On July 2, 2020, the Company issued shares of its Convertible preferred stock Series B, par value $0.001 per share (the “Series B Preferred Stock”) to an affiliate of EW Healthcare Partners and to certain funds managed by Hayfin (individually, the “Holder”, collectively the “Holders”) pursuant to a Securities Purchase Agreement with Falcon Fund 2 Holding Company, L.P., an affiliate of EW Healthcare Partners, and certain funds managed by Hayfin, dated as of June 30, 2020 (the “Securities Purchase Agreement”), for an aggregate purchase price of $100 million (the “Preferred Stock Transaction”).

The Series B Preferred Stock accumulates a 4.0% cumulative dividend per annum prior to the quarterly dividend payment for the period ending June 30, 2021, and a 6.0% cumulative dividend per annum thereafter. Dividends are declared at the sole discretion of the Company’s board of directors. Dividends are paid at the end of each quarter based for dividend amounts that accumulate beginning on the last payment date through the day prior to the end of each quarter. In lieu of paying a dividend, the Company may elect to accrue the dividend owed to shareholders. Accrued dividend balances accumulate dividends at the prevailing dividend rate for each dividend period for which they are outstanding.

Each share of Series B Preferred Stock, including any accrued and unpaid dividends, is convertible into Company’s common stock at any time at the option of the Holder at a conversion price of $3.85 per common share, or 259.74 common shares for each Series B Preferred Share prior to any accrued and unpaid dividends. The Series B Preferred Stock, including any accrued and unpaid dividends, automatically converts into common stock at any time after the third anniversary of the issuance date, provided that the common stock has traded at 200% or more of the conversion price (i) for 20 out of 30 consecutive trading days and (ii) on such date of conversion.

Holders of the Series B Preferred Stock, voting as a class, are entitled to appoint two members to the board of directors. Holders of the Series B Preferred Stock are entitled to vote on all matters to be voted on by the Company’s shareholders shall vote on an as-converted basis as a single class with the Common Stock not to exceed 19.9% of the total voting stock of the Company. Holders of the Series B Preferred Stock are also entitled to a liquidation preference in an amount equal to the original issue price plus all accrued and unpaid dividends in the event of a liquidation, dissolution, or winding-up of the Company.

The Company evaluated its Series B Preferred Stock and determined that it was considered an equity host under ASC 815, Derivatives and Hedging. As a result of the Company’s conclusion that the Series B Preferred Stock represented an equity host, the conversion feature of all Series B Preferred Stock was considered to be clearly and closely related to the associated Series B Preferred Stock host instrument. Accordingly, the conversion feature of all Series B Preferred Stock was not considered an embedded derivative that required bifurcation. At the time of the issuance of the Series B Preferred Stock, the Company’s common stock, into which the Company’s Series B Preferred Stock is convertible, had an estimated fair value exceeding the effective conversion price of the Series B Preferred Stock, giving rise to a beneficial conversion feature in the amount of $31.1 million. This amount was immediately recognized as a deemed dividend on the commitment date since there is no stated redemption date and the Series B Preferred Stock is immediately convertible.

perpetual dividend; and (2) the perpetual dividend amount for a corresponding number of periods to ascribe a fair value to this feature. These amounts were discounted to present value using a market rate for dividend yield as of the Closing Date. The Company calculated the amount of the increasing-rate dividend feature as $1.8 million. This amount is amortized as a deemed dividend to preferred shareholders using the effective interest method through the commencement date of the Perpetual Dividend Rate. During the year ended December 31, 2020, the Company recognized $0.9 million of deemed dividends related to the amortization of the increasing-rate dividend feature.

If the Company undergoes a change of control, the Company will have the option to repurchase some or all of the then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the liquidation preference, subject to the rights of the Holders of the Series B Preferred Stock in connection with such change in control. If the Company does not exercise such repurchase right, Holders of the Series B Preferred Stock will have the option to (1) require the Company to repurchase any or all of its then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the liquidation preference or (2) convert the Series B Preferred Stock, including accrued and unpaid dividends into common stock and receive its pro rata consideration thereunder. Because the contingent redemption of the Series B Preferred Stock by the holder in the event of change in control is outside the Company’s control, the Series B Preferred Stock and related beneficial conversion feature were classified as temporary equity.

The Company has not declared or paid any dividends on the Series B Convertible Preferred Stock since issuance. Dividends in arrears as of December 31, 2020 was $2.0 million. As this amount has not been declared, the Company has not recorded this amount on its consolidated balance sheet as of December 31, 2020.

The Company has two share-based compensation plans which provide for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards and restricted Common Stock awards: the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan Amended and Restated through October 2, 2020 (the “2016 Plan”), which was approved by shareholders on May 18, 2016 and the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (the “Prior Incentive Plan”). During the years ended December 31, 2020, 2019, and 2018 the Company used only the 2016 Plan to make grants.

The 2016 Plan permits the grant of equity awards to the Company’s employees, directors, consultants and advisors for up to 8,400,000 shares of the Company’s common stock plus (i) the number of shares of the Company’s common stock that remain available for issuance under the Prior Incentive Plan, and (ii) the number of shares that are represented by outstanding awards that later become available because of the expiration or forfeiture of the award without the issuance of the underlying shares. The awards are subject to a vesting schedule as set forth in each individual agreement. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant, and those option awards generally vest based on three years of continuous service and have 10-year contractual terms. Restricted stock awards generally vest over three years. Certain option and restricted stock awards provide for accelerated vesting if there is a change in control or upon death or disability.


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2020	2,885,334	$	4.42
Granted	—	—
Exercised	(508,300)	2.62
Unvested options forfeited	—	—
Vested options expired	(351,351)	5.90
Outstanding at December 31, 2020	2,025,683	4.62		2.10	9,054,128
Exercisable at December 31, 2020	2,025,683	$	4.62	2.10	$	9,054,128

The intrinsic values of the options exercised during the years ended December 31, 2020, 2019 and 2018 were $1.9 million, $0.6 million, and $7.9 million, respectively. Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2020, 2019 and 2018 was $0.4 million, $0.1 million, and $3.6 million, respectively. The actual tax benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $1.6 million, $0.2 million, and $5.9 million, respectively, for the years ended December 31, 2020, 2019 and 2018. The Company has a policy of using its available repurchased treasury stock to satisfy option exercises.

The fair value of options vested during the years ended December 31, 2020, 2019 and 2018 were $0, $1.4 million, and $0.1 million, respectively. There were no options granted during the years ended December 31, 2020, 2019 and 2018 and there was no unrecognized compensation expense at December 31, 2020.

During the year ended December 31, 2019, On June 13, 2019, our Board of Directors (prior to the election or appointment of any of the Company’s current non-executive Board members), in its capacity as Administrator of the 2006 Plan, extended the contractual life of 612,000 fully vested share options held by 7 members of the Board and 278,916 fully vested share options held by a former employee. As a result of that modification, the Company recognized incremental share-based compensation expense of $0.4 million for the year ended December 31, 2019.

The incremental fair value of the modified options in 2020 was estimated on the modification date using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities were the blend of the Company’s historical stock price volatility as well as that of market comparable publicly traded peer companies and other factors estimated over the expected term of the options. The term of the modified options was the remaining time until the end of the contractual maturity of ten years. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of modification for the period of the expected term.

The Company has issued several classes of restricted stock awards to employees: restricted stock (“RSAs”), restricted stock unit awards (“RSUs”), and performance stock unit awards (“PSUs”). The following is summary information for restricted stock awards for the year ended December 31, 2020. Restricted stock and RSUs vest over a one- to three-year period in equal annual increments and require continuous service. Performance stock unit awards vest based on specific agreements with employees and require continuous service through the specified event.

As of December 31, 2020, there was approximately $11.5 million of total unrecognized stock-based compensation related to unvested restricted stock awards. That expense is expected to be recognized over a weighted-average period of 1.99 years, which approximates the remaining vesting period of these grants. All RSAs noted below as unvested are considered issued and outstanding at December 31, 2020, while unvested RSAs and PSUs are not considered issued and outstanding as of December 31, 2020.


	RSA			RSU			PSU
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020	3,383,196	$	5.13	—	$	—	140,845	$	7.10
Modification of prior year grants	—	—		271,184	5.90		—	—
Granted	599,728	6.33		2,432,654	5.90		25,422	5.90
Vested	(1,416,888)	6.18		(271,184)	5.90		(87,370)	6.87
Forfeited	(390,177)	5.11		(107,381)	5.90		(43,685)	6.87
Unvested at December 31, 2020	2,175,859	$	4.78	2,325,273	$	5.90	35,212	$	7.10

During the year ended December 31, 2019, the Company granted a fixed dollar value restricted share unit award to the members of its Board in the amount of $1.6 million. The restricted share unit awards vested at the date of the 2019 Annual Meeting and were settled in common stock with the number of shares of common stock based on the closing price of the Company’s share price on August 5, 2020, a date thirty days after the Company became current on its SEC filings. Upon this event, these awards were modified from a fixed dollar-amount of awards to be settled in a variable number of shares to a fixed number of shares based on the closing price of the Company’s common stock on August 5, 2020. This event constituted a modification of the awards from liability-based awards to equity-based awards and did not change the total amount of expense recognized. Prior to August 5, 2020, the Company recorded $1.3 million of expense, of which $0.9 million and $0.4 million were recognized during the years ended December 31, 2020 and 2019, respectively. The Company reclassified $1.3 million of recorded liability to additional paid-in capital to reflect this modification on August 5, 2020. Subsequent to the modification, $0.3 million of expense was recognized as additional paid-in capital.


	Years Ended December 31,
	2020		2019		2018
Cost of sales	$	520	$	477	$	705
Research and development	288		265		584
Selling, general and administrative	14,549		11,322		13,479
Total share-based compensation	15,357		12,064		14,768
Income tax benefit	(3,792)		$	(3,081)	$	(3,803)
Total share-based compensation, net of tax benefit	$	11,565	$	8,983	$	10,965

For the year ended December 31, 2018, the Company purchased 507,600 shares of its Common Stock under the Company’s share repurchase program, for an aggregate purchase price of approximately $7.6 million. The share repurchase program expired during the year ended December 31, 2018.

Repurchases of shares of Common Stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock and exercise of stock options for the years ended December 31, 2020, 2019, and 2018 were 435,492, 429,918, and 614,123, respectively, for an aggregate purchase price of $2.3 million, $1.5 million, and $4.9 million, respectively.