THIS SECURITY AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.
BIOMATRIX, INC.
6.9% CONVERTIBLE SUBORDINATED NOTE DUE MAY 14, 2003
No. R-2 $10,000,000
Biomatrix, Inc., a corporation duly organized and existing
under the laws of Delaware (the "Company") for value received, hereby promises
to pay to SBC Warburg Dillon Read Inc., or registered assigns, the principal sum
of Ten Million Dollars ($10,000,000) on May 14, 2003 and to pay interest
thereon, from May 14, 1998, or from the most recent interest payment date to
which interest has been paid or duly provided for, semi-annually on May 14 and
November 14 in each year, commencing November 14, 1998, at the rate of 6.9% per
annum, until the principal hereof is due, and at the rate of 6.9% per annum on
any overdue principal and premium, if any, and, to the extent permitted by law,
on any overdue interest. The interest so payable, and punctually paid or duly
provided for, on any interest payment date will be paid to the person in whose
name this Security (or one or more predecessor Securities) is registered at the
close of business on the regular record date for such interest, which shall be
the May 1 or November 1 (whether or not a business day), as the case may be,
next preceding such interest payment date. Payment of the principal of (and
premium, if any, on) this Security shall be made upon the surrender of this
Security to the Company, at its office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ (or such other office within the United States as shall be notified
by the Company to the holder hereof) (the "Designated Office"), in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, by transfer to a U.S.
dollar account maintained by the payee with a bank in the United States of
America. Payment of interest on this Security shall be made by transfer to a
U.S. dollar account (such a transfer to be made only if the holder shall have
furnished wire instructions in writing to the Company no later than 15 days
prior to the relevant payment date) maintained by the payee with a bank in the
United States of America, PROVIDED that if the holder shall not have timely
furnished wire instructions in writing to the Company, payment of interest on
this Security shall be made by a check mailed to the address of the person
entitled thereto as such address shall appear in the Company security register.
1. REDEMPTION. This Security is subject to redemption upon not
less than 30 nor more than 60 days' notice by mail, at any time on or after May
14, 2000,
as a whole or in part, (in any amount that is an integral multiple of
$1,000) at the election of the Company, at a redemption price of 100% of the
principal amount thereof, together with accrued interest to the redemption date,
but interest installments whose stated maturity is on or prior to such
redemption date will be payable to the holder of this Security, or one or more
predecessor Securities, of record at the close of business on the relevant
record dates referred to on the face hereof; PROVIDED that this Security may not
be redeemed on or prior to May 14, 2001 unless the Closing Price of the Company
Stock exceeds 2.25 times the Conversion Price for any period of 20 consecutive
Trading Days commencing on or after May 14, 2000 and ending not less than two
Trading Days prior to the Company's giving notice of such redemption to the
holder hereof.
2. CONVERSION. (a) The holder of this Security is entitled at
any time on or after May 14, 1999 and before the close of business on May 14,
2003 (or, in case this Security or a portion hereof is called for redemption or
the holder hereof has exercised his right to require the Company to repurchase
this Security or a portion hereof, then in respect of this Security or such
portion hereof, as the case may be, until and including, but (unless the Company
defaults in making the payment due upon redemption or repurchase, as the case
may be) not after, the close of business on the redemption date or the
Repurchase Date, as the case may be) to convert this Security (or any portion of
the principal amount hereof that is an integral multiple of $1,000), into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100 of a share) of Common Stock of the Company at the rate of 50 shares of
Common Stock (the "Conversion Rate") for each $1,000 principal amount of
Security (or at the current adjusted rate if an adjustment has been made as
provided below) by surrender of this Security, duly endorsed or assigned to the
Company or in blank to the Company at the Designated Office, accompanied by
written notice to the Company that the holder hereof elects to convert this
Security (or if less than the entire principal amount hereof is to be converted,
specifying the portion hereof to be converted). Upon surrender of this Security
for conversion, the holder will be entitled to receive the interest accruing on
the principal amount of this Security then being converted from the interest
payment date next preceding the date of such conversion to such date of
conversion. No payment or adjustment is to be made on conversion for dividends
on the Common Stock issued on conversion hereof. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest, the Company shall pay a cash adjustment, computed on
the basis of the Closing Price of the Common Stock on the date of conversion,
or, at its option, the Company shall round up to the next higher whole share.
Notwithstanding the foregoing, at no time will the holder be
entitled to convert this Security into shares of Common Stock representing more
than 4.9% of the Common Stock then outstanding. If at any time the Conversion
Rate and the principal amount of this Security would result in a greater number
of shares being issuable upon conversion, then for so long as such condition
shall exist, upon exercise of the conversion right the holder shall receive (i)
up to that number of shares of Common Stock representing 4.9% of the Common
Stock then outstanding, and (ii) an amount (in cash but not less than zero),
payable in immediately available funds, determined pursuant to the formula:
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C = ( P X CR - I) x CP
--------
$1,000
where C = the cash amount receivable by the holder;
P = the principal amount of this Security being
converted;
CR = the Conversion Rate;
I = the number of shares issuable pursuant to
clause (i) above; and
CP = the Closing Price of the Common Stock on the
date of conversion.
(b) The Conversion Rate shall be subject to adjustments from
time to time as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company payable in
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the Determination Date for such dividend
or other distribution shall be increased by dividing such Conversion
Rate by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding at the close of business on such
Determination Date and the denominator shall be the sum of such number
of shares and the total number of shares constituting such dividend or
other distribution, such increase to become effective immediately after
the opening of business on the day following such Determination Date.
For the purposes of this paragraph (1), the number of shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution
on shares of Common Stock held in the treasury of the Company.
(2) Subject to the last sentence of paragraph (7) of this
Section 2(b), in case the Company shall issue rights, options or
warrants to all holders of its Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in paragraph
(8) of this Section 2(b)) of the Common Stock on the Determination Date
for such distribution, the Conversion Rate in effect at the opening of
business on the day following such Determination Date shall be
increased by dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on such Determination Date plus the number of
shares of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding
at the close of business on
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such Determination Date plus the number of shares of Common Stock so
offered for subscription or purchase, such increase to become effective
immediately after the opening of business on the day following such
Determination Date. For the purposes of this paragraph (2), the number
of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions
of shares of Common Stock. The Company will not issue any rights,
options or warrants in respect of shares of Common Stock held in the
treasury of the Company.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately increased, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately reduced, such increase or
reduction, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) Subject to the last sentence of paragraph (7) of this
Section 2(b), in case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, or other property
(including securities, but excluding (i) any rights, options or
warrants referred to in paragraph (2) of this Section 2(b), (ii) any
dividend or distribution paid exclusively in cash, (iii) any dividend
or distribution referred to in paragraph (1) of this Section 2(b) and
(iv) any merger or consolidation to which Section 2(h) applies), the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior
to the close of business on the Determination Date for such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (8) of this
Section 2(b)) of the Common Stock on such Determination Date less the
then fair market value (as determined in good faith by the Board of
Directors of the Company) of the portion of the assets, shares or
evidences of indebtedness so distributed applicable to one share of
Common Stock and the denominator shall be such current market price per
share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following such
Determination Date. If the Board of Directors determines the fair
market value of any distribution for purposes of this paragraph (4) by
reference to the actual or when issued trading market for any
securities comprising such distribution, it must in doing so consider
the prices in such market over the same period used in computing the
current market price per share pursuant to paragraph (8) of this
Section 2(b).
(5) In case the Company shall, by dividend or otherwise, make
a Cash Distribution, then, and in each such case, immediately after the
close of business on the Determination Date for such Cash Distribution,
the Conversion
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Rate shall be adjusted so that the same shall equal the rate determined
by dividing the Conversion Rate in effect immediately prior to the
close of business on such Determination Date by a fraction (a) the
numerator of which shall be equal to the current market price per share
(determined as provided in paragraph (8) of this Section 2(b)) of the
Common Stock on such Determination Date less an amount equal to the
quotient of (1) the amount of such Cash Distribution divided by (2) the
number of shares of Common Stock outstanding on such Determination Date
and (b) the denominator of which shall be equal to the current market
price per share (determined as provided in paragraph (8) of this
Section 2(b)) of the Common Stock on such Determination Date.
(6) In case the Company or any Subsidiary shall make an Excess
Purchase Payment, then, and in each such case, immediately prior to the
opening of business on the day after the tender offer in respect of
which such Excess Purchase Payment is to be made expires, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior
to the close of business on the Determination Date for such tender
offer by a fraction (a) the numerator of which shall be equal to the
current market price per share (determined as provided in paragraph (8)
of this Section 2(b)) of the Common Stock at such Determination Date
less the amount of such Excess Purchase Payment and (b) the denominator
of which shall be equal to the current market price per share of the
Common Stock (determined as provided in paragraph (8) of this Section
2(b)) as of such Determination Date.
(7) The reclassification of Common Stock into securities other
than Common Stock (other than any reclassification upon a consolidation
or merger to which Section 2(h) applies) shall be deemed to involve (a)
a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such
reclassification shall be deemed to be the Determination Date), and (b)
a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or
combination becomes effective" within the meaning of paragraph (3) of
this Section 2(b)). Rights or warrants issued by the Company to all
holders of its Common Stock entitling the holders thereof to subscribe
for or purchase shares of Common Stock, which rights or warrants (i)
are deemed to be transferred with such shares of Common Stock, (ii) are
not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, in each case in clauses (i) through (iii)
until the occurrence of a specified event or events ("Trigger Event"),
shall for purposes of this Section 2(b) not be deemed issued until the
occurrence of the earliest Trigger Event.
(8) For the purpose of any computation under paragraphs (2),
(4), (5) or (6) of this Section 2(b) the current market price per share
of Common Stock on any date shall be calculated by the Company and be
deemed to be the average of the daily Closing Prices for the five
consecutive Trading Days selected by the
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Company commencing not more than 10 Trading Days before, and ending not
later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when
used with respect to any issuance or distribution, means the first date
on which the Common Stock trades regular way in the applicable
securities market or on the applicable securities exchange without the
right to receive such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made by
reason of this paragraph (9)) would require an increase or decrease of
at least one percent in such rate; PROVIDED, HOWEVER, that any
adjustments which by reason of this paragraph (9) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 2 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
(10) The Company may make such increases in the Conversion
Rate, for the remaining term of the Securities or any shorter term, in
addition to those required by paragraphs (1), (2), (3), (4), (5) and
(6) of this Section 2(b) as it considers to be advisable in order to
avoid or diminish any income tax to any holders of shares of Common
Stock resulting from any dividend or distribution of stock or issuance
of rights or warrants to purchase or subscribe for stock or from any
event treated as such for income tax purposes.
(c) Whenever the Conversion Rate is adjusted as provided in
Section 2(b), the Company shall compute the adjusted Conversion Rate in
accordance with Section 2(b) and shall prepare a certificate signed by the chief
financial officer of the Company setting forth the adjusted Conversion Rate and
showing in reasonable detail the facts upon which such adjustment is based, and
shall promptly deliver such certificate to the holder of Security.
(d) In case:
(1) the Company shall declare a dividend or other distribution
on its Common Stock payable (i) otherwise than exclusively in cash or
(ii) exclusively in cash in an amount that would require any adjustment
pursuant to Section 2(b); or
(2) the Company shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other
rights; or
(3) of any reclassification of the Common Stock of the
Company, or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the conveyance, sale, transfer or lease of
all or substantially all of the assets of the Company; or
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(4) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(5) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the Company's outstanding shares of
Common Stock (or shall amend any such tender offer);
then the Company shall cause to be delivered to the holder of this Security, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable record, expiration or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, rights, options or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights, options or
warrants are to be determined, (y) the date on which the right to make tenders
under such tender offer expires or (z) the date on which such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up. Neither the
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (1) through (5) of this Section
2(d).
(e) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of effecting the conversion of the Security, the full number of
shares of Common Stock then issuable upon the conversion of this Security.
(f) Except as provided in the next sentence, the Company will
pay any and all stamp or transfer taxes and duties that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of the
Security. The Company shall not, however, be required to pay any tax or duty
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the holder of
this Security, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax
or duty, or has established to the satisfaction of the Company that such tax or
duty has been paid.
(g) The Company agrees that all shares of Common Stock which
may be delivered upon conversion of the Security, upon such delivery, will have
been duly authorized and validly issued and will be fully paid and nonassessable
(and shall be issued out of the Company's authorized but unissued Common Stock)
and, except as provided in Section 2(f), the Company will pay all stamp or
transfer taxes, liens and charges with respect to the issue thereof.
(h) In case of any consolidation of the Company with any other
person, any merger of the Company into another person or of another person into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the
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Company) or any conveyance, sale, transfer or lease of all or substantially
all of the properties and assets of the Company, the person formed by such
consolidation or resulting from such merger or which acquires such properties
and assets, as the case may be, shall execute and deliver to the holder of this
Security a supplemental agreement providing that such holder have the right
thereafter, during the period this Security shall be convertible as specified in
Section 2(a), to convert this Security only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (including any Common Stock retainable) by a
holder of the number of shares of Common Stock of the Company into which this
Security might have been converted immediately prior to such consolidation,
merger, conveyance, sale, transfer or lease, assuming such holder of Common
Stock of the Company (i) is not a person with which the Company consolidated,
into which the Company merged or which merged into the Company or to which such
conveyance, sale, transfer or lease was made, as the case may be (a "Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease (PROVIDED that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, sale,
transfer, or lease is not the same for each share of Common Stock of the Company
held immediately prior to such consolidation, merger, conveyance, sale, transfer
or lease by others than a Constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("Non-electing Share"), then for the purpose of this Section 2(h) the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease by the holders of
each Non-electing Share shall be deemed to be the kind and amount so receivable
per share by a plurality of the Non-electing Shares). Such supplemental
agreement shall provide for adjustments which, for events subsequent to the
effective date of such supplemental agreement, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 2. The above
provisions of this Section 2(h) shall similarly apply to successive
consolidations, mergers, conveyances, sales, transfers or leases. In this
paragraph, "securities of the kind receivable" upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of Common Stock means securities
that, among other things, are registered and transferable under the Securities
Act, and listed and approved for quotation in all securities markets, in each
case to the same extent as such securities so receivable by a holder of Common
Stock.
(i) The Company (i) will effect all registrations with, and
obtain all approvals by, all governmental authorities that may be necessary
under any United States Federal or state law (including the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and state securities and Blue Sky laws) for the shares of Common Stock
issuable upon conversion of this Security to be lawfully issued and delivered as
provided herein, and thereafter publicly traded (if permissible under such
Securities Act) and qualified or listed as contemplated by clause (ii) (it being
understood that the Company shall not be required to register the Common Stock
issuable on conversion hereof under the Securities Act, except pursuant to the
Registration Rights Agreement between the Company and the initial holder of this
Security); and (ii) will list the shares of Common Stock required to be issued
and delivered upon conversion of Securities, prior to such
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issuance or delivery, on each national securities exchange on which
outstanding Common Stock is listed or quoted at the time of such delivery, or
if the Common Stock is not then listed on any securities exchange, to qualify
the Common Stock for quotation on the Nasdaq National Market or such other
inter-dealer quotation system, if any, on which the Common Stock is then
quoted.
(j) For purposes hereof:
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control", when used with respect to any specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Cash Distribution" means the distribution by the Company to
all holders of its Common Stock of cash, other than any cash that is distributed
upon a merger or consolidation to which Section 2(h) applies or as part of a
distribution referred to in paragraph (4) of Section 2(b).
"Closing Price" means, with respect to the Common Stock of the
Company, for any day, the reported last sale price per share on the Nasdaq
National Market, or, if the Common Stock is not admitted to trading on the
Nasdaq National Market, on the principal national securities exchange or
inter-dealer quotation system on which the Common Stock is listed or admitted to
trading, or if not admitted to trading on the Nasdaq National Market, or listed
or admitted to trading on any national securities exchange or inter-dealer
quotation system, the average of the closing bid and asked prices per share in
the over-the-counter market as furnished by any New York Stock Exchange member
firm selected from time to time by the Company for that purpose.
"Common Stock" means the Common Stock, par value $.0001 per
share, of the Company authorized at the date of this instrument as originally
executed. Subject to the provisions of Section 2(h), shares issuable on
conversion or repurchase of this Security shall include only shares of Common
Stock or shares of any class or classes of common stock resulting from any
reclassification or reclassifications thereof; PROVIDED, HOWEVER, that if at any
time there shall be more than one such resulting class, the shares so issuable
on conversion of this Security shall include shares of all such classes, and the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Conversion Price" on any day means an amount equal to $1,000
divided by the Conversion Rate in effect on such day.
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to
shareholders, the date fixed for the determination of shareholders entitled to
receive such dividend or
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other distribution and, in the case of a tender offer, the last time that
tenders could have been made pursuant to such tender offer.
"Excess Purchase Payment" means the excess, if any, of (i) the
amount of cash plus the fair market value (as determined in good faith by the
Company's Board of Directors) of any non-cash consideration required to be paid
with respect to one share of Common Stock acquired or to be acquired in a tender
offer made by the Company or any subsidiary of the Company for all or any
portion of the Common Stock over (ii) the current market price per share as of
the last time that tenders could have been made pursuant to such tender offer.
"Trading Day" means (i) if the Common Stock is admitted to
trading on the Nasdaq National Market or any other system of automated
dissemination of quotations of securities prices, a day on which trades may be
effected through such system; (ii) if the Common Stock is listed or admitted for
trading on the New York Stock Exchange or any other national securities
exchange, a day on which such exchange is open for business; or (iii) if the
Common Stock is not admitted to trading on the Nasdaq National Market or listed
or admitted for trading on any national securities exchange or any other system
of automated dissemination of quotation of securities prices, a day on which the
Common Stock is traded regular way in the over-the-counter market and for which
a closing bid and a closing asked price for the Common Stock are available.
3. RIGHT TO REQUIRE REPURCHASE. (k) In the event that a Change
in Control (as hereinafter defined) shall occur, then the holder of this
Security shall have the right, at such holder's option, subject to the rights of
holders of Senior Indebtedness, to require the Company to repurchase, and upon
the exercise of such right the Company shall repurchase, this Security, or any
portion of the principal amount hereof that is equal to $1,000 or any integral
multiple thereof, on the date (the "Repurchase Date") that is ten Trading Days
after the date on which the Company gives notice thereof to the holder of this
Security, at a purchase price equal to 100% of the principal amount of this
Security to be repurchased, plus interest accrued to the Repurchase Date (the
"Repurchase Price"); PROVIDED, HOWEVER, that installments of interest on this
Security whose stated maturity is on or prior to the Repurchase Date shall be
payable to the holder of this Security, or one or more predecessor Securities,
registered as such on the relevant Record Date according to their terms. At the
option of the Company, the Repurchase Price may be paid in cash or, subject to
the fulfillment by the Company of the conditions set forth in Section 3(b), by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price as described in Section 3(b). The Company agrees to give the
holder of this Security notice of any Change in Control, by facsimile
transmission confirmed in writing by overnight courier service, promptly and in
any event within two Trading Days of the occurrence thereof.
(l) The Company may elect to pay the Repurchase Price by
delivery of shares of Common Stock pursuant to Section 3(a), if and only if the
following conditions have been satisfied:
(1) The shares of Common Stock deliverable in payment of
the Repurchase Price shall have a fair market value as of the Repurchase Date
of not less
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than the Repurchase Price. For purposes of this Section 3(b), the fair
market value of shares of Common Stock shall be equal to 95% of the average of
the Closing Prices for the five consecutive Trading Days ending on and including
the third Trading Day immediately preceding the Repurchase Date;
(2) In the event any shares of Common Stock to be issued upon
repurchase of this Security require registration under any Federal securities
law before such shares may be freely transferrable without being subject to any
transfer restrictions under the Securities Act of 1933 upon issuance, such
registration shall have been completed and shall have become effective prior to
the Repurchase Date;
(3) In the event any shares of Common Stock to be issued upon
repurchase of this Security require registration with or approval of any
governmental authority under any State law or any other Federal law before such
shares may be validly issued or delivered upon repurchase, such registration
shall have been completed, have become effective and such approval shall have
been obtained, in each case, prior to the Repurchase Date;
(4) Immediately prior to the Repurchase Date the shares of
Common Stock deliverable in payment of the Repurchase Price shall have been
approved for trading or listed on the Nasdaq National Market or the principal
national securities exchange or interdealer quotation system on which the Common
Stock is then admitted to trading or listed; and
(5) All shares of Common Stock deliverable in payment of the
Repurchase Price shall be issued out of the Company's authorized but unissued
Common Stock and will, upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 3(b) are
not satisfied in accordance with the terms thereof, the Repurchase Price shall
be paid by the Company only in cash.
(m) To exercise a repurchase right, the holder shall deliver
to the Company on or before the 5th day prior to the Repurchase Date, together
with this Security, written notice of the holder's exercise of such right, which
notice shall set forth the name of the holder, the principal amount of this
Security to be repurchased (and, if this Security is to be repurchased in part,
the portion of the principal amount thereof to be repurchased and the name of
the person in which the portion thereof to remain outstanding after such
repurchase is to be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and, in the event that the Repurchase
Price shall be paid in shares of Common Stock, the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
shall be issued. Such written notice shall be irrevocable, except that the right
of the holder to convert this Security (or the portion hereof with respect to
which the repurchase right is being exercised) shall continue until the close of
business on the Repurchase Date.
(n) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid to
the holder the
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Repurchase Price in cash or shares of Common Stock, as provided above, or, if
shares of Common Stock are to be paid, as promptly after the Repurchase Date
as practicable, together with accrued and unpaid interest to the Repurchase
Date; PROVIDED, HOWEVER, that installments of interest that mature on or
prior to the Repurchase Date shall be payable in cash, to the holders of this
Security, or one or more predecessor Securities, registered as such at the
close of business on the relevant regular record date.
(o) If this Security (or portion thereof) is surrendered for
repurchase and is not so paid on the Repurchase Date, the principal amount of
this Security (or such portion hereof, as the case may be) shall, until paid,
bear interest to the extent permitted by applicable law from the Repurchase Date
at the rate per annum borne by this Security, and shall remain convertible into
Common Stock until the principal of this Security (or portion thereof, as the
case may be) shall have been paid or duly provided for.
(p) If this Security is to be repurchased only in part, it
shall be surrendered to the Company at the Designated Office (with, if the
Company so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company duly executed by, the holder hereof or his
attorney duly authorized in writing), and the Company shall execute and make
available for delivery to the holder without service charge, a new Security or
Securities, containing identical terms and conditions, each in an authorized
denomination in aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so surrendered.
(q) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such repurchase shall be deemed to have become on the Repurchase
Date the holder or holders of record of the shares represented thereby;
PROVIDED, HOWEVER, that any surrender for repurchase on a date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for such shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open. No payment or adjustment shall be made for dividends or
distributions on any Common Stock issued upon repurchase of this Security
declared prior to the Repurchase Date.
(r) No fractions of shares shall be issued upon repurchase of
this Security. Instead of any fractional share of Common Stock which would
otherwise be issuable on the repurchase of this Security, the Company will
deliver to the holder its check for the current market value of such fractional
share. The current market value of a fraction of a share shall be determined by
multiplying the current market price of a full share by the fraction, and
rounding the result to the nearest cent. For purposes of this Section 3 the
current market price of a share of Common Stock shall be the Closing Price of
the Common Stock on the Trading Day immediately preceding the Repurchase Date.
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(s) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of this Security shall be made without charge to the
holder of this Security for such certificates or for any stamp or transfer tax
or duty in respect of the issuance or delivery of such certificates or the
securities represented thereby; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issuance or delivery of certificates for shares of Common Stock
in a name other than that of the holder of this Security, and no such issuance
or delivery shall be made unless and until the person requesting such issuance
or delivery has paid to the Company the amount of any such tax or duty or has
established, to the satisfaction of the Company, that such tax or duty has been
paid.
(t) For purposes of this Section 3;
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934; and
(2) a "Change in Control" shall be deemed to have occurred at
the time, after the original issuance of this Security, of:
(i) the acquisition by any person of beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock of
the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to
vote generally in the election of directors (any shares of voting stock
of which such person is the beneficial owner that are not then
outstanding being deemed outstanding for purposes of calculating such
percentage) other than any such acquisition by the Company or any
employee benefit plan of the Company; PROVIDED that the acquisition by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Denliger, ▇▇▇▇ ▇. ▇▇▇▇▇, any of their
Affiliates, or any combination of such persons shall not constitute a
Change in Control unless such person or persons benefically own 66% or
more of such total voting power; or
(ii) any consolidation or merger of the Company with or into,
any other person, any merger of another person with or into the
Company, or any conveyance, transfer, sale, lease or other disposition
of all or substantially all of the assets of the Company to another
person (other than (a) any such transaction (x) which does not result
in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock and (y) pursuant to which holders of
Common Stock immediately prior to such transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the
election of directors of the continuing or surviving person immediately
after such transaction and (b) any merger which is effected solely to
change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of common stock);
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PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have occurred
if the Closing Price for any five Trading Days within the period of 10
consecutive Trading Days (x) ending immediately after the later of the date of
the Change in Control or the date of the public announcement of the Change in
Control (in the case of a Change in Control under Clause (i) above) or (y)
ending immediately prior to the date of the Change in Control (in the case of a
Change in Control under Clause (ii) above) shall equal or exceed 105% of the
Conversion Price in effect on each such Trading Day.
4. EVENTS OF DEFAULT. (a) "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Section
6 or be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon this Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default by the Company in the performance of its
obligations in respect of any conversion of this Security (or any
portion hereof) in accordance with Section 2; or
(3) failure by the Company to give any notice of a Change of
Control required to be delivered in accordance with Section 3(a); or
(4) default in the performance, or breach, of any material
covenant or warranty of the Company herein (other than a covenant or
warranty a default in the performance or breach of which is
specifically dealt with elsewhere in this Section 4(a)) and continuance
of such default or breach for a period of 30 days after there has been
given, by registered or certified mail, to the Company by the holder of
this Security a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company, or under
any agreement, mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company, with a principal amount
then outstanding in excess of $5,000,000, whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay the principal of such indebtedness (in whole or in any
part greater than $5,000,000) when due and payable or shall have
resulted in such indebtedness (in whole or in any part greater than
$5,000,000) becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 30 days after there
shall have been given, by registered or certified mail, to the Company
by the holder of this Security a written notice specifying such default
and requiring the Company to
-14-
cause such indebtedness to be discharged or cause such acceleration to
be rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
(b) If an Event of Default (other than an Event of Default
specified in Section 4(a)(6) or 4(a)(7)) occurs and is continuing, then in every
such case the holder of this Security may declare the principal hereof to be due
and payable immediately, by a notice in writing to the Company, and upon any
such declaration such principal and all accrued interest thereon shall become
immediately due and payable. If an Event of Default specified in Section 4(a)(6)
or 4(a)(7) occurs and is continuing, the principal of, and accrued interest on,
this Security shall IPSO FACTO become immediately due and payable without any
declaration or other act of the holders.
5. CONSOLIDATION, MERGER, ETC. (a) The Company shall not
consolidate with or merge into any other person or, directly or indirectly,
convey, transfer, sell or lease all or substantially all of its properties and
assets to any person, and the Company shall not permit any person to consolidate
with or merge into the Company or, directly or indirectly, convey, transfer,
sell or lease all or substantially all of its properties and assets to the
Company, unless:
-15-
(1) in case the Company shall consolidate with or merge into
another person or convey, transfer, sell or lease all or substantially
all of its properties and assets to any person, the person formed by
such consolidation or into which the Company is merged or the person
which acquires by conveyance, transfer or sale, or which leases, all or
substantially all the properties and assets of the Company shall be a
corporation, limited liability company, partnership or trust, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the holder of this Security in form satisfactory to the
holder, the due and punctual payment of the principal of (and premium,
if any) and interest on this Security and the performance or observance
of every covenant of this Security on the part of the Company to be
performed or observed, including the conversion rights provided herein;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
a subsidiary of the Company as a result of such transaction as having
been incurred by the Company or such subsidiary of the Company at the
time of such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and
(3) the Company has delivered to the holder of this Security
an officers' certificate stating that such consolidation, merger,
conveyance, transfer, sale or lease and, if a supplemental agreement is
required in connection with such transaction, such supplemental
agreement, comply with this Section and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
(b) Upon any consolidation of the Company with, or merger of
the Company into, any other person or any conveyance, transfer, sale or lease of
all or substantially all of the properties and assets of the Company in
accordance with Section 5(a), the successor person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer, sale
or lease is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Security with the same effect
as if such successor person had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor person shall be
relieved of all obligations and covenants under this Security.
6. SUBORDINATION. The Company agrees, and the holder
of this Security by accepting a Security agrees, that the indebtedness
evidenced by this Security is subordinated in right of payment to the
prior payment in full of all Senior Indebtedness, and that the subordination
is for the benefit of the holders of Senior Indebtedness.
"Senior Indebtedness" means:
(a) the principal of, interest (including, to the extent
permitted by applicable law, interest on or after the commencement of any
bankruptcy or similar
-16-
proceeding whether or not representing an allowed claim in such proceeding)
on and any other amounts owing with respect to (i) any indebtedness of the
Company, now or hereafter outstanding, in respect of borrowed money (other
than the Securities), (ii) any indebtedness of the Company, now or hereafter
outstanding, evidenced by a bond, note, debenture, capitalized lease, letter
of credit or other similar instrument, (iii) any other written obligation of
the Company, now or hereafter outstanding, to pay money issued or assumed as
all or part of the consideration for the acquisition of property, assets or
securities and (iv) any guaranty or endorsement (other than for collection or
deposit in the ordinary course of business) or discount with recourse of, or
other agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire, to supply or advance funds or to become liable with
respect to (directly or indirectly), any indebtedness or obligation of any
person of the type referred to in the preceding subclauses (i), (ii) and
(iii) now or hereafter outstanding; and
(b) any refundings, renewals or extensions of any
indebtedness or other obligation described in clause (a) above.
Notwithstanding the foregoing, if, by the terms of the
instrument creating or evidencing any indebtedness or obligation referred to in
clauses (a) and (b) above, it is expressly provided that such indebtedness or
obligation is not senior in right of payment to this Security, such indebtedness
or obligation shall not be included as Senior Indebtedness.
7. OTHER. (a) No provision of this Security shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, premium, if any, and interest on
this Security at the times, places and rate, and in the coin or currency,
herein prescribed or to convert this Security as herein provided.
(b) The Company will give prompt written notice to the holder
of this Security of any change in the location of the Designated Office.
(c) The transfer of this Security is registrable on the
Security Register of the Company upon surrender of this Security for
registration of transfer at the Designated Office, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by, the holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. Such Securities are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. No
service charge shall be made for any such registration of transfer, but the
Company may require payment of a sum sufficient to recover any tax or other
governmental charge payable in connection therewith. Prior to due presentation
of this Security for registration of transfer, the Company and any agent of the
Company may treat the person in whose name this Security is registered, as the
owner thereof for all purposes, whether or not this Security be overdue, and
neither the Company, nor any such agent shall be affected by notice to the
contrary.
Notwithstanding any other provision of this Security, this
Security and the shares of Common Stock issuable upon conversion hereof may only
be transferred by the holder of this Security (a) in the case of the Common
Stock only, in a widely
-17-
dispersed public offering; (b) to one or more investors, in one or more
transactions, any one of whom, after such purchase, would hold not more than
2% of the shares of Common Stock then outstanding (assuming conversion of any
portion of this Security so transferred); (c) to any person or entity that
already controls more than 50% of the voting securities of the Company prior
to such transfer; (d) in a transaction that complies with the volume and
manner of sale restrictions of Rule 144 under the Securities Act; or (e) in a
transaction approved in advance by the Federal Reserve Board. The holder of
this Security, by acceptance thereof, shall be deemed to have agreed to the
foregoing restriction on transfers.
(d) THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
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IN WITNESS WHEREOF, the Company has caused this Security to be
duly executed under its corporate seal.
Dated: May 14, 1998
BIOMATRIX, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
Attest:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
-19-
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 3(a) of this Security, the undersigned
hereby elects to have all or a portion of this Security repurchased by the
Company.
2. The undersigned hereby directs the Company to pay
[choose one] (a) it or (b) Name: __________________; address:
__________________; Social Security or Other Taxpayer Identification
Number, if any: ____________, an amount in cash or, at the Company's
election, Common Stock valued as set forth in the Security, equal to 100%
of the principal amount to be repurchased (as set forth below), plus
interest accrued to the Repurchase Date, as provided herein.
Dated: _______________________
_______________________
Signature
Principal amount to be repurchased
(an integral multiple of $1,000): ______________________
Remaining principal amount following such repurchase (not less than $1,000):
______________________
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of the principal
amount hereof (which is an integral multiple of $1,000) below designated, into
shares of Common Stock in accordance with the terms of this Security, and
directs that such shares, together with a check in payment for any fractional
share and any Security representing any unconverted principal amount hereof, be
delivered to and be registered in the name of the undersigned unless a different
name has been indicated below. If shares of Common Stock or Securities are to be
registered in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
Dated: _____________________
_______________________
Signature
-20-
If shares or Securities are to be registered in the name If only a portion of
the Securities is to be of a person other than the holder, please print such
converted, please indicate: person's name and address:
1. Principal amount to be converted:
_________________________ $_____________
Name
2. Principal amount and denomination of
Security representing unconverted
principal amount to be issued:
_________________________
Address
Amount: $__________
Denominations: $__________
_________________________ (any integral multiple of $1,000)
Social Security or other Taxpayer
Identification Number,
if any
-21-