Amendment No. 1 To Investment Agreement

EXHIBIT 4.1


AMENDMENT NO. 1 TO INVESTMENT AGREEMENT


This Amendment No. 1 to Investment Agreement (this "Amendment") is made as of January 26, 1998 by and between Hatteras Partners, L.P., formerly known as Ramius Hatteras Partners, L.P. (the "Investor") and Advanced Tissue Sciences, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company").


WHEREAS, the Investor and the Company are parties to that certain Investment Agreement (the "Investment Agreement") dated as of February 9, 1996 pursuant to which the Investor shall, upon the request of the Company, invest up to $50,000,000 in the Company's Common Stock, par value $.01 per share (the "Common Stock"); and


WHEREAS, pursuant to Section 1.2(a) of the Investment Agreement, the Investment Agreement terminates on the earlier of February 9, 1998 or the occurrence of certain specified events, and the Investor and the Company desire to extend the term to February 9, 1999; and


WHEREAS, in exchange for extending the term of the Investment Agreement, the Company has agreed to grant the Investor a warrant to purchase 50,000 shares of Common Stock at an exercise price per share equal to the average of the high and low sales prices for the Common Stock as reported on the Nasdaq National Market on the date hereof (the "Warrant"), which Warrant will contain a "cashless exercise" provision for the benefit of the Investor; and


WHEREAS, the Investor has agreed that in exchange for providing the Investor a "cashless exercise" right under the Warrant and the inclusion of certain "piggyback registration rights" in the Warrant, the Company shall not otherwise be obligated to register for resale under the Securities Act of 1933, as amended (the "1933 Act"), the shares of Common Stock issuable upon the exercise of the Warrant.


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1. Defined Terms. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Investment Agreement.


2. Amendment of Section 1.2(a) to Extend Term to February 9, 1999. The first sentence of Section 1.2(a) of the Investment Agreement is hereby restated to read as follows:


"At any time prior to the earlier of (i) February 9, 1999 or
(ii) the termination of this Agreement in accordance with
Article V herein, the Company may deliver written notices
to the Investor (each such notice hereinafter referred to
as a "Put Notice") stating a dollar amount (the "Dollar
Amount") of Common Stock which the Company intends to sell
to the Investor five business days following the date (the
...