither the Company nor any Company Subsidiary has
granted or assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company or any Company Subsidiary. The
Company and each Company Subsidiary has secured valid written assignments from
all consultants and employees who contributed to the creation or development of
IP Rights of the rights to such contributions that the Company does not already
own by operation of law. The Company has taken all necessary and appropriate
steps to protect and preserve the confidentiality of all IP Rights not otherwise
protected by patents, patent applications or copyright. The Company has a policy
requiring each of its employees and contractors to execute proprietary
information and confidentiality agreements substantially in the Company's
standard forms and all current and former employees and contractors of the
Company and each Company Subsidiary have executed such an agreement. The Company
has provided a true and correct copy of such form to Medtronic.
3.11 Governmental Approvals. Subject to the accuracy of the representations
----------------------
and warranties of Medtronic set forth in Article 4, no registration or filing
with, or consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Company of this Agreement and the
License Agreement, or for the issuance, sale and delivery of the Shares.
3.12 Brokers. The Company has no contract, arrangement or understanding
-------
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
3.13 Investment Company Status. The Company is not and upon consummation of
-------------------------
the sale of the Shares will not be an "investment company," a company controlled
by an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
3.14 Regulatory Filings. All documentation, correspondence, reports, data,
------------------
analysis and certifications relating to or regarding any medical devices of the
Company and/or any Company Subsidiary, filed or delivered by or on behalf of the
Company and/or any Company Subsidiary to any governmental authority, agency or
body were true and accurate when so filed or delivered.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MEDTRONIC
MAMI makes the following representations and warranties to the Company:
4.1 Purchase of Shares. MAMI is an "accredited investor" within the
------------------
meaning of Rule 501 under the Securities Act, as presently in effect, and was
not organized for the specific purpose of acquiring the Shares. Without limiting
the Company's representations and warranties
15
contained in Article 3, MAMI has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of MAMI's
investment in the Company and MAMI is able financially to bear the risks
thereof. Without limiting the Company's representations and warranties contained
in Article 3, MAMI has had an opportunity to discuss the terms and conditions of
the offering of the Shares and the Company's business, properties, management
and financial affairs with the Company's management. This Agreement is made with
MAMI in reliance on MAMI's representation to the Company, which by MAMI's
execution of this Agreement MAMI hereby confirms, that the Shares are being
acquired for MAMI's own account, not as a nominee or agent, for the purpose of
investment and not with a view to the resale or distribution of any part
thereof, and that MAMI has no present intention of selling, granting any
participation in or otherwise distributing the Shares. By executing this
Agreement, MAMI further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares. MAMI understands that (i) the Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
or Rule 505 or 506 promulgated thereunder, (ii) the Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Shares will bear a
legend to such effect and (iv) the Company will make a notation on its transfer
books to such effect. In this regard, MAMI represents that it is familiar with
Securities Act Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
4.2 Corporate Authority. The execution, delivery and performance by MAMI
-------------------
and Medtronic, Inc. of this Agreement and the transactions contemplated hereby
have been duly and validly authorized and approved by all requisite corporate
action on the part of MAMI and Medtronic, Inc., and the execution and the
delivery of this Agreement and consummation of the transactions contemplated
hereby and compliance with and fulfillment of the terms and provisions hereof
and thereof will not (i) conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under the Articles of
Incorporation or Bylaws of MAMI or Medtronic, Inc., or (ii) require any
affirmative approval, consent, authorization or other order or action of any
court, governmental authority, regulatory body, creditor or any other person.
MAMI and Medtronic, Inc. have all requisite power and authority to do and
perform all acts and things required to be done by MAMI and Medtronic, Inc.
under this Agreement and the agreements contemplated hereby. This Agreement has
been duly executed and delivered by MAMI and Medtronic, Inc. and constitutes the
legal, valid and binding obligation of MAMI and Medtronic, Inc. enforceable in
accordance with its terms except as may be limited by laws affecting creditors'
rights generally or by judicial limitations on the right to specific
performance.
4.3 Resales of Shares.
-----------------
(a) MAMI hereby covenants and agrees not to make any disposition of
all or any portion of the Shares unless and until it has satisfied the
rules, regulations and other requirements of the Securities Act including,
without limitation, in the event of any resale
16
under a registration statement, the prospectus delivery requirements
under the Securities Act.
(b) MAMI shall notify the Company in advance of any proposed
disposition of any unregistered Shares and shall furnish the Company with a
statement of the circumstances surrounding the proposed disposition, and if
requested by the Company, MAMI shall furnish the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of the Shares under the Act.
4.4 Legends. It is understood that the certificates evidencing the Shares
-------
may bear the following legend and any other legends required by applicable laws:
"These securities have not been registered under the
Securities Act of 1933, as amended. 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 of such Act."
ARTICLE 5
COVENANTS
5.1 Reasonable Efforts. The Company will use reasonable efforts to satisfy
------------------
in a timely fashion each of the conditions to be satisfied under Article 6 of
this Agreement.
5.2 State Laws. The Company will take such action as it reasonably
----------
determines to be necessary to qualify the Shares for sale to MAMI under this
Agreement under applicable securities laws of the states of the United States
(or to obtain an exemption from such qualification); provided, however, that
notwithstanding anything herein to the contrary, the Company shall not be
required to qualify to do business or consent to service of process and shall
not be subjected to general taxation in any other jurisdiction in which it is
not now so qualified or has not so consented and shall not be required to make
any change in its Amended and Restated Certificate of Incorporation or Restated
Bylaws, which the Company determines to be contrary to its best interests.
5.3 Employee Agreements. The Company and each Company Subsidiary shall
-------------------
obtain from their respective employees or consultants an agreement providing
reasonable and customary protections to the Company or the respective Company
Subsidiary, as the applicable case may be, regarding the confidentiality of the
Company or the respective Company Subsidiary's information and the ownership by
the Company or the respective Company Subsidiary of inventions of such employees
or consultants.
5.4 Use of Medtronic Name. The Company shall not, except with the written
---------------------
consent of Medtronic, use Medtronic's name or that of any Affiliate of Medtronic
except as the Company
17
determines, upon the advice of counsel, may be required by law, or governmental
regulations, including without limitation, the rules and regulations promulgated
by the SEC.
5.5 Compliance with Law. As long as Medtronic owns any Common Stock, the
-------------------
Company will and will cause the Company Subsidiaries to conduct their respective
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which they are conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, the failure to comply with which would have a Material Adverse
Effect.
5.6 Registration of Shares. Within 90 days after the date of the Closing,
----------------------
the Company shall, at its expense, subject to receipt of necessary information
from MAMI:
(a) prepare and file with the SEC a Registration Statement on Form S-3
with respect to the sale of the Shares by MAMI on the Nasdaq National
Market (or the facilities of any national securities exchange on which the
Common Stock is then traded) or in privately negotiated transactions (the
"Form S-3 Registration Statement") and use reasonable efforts to cause such
Form S-3 Registration Statement to become and remain effective until the
distribution described in the Form S-3 Registration Statement has been
completed, but in no event shall the Company be obligated to maintain the
effectiveness of such Registration Statement for more than 180 days after
the effective date; and
(b) as expeditiously as possible prepare and file with the SEC any
amendments and supplements to the Form S-3 Registration Statement and the
prospectus included in the Form S-3 Registration Statement as may be
necessary to keep the Registration Statement effective for the period
described in paragraph (a) above; and
(c) as expeditiously as possible furnish to MAMI such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as MAMI may reasonably request in order to facilitate the public
sale or other disposition of the Shares.
The Company will notify MAMI in writing promptly upon the Form S-3 Registration
Statement being declared effective by the SEC.
5.7 Reporting Requirements. With a view to making available the benefits
----------------------
of rules and regulations of the SEC that from time to time permit the sale of
the Shares to the public without registration, the Company shall, at its
expense, use reasonable efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
after the date hereof; and
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act.
5.8 Disposition of the Shares. MAMI hereby covenants that it will not make
-------------------------
any sales of the Shares not in accordance with the Form S-3 Registration
Statement and without satisfying the prospectus delivery requirement under the
Securities Act. MAMI acknowledges
18
that there may occasionally be times when the Company must suspend (for a period
not to exceed 90 days) the use of the prospectus forming part of the Form S-3
Registration Statement until such time as an amendment to such Form S-3
Registration Statement has been filed by the Company and declared effective by
the SEC, or until such time as the Company has filed an appropriate report with
the SEC pursuant to the Exchange Act or applicable securities laws. MAMI hereby
covenants that it will not sell any Shares pursuant to said prospectus during
the period commencing at the time at which the Company gives MAMI written notice
of the suspension of the use of such prospectus and ending at the time the
Company gives MAMI written notice that MAMI may thereafter effect sales pursuant
to said prospectus. MAMI further covenants to notify the Company promptly of the
sale of any or all of its Shares and to comply with all filing, reporting and
other obligations under applicable securities laws. MAMI further covenants to
provide the Company with an updated, accurate and complete plan of distribution
at all times for the Company is required to keep the Form S-3 Registration
Statement in effect.
5.9 Compliance With Regulation FD. Medtronic hereby covenants and agrees
-----------------------------
that it will maintain in confidence all material, nonpublic information
disclosed to Medtronic by the Company.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF MEDTRONIC
The obligations of MAMI to invest in the Company and accept the Shares on
the date of the Closing are subject to the satisfaction, on the date of the
Closing, of the conditions set forth in Sections 6.1 through 6.7 below,
inclusive.
6.1 Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties contained in Article 3 shall be true, complete
and correct on and as of the date of the Closing with the same effect as though
such representations and warranties had been made on and as of such date, and
the President and Chief Financial Officer of the Company shall have certified to
such effect to MAMI in writing.
6.2 Performance. The Company shall have performed and complied with all
-----------
agreements contained in this Agreement and the License Agreement that are
required to be performed or complied with by the Company prior to or at the date
of the Closing, and the President and Chief Financial Officer of the Company
shall have certified to MAMI in writing to such effect and to the further effect
that all of the conditions set forth in Sections 6.1 through 6.8, inclusive,
have been satisfied.
6.3 All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to MAMI and its counsel, and MAMI and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they reasonably may request.
6.4 Supporting Documents. MAMI and its counsel shall have received copies
--------------------
of the following documents:
19
(a) a certificate of the Secretary of the Company dated the date of
the Closing and certifying: (i) the Company's then current Certificate of
Incorporation and Bylaws; and (ii) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors of the
Company authorizing the execution, delivery and performance of this
Agreement and the agreements and instruments referred to herein and the
consummation of the transactions contemplated hereby; and
(b) the License Agreement shall have been duly executed by the
Company.
6.5 Litigation Affecting Closing. No suit, action or other proceeding
----------------------------
shall be pending or threatened by any third party or by or before any court or
governmental agency in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement and the License
Agreement, or the consummation of the transactions contemplated hereby or
thereby, and no investigation that might result in any such suit, action or
other proceeding shall be pending or threatened.
6.6 Legislation. No statute, rule, regulation, order, or interpretation
-----------
shall have been enacted, entered or deemed applicable by any domestic or foreign
government or governmental or administrative agency or court that would make the
transactions contemplated by this Agreement and the License Agreement illegal.
6.7 Opinion of Company's Counsel. MAMI shall have received from Xxxxxxx,
----------------------------
Phleger & Xxxxxxxx LLP, counsel for the Company, an opinion dated as of the date
of the Closing in the form attached hereto as Exhibit A.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to enter into this Agreement on the date of
the Closing are subject to the satisfaction, on the date of the Closing, of the
conditions set forth in Section 7.1 through 7.5 below, inclusive.
7.1 Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties contained in Article 4 shall be true, complete
and correct on and as of the date of the Closing with the same effect as though
such representations and warranties had been made on and as of such date.
7.2 Payment of Purchase Price. MAMI shall have delivered the Purchase
-------------------------
Price specified in Section 2.1.
7.3 Qualifications. All authorizations, approvals or permits, if any, any
--------------
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Shares
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
7.4 Litigation Affecting Closing. No suit, action or other proceeding
----------------------------
shall be pending or threatened by any third party or by or before any court or
governmental agency in which it is
20
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement and the License Agreement, or the consummation of
the transactions contemplated hereby or thereby, and no investigation that might
result in any such suit, action or other proceeding shall be pending or
threatened.
7.5 Legislation. No statute, rule, regulation, order, or interpretation
-----------
shall have been enacted, entered or deemed applicable by any domestic or foreign
government or governmental or administrative agency or court that would make the
transactions contemplated by this Agreement and the License Agreement illegal.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Medtronic.
----------------------------
(a) The Company shall indemnify, defend and hold harmless Medtronic
and its parent, Affiliates, subsidiaries, officers, directors, employees,
agents and shareholders (collectively the "Medtronic Indemnified Parties")
from and against and in respect of any and all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, interest and
penalties, costs and expenses (including, without limitation, reasonable
legal fees and disbursements incurred in connection therewith and in
seeking indemnification therefor, and any amounts or expenses required to
be paid or incurred in connection with any action, suit, proceeding, claim,
appeal, demand, assessment, penalty, fine or judgment) ("Indemnifiable
Losses"), resulting from, arising out of, or imposed upon or incurred by
any person to be indemnified hereunder by reason of any breach of any
representation, warranty, covenant or agreement of the Company contained in
this Agreement or any agreement, certificate or document executed and
delivered by the Company pursuant hereto or in connection with any of the
transactions contemplated by this Agreement.
(b) The Company will indemnify and hold harmless the Medtronic
Indemnified Parties against any Indemnifiable Losses to which the Medtronic
Indemnified Parties may become subject, under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise insofar as such Indemnifiable Losses arise out
of or are based upon any untrue or allegedly untrue statement or omission
of any material fact required to be stated or necessary to make any
statement not misleading, to the extent that such untrue statement or
omission is included in the Form S-3 Registration Statement, or related
prospectus, or any amendment or supplement to the Form S-3 Registration
Statement or such prospectus (the "Filings"), except for such information
furnished by Medtronic expressly for use in the Filings; and the Company
will further reimburse the Medtronic Indemnified Parties for any legal and
other expense reasonably incurred in connection with the seeking of
indemnity pursuant to the terms herein.
8.2 Indemnification of the Company.
------------------------------
21
(a) Medtronic shall indemnify, defend and hold harmless the Company
and its Affiliates, Excluded Affiliates subsidiaries, officers, directors,
employees, agents and shareholders (collectively the "Company Indemnified
Parties") from and against and in respect of any and all Indemnifiable
Losses resulting from, arising out of, or imposed upon or incurred by any
person to be indemnified hereunder by reason of any breach of any
representation, warranty, covenant or agreement of the Medtronic
Indemnified Parties contained in this Agreement or any agreement,
certificate or document executed and delivered by the Medtronic Indemnified
Parties pursuant hereto or in connection with the transactions contemplated
by this Agreement.
(b) Medtronic will indemnify and hold harmless the Company Indemnified
Parties against any Indemnifiable Losses to which the Company Indemnified
Parties may become subject, under the Securities Act, the Exchange Act, or
any other federal or state statutory law or regulation, or at common law or
otherwise insofar as such Indemnifiable Losses arise out of or are based
upon any untrue or allegedly untrue statement or omission of any material
fact required to be stated or necessary to make any statement not
misleading, but only to the extent that such untrue statement or omission
is included in the Form S-3 Registration Statement, or related prospectus,
or any amendment or supplement to the Form S-3 Registration Statement or
such prospectus (the "Filings"), in reliance upon and in conformity with
written information furnished to the Company Indemnified Parties by or on
behalf of Medtronic expressly for use in the Filings or such untrue
statement or alleged untrue statement or omission or alleged omission was
delivered to a subsequent purchaser in a prospectus that was correct when
delivered to the Medtronic Indemnified Parties before the pertinent sale or
sales by the Medtronic Indemnified Parties; and Medtronic will further
reimburse the Company Indemnified Parties for any legal and other expense
reasonably incurred in connection with the seeking of indemnity pursuant to
the terms herein.
8.3 Third-Party Claims. If a claim by a third party is made against an
------------------
indemnified party and if the indemnified party intends to seek indemnity with
respect thereto under this Article 8, such indemnified party shall promptly
notify the indemnifying party of such claim; provided, however, that failure to
give timely notice shall not affect the rights of the indemnified party so long
as the failure to give timely notice does not adversely affect the indemnifying
party's ability to defend such claim against a third party. The indemnified
party shall not settle such claim without the consent of the indemnifying party,
which consent shall not be unreasonably withheld or delayed. If the indemnifying
party acknowledges in writing its indemnity obligations for Indemnifiable Losses
resulting therefrom, the indemnifying party may participate at its own cost and
expense in the settlement or defense of any claim for which indemnification is
sought; provided that such settlement or defense shall be controlled by the
indemnified party.
8.4 Cooperation as to Indemnified Liability. Each party hereto shall
---------------------------------------
cooperate fully with the other parties with respect to access to books, records,
or other documentation within such party's control, if deemed reasonably
necessary or appropriate by any party in the defense of any claim that may give
rise to indemnification hereunder.
22
ARTICLE 9
OTHER PROVISIONS
9.1 Nondisclosure. Each party agrees not to disclose or use (except to
-------------
such employees, officers, agents, subsidiaries or consultants are reasonably
required to know) any Confidential Information of the other party obtained
during the term of this Agreement until the expiration of five years after the
termination or expiration of this Agreement; provided, however, that any
Know-How obtained during the term of this Agreement or the License Agreement
shall be kept confidential until such Know-How ceases to be Confidential
Information. Each party further agrees to use reasonable efforts to prevent any
such prohibited disclosure by its present and future employees, officers,
agents, subsidiaries, or consultants during the term of this Agreement and for a
period of five years thereafter. Notwithstanding the foregoing, either party may
disclose such Confidential Information as such information must be publicly
disclosed by reason of legal, accounting or regulatory requirements beyond the
reasonable control, and despite the reasonable efforts of the Receiving Party,
provided, however, that the disclosing party shall take all reasonable steps to
seek confidential treatment of such Confidential Information to the fullest
extent available.
9.2 Further Assurances. At such time and from time to time on and after
------------------
the date of the Closing, upon request by the other party, Medtronic and the
Company will execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances that may be reasonably
required to carry out the purposes of this Agreement and for conveying,
transferring, assigning, delivering, assuring and confirming to Medtronic, or to
its respective successors and assigns, all of the Shares.
9.3 Complete Agreement. The Exhibits to this Agreement shall be construed
------------------
as an integral part of this Agreement to the same extent as if they had been set
forth verbatim herein. This Agreement and Exhibits hereto, the License Agreement
and the agreements contemplated herein and therein constitute the entire
agreement between the parties hereto with respect to the subject matters hereof
and thereof and supersede all prior agreements whether written or oral relating
hereto.
9.4 Survival of Representations, Warranties and Agreements. The
------------------------------------------------------
representations, warranties, covenants and agreements contained in Articles 3
and 4 of this Agreement shall survive the Closing for a period of 18 months. All
other representations, warranties, covenants and agreements shall survive
indefinitely unless stated otherwise herein. No independent investigation of the
Company by Medtronic, its counsel, or any of its agents or employees shall in
any way limit or restrict the scope of the representations and warranties made
by the Company in this Agreement.
9.5 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties hereto and the permitted successors and assigns of
the parties hereto. The rights of the Company may not be assigned, without the
written consent of Medtronic (which written consent shall not be unreasonably
withheld), and the rights of Medtronic may be assigned only to a subsidiary of
Medtronic or, subject to the prior written consent of the Company, such
23
business organization that shall succeed to all or substantially all of the
assets and business of Medtronic or such subsidiary.
9.6 Waiver, Discharge, Amendment, Etc. The failure of any party hereto to
---------------------------------
enforce at any time any of the provisions of this Agreement, including the
election of such party to proceed with the Closing despite a failure of any
condition to such party's closing obligations to occur, shall not, absent an
express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of the party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach. This Agreement may be amended by the Company and
Medtronic, by mutual action approved by their respective Boards of Directors or
their respective officers authorized by such Board of Directors, at any time.
Any amendment to this Agreement shall be in writing and signed by the Company
and Medtronic.
9.7 Notices. All notices or other communications to a party required or
-------
permitted hereunder shall be in writing and shall be delivered personally or by
telecopy (receipt confirmed) to an executive officer of such party or shall be
sent by a reputable express delivery service or by certified mail, postage
prepaid with return receipt requested, addressed as follows:
if to Medtronic to: Medtronic, Inc.
000 Xxxxxxxxx Xxxxxxx XX
Xxxxxxxxxxx, XX 00000-0000
with separate copies thereof addressed to
Attention: General Counsel
Mail Stop LC400
Telecopier No.: (000)000-0000
and
Attention: Vice President and Chief Development
Officer
Mail Stop LC390
Telecopier No.: (000)000-0000
if to the Company to: Advanced Tissue Sciences, Inc.
00000 Xxxxx Xxxxxx Xxxxx Xxxx
Xx Xxxxx, XX 00000-0000
Attention: Chief Executive Officer
Vice President and General Counsel
Telecopier No.: (000)000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
00
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Any party may change the above-specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by telecopy) or on the day shown on the return receipt
(if delivered by mail or delivery service).
9.8 Public Announcement. In the event any party proposes to issue any
-------------------
press release or public announcement concerning any provisions of this Agreement
or the transactions contemplated hereby, such party shall so advise the other
party hereto, and the parties shall thereafter use their best efforts to cause a
mutually agreeable release or announcement to be issued. Neither party will
publicly or privately disclose or divulge any provisions of this Agreement or
the transactions contemplated hereby without the other party's written consent,
except as may be required by applicable law, rule, regulation, order or stock
exchange regulation, and except for communications to employees subject to
similar obligations set forth in this Section 9.8; provided that, prior to
disclosure of any provision of this Agreement that either party considers
particularly sensitive or confidential to any governmental agency or stock
exchange, the parties shall cooperate to seek confidential treatment or other
applicable limitations on the public availability of such information.
9.9 Expenses. The Company and Medtronic shall each pay their own expenses
--------
incident to this Agreement and the preparation for, and consummation of, the
transactions provided for herein.
9.10 Governing Law. The formation, legality, validity, enforceability and
-------------
interpretation of this Agreement shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflict of laws; provided,
however, that nothing in Delaware procedural law shall be deemed to alter or
affect the applicability of the Federal Arbitration Act as governing arbitration
of disputes as provided in Section 9.14 and, provided further, that no Delaware
laws or rules of arbitration shall be applicable.
9.11 Titles and Headings; Construction. The titles and headings to the
---------------------------------
Articles and Sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement. This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.
9.12 Benefit. Nothing in this Agreement, expressed or implied, is intended
-------
to confer on any person other than the parties hereto or their respective
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
25
9.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
9.14 Arbitration. Any dispute arising out of or relating to this Agreement,
-----------
including the formation, interpretation or alleged breach hereof, shall be
settled in accordance with Exhibit B attached hereto. The results of such
arbitration proceedings shall be binding upon the parties hereto, and judgment
may entered upon the arbitration award in any court having jurisdiction thereof.
Notwithstanding the foregoing, either party may seek interim injunctive relief
from any court of competent jurisdiction.
26
ACCORDINGLY, each of the parties has caused this Investment Agreement to be
executed in the manner appropriate for each, and to be dated as of the date
first above-written.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxx, Ph.D.
President
MEDTRONIC ASSET MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Its Vice President
MEDTRONIC, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Its Vice President and Chief
Development Officer
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
EXHIBIT A
OPINION OF XXXXXXX, XXXXXXX & XXXXXXXX LLP
Xxxxxxx, Phleger & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
DIRECT 858.720.2500
FAX 000.000.0000
xxx.xxxxxxx.xxx
October 3, 2001
To Medtronic Asset Management, Inc.
000 Xxxxxxxxx Xxxxxxx XX
Xxxxxxxxxxx, XX 00000-0000
Ladies and Gentlemen:
We have acted as counsel for Advanced Tissue Sciences, Inc., a Delaware
corporation (the "Company"), in connection with the issuance and sale of shares
of its Common Stock pursuant to the Investment Agreement dated October 3, 2001
(the "Investment Agreement") between the Company and you. This opinion letter is
being rendered to you pursuant to Section 6.7 of the Investment Agreement in
connection with the Closing of the sale of the Common Stock. Capitalized terms
not otherwise defined in this opinion letter have the meanings given them in the
Investment Agreement.
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Company pursuant to the Investment
Agreement and upon certificates and statements of government officials and of
officers of the Company. We have also examined originals or copies of such
corporate documents or records of the Company as we have considered appropriate
for the opinions expressed herein. We have assumed for the purposes of this
opinion letter the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of the documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
certified, facsimile or photostatic copies, and the authenticity of the
originals of such copies.
In rendering this opinion letter we have also assumed: (A) that the
Investment Agreement has been duly and validly executed and delivered by you or
on your behalf, that you have the power to enter into and perform all your
obligations thereunder and have taken any and all necessary corporate action to
authorize the Investment Agreement, and that the Investment Agreement
constitutes valid, legal, binding and enforceable obligation upon you; (B) that
the representations and warranties made in the Investment Agreement by you are
true and correct; (C) that any wire transfers, drafts or checks tendered by you
will be honored; and (D) that you have filed any required state franchise,
income or similar tax returns and have paid any required state franchise, income
or similar taxes.
A-1
October 3, 2001
Page 2
As used in this opinion letter, the expression "we are not aware" or the
phrase "to our knowledge," or any similar expression or phrase with respect to
our knowledge of matters of fact, means as to matters of fact that, based on the
actual knowledge of individual attorneys within the firm principally responsible
for handling current matters for the Company (and not including any constructive
or imputed notice of any information), and after an examination of documents
referred to herein and after inquiries of certain officers of the Company, no
facts have been disclosed to us that have caused us to conclude that the
opinions expressed are factually incorrect; but beyond that we have made no
factual investigation for the purposes of rendering this opinion letter.
Specifically, but without limitation, we have not searched the dockets of any
courts and we have made no inquiries of securities holders or employees of the
Company, other than such officers. No inference as to our knowledge of the
existence or absence of any fact should be drawn from our representation of the
Company or the rendering of the opinions set forth below.
This opinion letter relates solely to the laws of the State of California,
the General Corporation Law of the State of Delaware and the federal law of the
United States and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering such
laws or opinions of other counsel have not been sought or obtained. Furthermore,
we invite your attention to the fact that the Investment Agreement states that
it is governed by the laws of the State of Delaware. We have made no
investigation of Delaware law (other than with respect to the General
Corporation Law of the State of Delaware) nor consulted with counsel admitted to
practice law in the State of Delaware. We have not examined the question of what
law would govern the interpretation or enforcement of the Investment Agreement,
and our opinion with regard to the validity, binding nature and enforceability
of the Investment Agreement is based upon the assumption that the internal laws
of the State of California would govern the provisions thereof.
Based upon our examination of and reliance upon the foregoing and subject
to the limitations, exceptions, qualifications and assumptions set forth below
and except as set forth in the Investment Agreement, we are of the opinion that
as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and the Company has
the requisite corporate power and authority to own its properties and to conduct
its business as, to our knowledge, it is presently conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform the Investment Agreement. The Investment Agreement
has been duly and validly authorized by the Company, duly executed and delivered
by the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable by you against the Company in accordance with its terms.
A-2
October 3, 2001
Page 3
3. The Shares have been duly authorized and, upon purchase at the Closing
pursuant to the terms of the Investment Agreement, will be validly issued,
nonassessable and fully paid.
4. Other than in connection with any securities laws (with respect to
which we direct you to paragraph 5 below), all consents, approvals, permits,
orders or authorizations of, and all qualifications by and registrations with,
any federal or Delaware corporate or California state governmental authority on
the part of the Company required in connection with the execution and delivery
of the Investment Agreement have been obtained, and are effective.
5. On the assumption that your representations in the Investment
Agreement are correct, the offer and sale of the Shares to you pursuant to the
terms of the Investment Agreement are exempt from the registration requirement
of Section 5 of the Securities Act of 1933, as amended, and from the
qualification requirement of the California Corporate Securities Law of 1968, as
amended.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(A) The legality, validity, binding nature and enforceability of the
Company's obligations under the Investment Agreement may be subject to or
limited by (1) bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent transfer and other similar laws affecting the rights of creditors
generally; (2) general principles of equity (whether relief is sought in a
proceeding at law or in equity), including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and the discretion of
any court of competent jurisdiction in awarding specific performance or
injunctive relief and other equitable remedies; and (3) without limiting the
generality of the foregoing, (a) principles requiring the consideration of the
impracticability or impossibility of performance of the Company's obligations at
the time of the attempted enforcement of such obligations, and (b) the effect of
California court decisions and statutes which indicate that provisions of the
Investment Agreement which permit any of you to take action or make
determinations may be subject to a requirement that such action be taken or such
determinations be made on a reasonable basis in good faith or that it be shown
that such action is reasonably necessary for your protection.
(B) We express no opinion as to the Company's or this transaction's
compliance or noncompliance with applicable federal or state antifraud or
antitrust statutes, laws, rules and regulations or Section 721 (as amended by
Section 5021 of the Omnibus Trade and Competitiveness Act of 1988: the so-called
"Exon-Xxxxxx" provision) of the Defense Production Act of 1950 and the
regulations thereunder.
(C) We express no opinion concerning the past, present or future fair
market value of any securities.
A-3
October 3, 2001
Page 4
(D) We express no opinion as to the enforceability under certain
circumstances of any provisions indemnifying a party against, or requiring
contributions toward, that party's liability for its own wrongful or negligent
acts, or where indemnification or contribution is contrary to public policy or
prohibited by law. In this regard, we advise you that in the opinion of the
Securities and Exchange Commission, provisions regarding indemnification of
directors, officers and controlling persons of an issuer against liabilities
arising under the Securities Act of 1933, as amended, are against public policy
and are therefore unenforceable.
(E) We express no opinion as to the enforceability under certain
circumstances of any provisions prohibiting waivers of any terms of the
Investment Agreement other than in writing, or prohibiting oral modifications
thereof or modification by course of dealing. In addition, our opinions are
subject to the effect of judicial decisions which may permit the introduction of
extrinsic evidence to interpret the terms of written contracts such as the
Investment Agreement.
(F) We express no opinion as to the effect of Section 1670.5 of the
California Civil Code or any other California law, federal law or equitable
principle which provides that a court may refuse to enforce, or may limit the
application of, a contract or any clause thereof which the court finds to have
been unconscionable at the time it was made or contrary to public policy.
(G) We express no opinion as to the effect of Sections 1203 and 1102(3) of
the California Uniform Commercial Code or any other California law, federal law
or equitable principle, providing for an obligation of good faith in the
performance or enforcement of contracts and prohibiting disclaimer of such
obligation.
(H) Our opinions in paragraph 4 are limited to laws and regulations
normally applicable to transactions of the type contemplated in the Investment
Agreement and do not extend to licenses, permits and approvals necessary for the
conduct of the Company's business. In addition and without limiting the previous
sentence, we express no opinion herein with respect to the effect of any land
use, safety, hazardous material, environmental or similar law, or any local or
regional law. Further, we express no opinion as to the effect of or compliance
with any state or federal laws or regulations applicable to the transactions
contemplated by the Investment Agreement because of the nature of the business
of any party thereto other than the Company. Also, we express no opinion with
respect to any patent, copyright, trademark or other intellectual property
matter, or as to the statutes, regulations, treaties or common laws of any
nation, state or jurisdiction with regard thereto.
(I) We express no opinion as to your compliance with any federal or state
law relating to your legal or regulatory status or the nature of your business.
(J) We express no opinion as to the effect of subsequent issuances of
securities of the Company, to the extent that further issuances which may be
integrated with the
A-4
October 3, 2001
Page 5
Closing may include purchasers that do not meet the definition of "accredited
investors" under Rule 501 of Regulation D and equivalent definitions under state
securities or "blue sky" laws.
(K) Our opinions with regard to the Investment Agreement do not extend to
other agreements or instruments (or forms of agreements or instruments) which
may be attached thereto as exhibits, including, without limitation, the License
Agreement.
(L) We express no opinion as to:
(1) The effect on the liquidation provisions of the Certificate of
Incorporation of applicable state law, federal law or equitable principles
restricting in certain circumstances distributions by a corporation to its
shareholders, relating to dissenters' rights or relating to involuntary
dissolution;
(2) The enforceability under certain circumstances of provisions
expressly or by implication waiving broadly or vaguely stated rights, unknown
future rights, or defenses to obligations or rights granted by law, when such
waivers are against public policy or prohibited by law;
(3) Sections 2.5, 2.6, 2.7 and 2.8 of the Investment Agreement;
(4) The enforceability under certain circumstances of provisions to
the effect that rights or remedies may be exercised without notice, or that
failure to exercise or delay in exercising rights or remedies will not operate
as a waiver of any such right or remedy;
(5) The enforceability under certain circumstances of provisions to
the effect that rights or remedies are not exclusive, that every right or remedy
is cumulative and may be exercised in addition to or with any other right or
remedy, or that election of a particular remedy or remedies does not preclude
recourse to one or more remedies;
(6) Any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections to the laying of venue or to forum on the basis of forum
non conveniens, in connection with any litigation arising out of or pertaining
to the Investment Agreement;
(7) Section 9.10 of the Investment Agreement to the extent that it
purports to exclude conflict of law principles under Delaware law;
(8) The value, validity or adequacy of the consideration paid by you
for the Common Stock;
(9) The effect of any Delaware law, federal law or equitable
principles which limit the amount of attorneys' fees that can be recovered under
certain circumstances;
A-5
October 3, 2001
Page 6
This opinion letter is rendered as of the date first written above solely
for your benefit in connection with the Investment Agreement and may not be
delivered to, quoted or relied upon by any person other than you, or for any
other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
XXXXXXX, PHLEGER & XXXXXXXX LLP
A-6
EXHIBIT B
ALTERNATIVE DISPUTE RESOLUTION
1) Negotiations. If any dispute arises between Advanced Tissue Sciences,
------------
Inc. and Medtronic Asset Management, Inc. with respect to the Investment
Agreement and the License Agreement, or any other agreement or instrument to be
entered into or filed in connection with the Investment Agreement (the
"Agreements"), or any alleged breach thereof, any party may, by written notice
to the other party, have such dispute referred to their respective designees
listed below or their successors for attempted resolution by good faith
negotiations within 30 days after such notice is received. Such designees are as
follows:
For Advanced Tissue Sciences, Inc. - the President of Advanced Tissue
Sciences, Inc. or his/her designee
For Medtronic Asset Management, Inc. - the President of Medtronic,
Inc.'s business unit to which the Agreements relate, or his/her
designee
Any settlement reached by the parties under this Section 1 shall not be binding
until reduced to writing and signed by the above-specified designees. When
reduced to writing, such settlement agreement shall supersede all other
agreements, written or oral, to the extent such agreements specifically pertain
to the matters so settled. If the designees are unable to resolve such dispute
within such 30-day period, any party may invoke the provisions of Section 2
below.
2) Arbitration. All claims, disputes, controversies, and other matters in
-----------
question arising out of or relating to the Agreements, including claims for
Indemnifiable Losses and disputes regarding the making of the Agreements,
including claims of fraud in the inducement, or to the alleged breach hereof,
shall be settled by negotiation between the parties as described in Section 1
above or, if negotiation is unsuccessful, by binding arbitration in accordance
with procedures set forth in Section 3 and 4 below.
3) Notice. Notice of demand for binding arbitration shall be given in
------
writing to the other party and shall be delivered personally or by telecopy
(receipt confirmed) to an executive officer of such party or shall be sent by a
reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed to the parties at the addresses set forth in
Section 9.7 of the Investment Agreement. Any party may change the
above-specified recipient and/or mailing address by notice to the other party
given in the manner herein prescribed. All notices shall be deemed given on the
day when actually delivered as provided above (if delivered personally or by
telecopy) or on the day shown on the return receipt (if delivered by mail or
delivery service). In no event may a notice of demand of any kind be filed
more than two years after the date the claim, dispute, controversy, or other
matter in question was asserted by one party against another, and if such demand
is not timely filed, the claim, dispute, controversy, or other matter in
question referenced in the demand shall be deemed released, waived, barred, and
unenforceable for all time, and barred as if by statute of limitations.
4) Binding Arbitration. Upon filing of a notice of demand for binding
-------------------
arbitration by any party hereto, arbitration shall be commenced and conducted as
follows:
B-1
(a) Arbitrators. All claims, disputes, controversies, and other
-----------
matters (collectively "matters") in question shall be referred to and
decided and settled by a standing panel of three independent arbitrators,
one selected by each of Medtronic's and the Company's representative and
the third by the two arbitrators so selected. The third shall be a former
judge of one of the U.S. District Courts or one of the U.S. Court of
Appeals or such other classes of persons as the parties may agree.
Selection of arbitrators shall be made within 30 days after the date of the
first notice of demand given pursuant to Section 3 and within 30 days after
any resignation, disability or other removal of such arbitrator. Following
appointment, each arbitrator shall remain a member of the standing panel,
subject to recusal for just cause or resignation or disability; provided,
however, an arbitrator can be removed by the party who appointed the
arbitrator, or in the case of the third arbitrator, by either party for any
reason at any time when no matter is in arbitration.
(b) Cost of Arbitration. The cost of each arbitration proceeding,
-------------------
including without limitation the arbitrators' compensation and expenses,
hearing room charges, court reporter transcript charges, etc., shall be
borne by the party whom the arbitrators determine has not prevailed in such
proceeding, or borne equally by the parties if the arbitrators determine
that neither party has prevailed. The arbitrators shall also award the
party that prevails substantially in its pre-hearing position its
reasonable attorneys' fees and costs incurred in connection with the
arbitration. The arbitrators are specifically instructed to award
attorneys' fees for instances of abuse of the discovery process.
(c) Location of Proceedings. All arbitration proceedings shall be
-----------------------
held in Minneapolis, Minnesota unless the parties agree otherwise.
(d) Pre-hearing Discovery. The parties shall have the right to
---------------------
conduct and enforce pre-hearing discovery in accordance with the then
current Federal Rules of Civil Procedure, subject to these limitations:
Document discovery and other discovery shall be under the control of and
enforceable by the arbitrators. The arbitrators shall permit and facilitate
such other discovery as they shall determine is appropriate under the
circumstances, taking into account the needs of the parties and the
desirability of making discovery expeditious and cost effective. Discovery
disputes shall be decided by the arbitrators. The arbitrators are
empowered:
(i) to issue subpoenas to compel pre-hearing document or
deposition discovery;
(ii) to enforce the discovery rights and obligations of the
parties; and
(iii) to otherwise control the scheduling and conduct of the
proceedings.
Notwithstanding any contrary foregoing provisions, the arbitrators shall
have the power and authority to, and to the fullest extent practicable shall,
abbreviate arbitration discovery in a manner that is fair to all parties in
order to expedite the arbitration proceeding and render a final decision within
six months after the pre-hearing conference.
B-2
(e) Pre-hearing Conference. Within 45 days after filing of notice of
----------------------
demand for binding arbitration, the arbitrators shall hold a pre-hearing
conference to establish schedules for completion of discovery, for exchange of
exhibit and witness lists, for arbitration briefs, for the hearing, and to
decide procedural matters and all other questions that may be presented.
(f) Hearing Procedures. The hearing shall be conducted to preserve its
------------------
privacy and to allow reasonable procedural due process. Rules of evidence need
not be strictly followed, and the hearing shall be streamlined as follows:
(i) Documents shall be self-authenticating, subject to valid
objection by the opposing party;
(ii) Expert reports, witness biographies, depositions, and
affidavits may be utilized, subject to the opponent's right of a live
cross-examination of the witness in person;
(iii) Charts, graphs, and summaries shall be utilized to present
voluminous data, provided (i) that the underlying data was made
available to the opposing party 30 days prior to the hearing, and (ii)
that the preparer of each chart, graph, or summary is available for
explanation and live cross-examination in person;
(iv) The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and
(v) The arbitrators shall establish all other procedural rules
for the conduct of the arbitration in accordance with the rules of
arbitration of the Center for Public Resources.
(g) Governing Law. This arbitration provision shall be
governed by, and all rights and obligations specifically enforceable
under and pursuant to, the Federal Arbitration Act (9 U.S.C.ss.1 et
seq.) and the laws of the State of Delaware shall be applied, without
reference to the choice of law principles thereof, in resolving
matters submitted to such arbitration.
(h) Consolidation. No arbitration shall include, by
consolidation, joinder, or in any other manner, any additional person
not a party to this Agreement (other than affiliates of any such
party, which affiliates may be included in the arbitration), except by
written consent of the parties hereto containing a specific reference
to this Agreement.
(i) Award. The arbitrators shall be required to render their
final decision within six months after the pre-hearing conference. The
arbitrators are empowered to render an award of general compensatory
damages and equitable relief (including, without limitation,
injunctive relief), but are not empowered to award punitive or
presumptive damages. The award rendered by the arbitrators (1) shall
be final; (2) shall not constitute a basis for collateral estoppel as
to any
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issue; and (3) shall not be subject to vacation or modification,
except in the event of fraud or gross misconduct on the part of the
arbitrators.
(j) Confidentiality. The parties hereto will maintain the
substance of any proceedings hereunder in confidence and make
disclosures to others only to the extent necessary to properly conduct
the proceedings or as otherwise required by law.
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