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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): DECEMBER 10, 1998
GERON CORPORATION
(Exact name of registrant as specified in its charter)
0-20859
(Commission File Number)
DELAWARE 75-2287752
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
230 CONSTITUTION DRIVE, MENLO PARK, CA, 94025
(Address of principal executive offices, with zip code)
(650) 473-7700
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On December 10, 1998, Geron Corporation, a Delaware Corporation (the
"Company") entered into an agreement to sell $15 million in convertible zero
coupon debentures to investment funds managed by three institutional investors
(the "Purchasers").
The debentures are convertible by the holders at a fixed conversion
price of $10.00 per share. The debentures convert at the Company's option when
the Company's common stock has traded at a certain premium to the fixed
conversion price for five (5) consecutive trading days. For a period of eighteen
(18) months, the Purchasers hold a right to purchase up to $15,000,000 of
additional Common Stock at a premium to the fixed conversion price.
The Company's press release announcing the sale of the convertible zero
coupon debentures, as well as the Securities Purchase Agreement, Form of
Debenture, Form of Warrant, and Registration Rights Agreement are filed as
exhibits to this Current Report on Form 8-K. This summary description of the
transaction is qualified in its entirety by reference to the documents filed as
exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
The following are filed as exhibits to this Current Report on Form 8-K:
4.1 Form of Debenture.
4.2 Form of Warrant.
10.40 Securities Purchase Agreement dated as of December 10, 1998
among Geron Corporation and certain investors.
10.41 Registration Rights Agreement dated as of December 10, 1998
among Geron Corporation and certain investors.
99.1 Press Release dated December 10, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GERON CORPORATION
Date: DECEMBER 16, 1998 By: /s/ DAVID L. GREENWOOD
--------------------------------------
DAVID L. GREENWOOD
CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
4.1 Form of Debenture.
4.2 Form of Warrant.
10.40 Securities Purchase Agreement dated as of December 10,
1998 among Geron Corporation and certain investors.
10.41 Registration Rights Agreement dated as of December 10,
1998 among Geron Corporation and certain investors.
99.1 Press Release dated December 10, 1998.
</TABLE>
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EXHIBIT 4.1
SERIES [A] [B] [___%] [ZERO COUPON] CONVERTIBLE DEBENTURES
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
No. __ $ ________________
GERON CORPORATION
SERIES [A] [B] ZERO COUPON CONVERTIBLE DEBENTURES
GERON CORPORATION, A DELAWARE CORPORATION (THE "ISSUER"), FOR
VALUE RECEIVED HEREBY PROMISES TO PAY TO ____________OR ITS REGISTERED ASSIGNS
THE PRINCIPAL SUM OF ____________DOLLARS AT THE ISSUER'S OFFICE OR AGENCY FOR
SAID PURPOSE IN NEW YORK, NEW YORK ON DECEMBER 10, 2001 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 AT THE LAST ADDRESS OF THE HOLDER
(AS DEFINED HEREIN) LAST APPEARING ON THE REGISTER (AS DEFINED HEREIN).
This Security is one of a duly authorized issue of Series A
zero-coupon convertible debentures of the Issuer (the "Security") referred to in
the Securities Purchase Agreement (the "Purchase Agreement") dated as of
December 10, 1998 by and among the Issuer, Brown Simpson Strategic Growth Fund,
L.P., a Cayman Islands exempt issuer, Brown Simpson Strategic Growth Fund, L.P.,
a New York limited partnership, LB I Group Inc., a Delaware corporation and RGC
International Investors, LDC, a Cayman Islands limited duration company. The
Securities are subject to the terms and conditions of the Purchase Agreement.
The Issuer agrees to issue from time to time replacement Securities in the form
hereof to facilitate any transfers and assignments. In addition, after delivery
of an indemnity in form and substance satisfactory to the Issuer, the Issuer
also agrees to issue replacement Securities for securities which have been lost,
stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Securities and particulars of the respective Securities held by
them and of all transfers of such Securities.
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References to the "Holder" or "Holders" shall mean the Person listed in the
Register as the payee of any Security unless the payee shall have presented such
Security to the Issuer for transfer and the transferee shall have been entered
in the Register as a subsequent holder, in which case the term shall mean such
subsequent holder. The ownership of the Securities shall be proven by the
Register. For the purpose of paying interest and principal on the Securities,
the Issuer shall be entitled to rely on the names and addresses in the Register
and notwithstanding anything to the contrary contained in this Security, no
Event of Default shall occur under Section 3.1 if payment of principal is made
in accordance with the names and addresses and particulars contained in the
Register.
No provision of this Security shall alter or impair the
obligations of the Issuer, which are absolute and unconditional, to pay the
principal of and accrued interest on this Security at the place, times, rate,
and in the currency, herein prescribed.
THE PRINCIPAL OF THIS SECURITY SHALL NOT BEAR INTEREST, EXCEPT IN
THE CASE OF A DEFAULT OF PRINCIPAL UPON ACCELERATION, REDEMPTION OR AT MATURITY
AND IN SUCH CASE THE OVERDUE PRINCIPAL OF THIS SECURITY SHALL BEAR INTEREST AT
THE RATE OF 15% PER ANNUM (TO THE EXTENT THAT THE PAYMENT OF SUCH INTEREST SHALL
BE LEGALLY ENFORCEABLE), WHICH SHALL ACCRUE FROM THE DATE OF SUCH DEFAULT IN
PAYMENT TO THE DATE PAYMENT OF SUCH OVERDUE PRINCIPAL HAS BEEN MADE OR DULY
PROVIDED FOR. SUCH INTEREST WILL BE COMPUTED ON THE BASIS OF A 365-DAY YEAR (OR
366 DAYS IN THE CASE OF A LEAP YEAR). INTEREST ON ANY OVERDUE PRINCIPAL SHALL BE
PAYABLE ON DEMAND. PAYMENT OF THE PRINCIPAL OF AND ANY SUCH INTEREST ON THIS
SECURITY WILL BE IN NEW YORK, NEW YORK.
The payment obligations evidenced by this Security shall rank
senior to all other Debt of the Issuer. The Issuer shall not issue directly or
indirectly any Debt for Money Borrowed which is senior to the indebtedness
evidenced by this Security.
ARTICLE I
DEFINITIONS
I.1. CERTAIN TERMS DEFINED. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for
all purposes of this Security shall have the respective meanings
specified below. All accounting terms used herein and not expressly
defined shall have the meanings given to them in accordance with
generally accepted accounting principles, and the term "generally
accepted accounting principles" shall mean such accounting principles
which are generally accepted as of the date hereof. The terms defined in
this Section 1.1 include the plural as well as the singular.
"Acceleration Notice" shall have the meaning set forth in section
3.1.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such
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Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Average Price" on any date means (x) the sum of the Per Share
Market Value for the ten (10) Trading Days immediately preceding such date minus
(y) the highest and lowest Per Share Market Values during the ten (10) Trading
Days immediately preceding such date, divided by (z) eight.
"Board of Directors" means either the Board of Directors of the
Issuer or any committee of such Board duly authorized to act hereunder.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized by law to
close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock whether now outstanding or issued after the original
Issue Date, including, without limitation, all Common Stock and all Preferred
stock.
"Change of Control" means the occurrence of one or more of the
following events: the occurrence of any of (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or
any of their Affiliates, of in excess of 50% of the voting securities of the
Issuer, (ii) a replacement of more than one-half of the members of the Issuer's
Board of Directors which is not approved by those individuals who are members of
the Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Issuer with or into another entity,
consolidation or sale of all or substantially all of the assets of the Issuer in
one or a series of related transactions or (iv) the execution by the Issuer of
an agreement to which the Issuer is a party or by which it is bound, providing
for any of the events set forth in (i), (ii) or (iii).
"Common Stock" means the common stock, par value $.001 per share,
of the Issuer.
"Conversion Price" shall have the meaning set forth in Section
4.2.
"Debt" of any Person means, at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee under capitalized leases, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
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"Debt for Money Borrowed" of any Person means at any date,
without duplication, Debt of the type referred to in clauses (i) and (ii) of the
definition of "Debt" set forth herein.
"GAAP" or "generally accepted accounting principles" means
generally accepted accounting principles in the United States, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession.
"Holder", "Holder of Securities", "Securityholder" or other
similar terms means the registered holder of any Security.
"Incurrence" means the incurrence, creation, assumption or in any
other manner becoming liable with respect to, or the extension of the maturity
of or becoming responsible for the payment of, any Debt. "Incur" shall have a
comparable meaning.
"Issuer" shall have the meaning set forth in the first paragraph
hereof.
"Issuer Conversion Notice" shall have the meaning set forth in
Section 4.7.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Security, the Issuer shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Mandatory Prepayment Amount" for any Security means the greater
of (i) the sum of (x) 115% of the principal amount of the Security to be prepaid
and (y) all other amounts, costs, interest, expenses and liquidated damages due
in respect of such principal amount and (ii) the sum of (x) at the option of the
Holder, either (I) the principal amount of the Security to be repaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on the date
the Mandatory Prepayment Amount is demanded or otherwise due, multiplied by the
Average Price on the date the Mandatory Prepayment Amount is demanded or
otherwise due or (II) the principal amount of the Security to be prepaid, plus
all accrued and unpaid interest thereon, divided by the Conversion Price on the
Trading Day immediately prior to the date the Mandatory Prepayment Amount is
paid in full, multiplied by the Average Price on the Trading Day immediately
prior to the date the Mandatory Prepayment Amount is paid in full, and (y) all
other amounts, costs, interest, expenses and liquidated damages due in respect
of such principal amount.
"Nasdaq" means the Nasdaq National Market.
"Original Issue Date" of any Security (or portion thereof) means
the earlier of (i) the date of such Security and (ii) the date of any Security
(or portion thereof) for which such security was issued (directly or indirectly)
on registration of transfer, exchange or substitution.
"Per Share Market Value" means (i) on any particular date the
closing bid price per share of the Common Stock on such date on Nasdaq or any
Subsequent Market on which the Common Stock is then listed or if there is no
such price on such date, then the closing bid price
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on such exchange or quotation system on the date nearest preceding such date or
(ii) if the Common Stock is not listed then on Nasdaq or any Subsequent Market,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (iii) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by an appraiser selected in good faith by the holder of this Security; provided,
however, that the Issuer, after receipt of the determination by such appraiser,
shall have the right to select an additional appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
appraiser; and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the date of this Security, and includes, without limitation, all classes
and series of preferred or preference stock.
"Principal", wherever used with reference to the Securities or
any Security or any portion thereof, shall be deemed to include "and premium, if
any."
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
generally accepted accounting principles.
"Purchase Price" means, with respect to any Security, the
purchase price paid to the Issuer upon issuance of such Security.
"Purchasers" shall have the meaning ascribed thereto in the
Purchase Agreement.
"Registration Rights Agreement" means that Registration Rights
Agreement dated as of December 10, 1998 by and among the Issuer and the
Purchasers.
"Security" or "Securities" shall have the meaning set forth in
the second paragraph hereof.
"Series A Convertible Preferred Stock" means the Series A
Convertible Preferred Stock of the Issuer.
"Stated Maturity Date" means December 10, 2001.
"Stock Option Plan" means any contract, plan or agreement which
has been approved by the Board of Directors of the Issuer, pursuant to which the
Issuer's securities may be issued to any employee, officer, director or
consultant.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
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"Subsequent Market" means the New York Stock Exchange, American
Stock Exchange or Nasdaq Smallcap Market.
"Trading Day" means (a) a day on which the Common Stock is traded
on Nasdaq or on such Subsequent Market on which the Common Stock is then listed
or quoted or (b) if the Common Stock is not listed on Nasdaq or a Subsequent
Market, a day on which the Common Stock is traded in the over-the-counter
Market, as reported by the OTC Bulletin Board, or (c) if the Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions or
reporting prices) provided, however that in any event that the Common Stock is
not listed or quoted as set forth in (a), (b), or (c) hereof, then a Trading Day
shall mean any Business Day.
"Tranche A Closing Date" has the meaning set forth in the
Purchase Agreement.
"Tranche B Closing Date" has the meaning set forth in the
Purchase Agreement.
"Warrants" has the meaning set forth in the Purchase Agreement.
"Wholly-Owned Subsidiary" means with respect to any Person a
Subsidiary the voting stock of which is more than 90% owned by such Person.
ARTICLE II
PAYMENT; THE SECURITIES
II.1. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants and agrees
that it will duly and punctually pay or cause to be paid the principal
and interest on overdue principal (to the extent enforceable under
applicable law), with respect to each of the Securities at the place or
places, at the respective times and in the manner provided in the
Securities.
II.2. MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case
any temporary or definitive Security shall become mutilated, defaced or
be apparently destroyed, lost or stolen, the Issuer shall execute and
deliver a new Security, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated or defaced
Security. In every case the applicant for a substitute Security shall
furnish to the Issuer such security or indemnity as it may require to
indemnify and defend and to save it harmless and, in every case of
destruction, loss or theft evidence to the Issuer's satisfaction of the
apparent destruction, loss or theft of such Security and of the
ownership thereof.
Upon the issuance of any substitute Security, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Security which has matured or is about to mature, or has
been called for redemption in full, or is being surrendered for conversion in
full shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Issuer may, instead of issuing a substitute Security, with the
holder's consent, pay or authorize the payment or conversion of the same
(without surrender thereof except in the case of a mutilated or defaced
Security), if the applicant for such payment shall furnish to the Issuer such
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security or indemnity as it may require to save it harmless from all risks,
however remote, and, in every case of apparent destruction, loss or theft, the
applicant shall also furnish to the Issuer evidence to the Issuer's satisfaction
of the apparent destruction, loss or theft of such Security and of the ownership
thereof.
Every substitute Security issued pursuant to the provisions of
this Section by virtue of the fact that any Security is apparently destroyed,
lost or stolen shall constitute an additional contractual obligation of the
Issuer, whether or not the apparently destroyed, lost or stolen Security shall
be at any time enforceable by anyone and shall be entitled to all the benefits
of (but shall be subject to all the limitations of rights set forth in) this
Security equally and proportionately with any and all other Securities duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, defaced, or apparently destroyed, lost or stolen
Securities and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
II.3. CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All Securities
surrendered for payment, redemption, registration of transfer or
exchange shall be delivered to the Issuer for cancellation and no
Securities shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Security. If the Issuer shall acquire
any of the Securities, such acquisition alone shall not operate as a
redemption or satisfaction of the indebtedness represented by such
Securities unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
III.1. EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF
DEFAULT. In case one or more of the following events ("Events of
Default") (whatever the reason for such Event of Default and whether it
shall 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) shall
have occurred and be continuing:
(a) default in the payment of all or any part of
the principal of or interest on overdue principal
on, any of the Securities as and when the same
shall become due and payable either at maturity,
upon any redemption, by declaration or otherwise;
or
(b) failure on the part of the Issuer duly to
observe or perform any other of the covenants or
agreements on the part of the Issuer contained in
this Security or the Purchase Agreement or the
Registration Rights Agreement for a period of five
(5) Business Days after the date on which any
officer of the Issuer shall have obtained actual
knowledge of such failure or after written notice
thereof has been given to the Issuer by the holders
of at least a
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majority in aggregate principal amount of the
Securities then outstanding; or
(c) there shall have occurred with respect to any
issue or issues of Debt of the Issuer and/or one or
more Subsidiaries having an outstanding principal
amount of $1,000,000 or more in the aggregate for
all such issues of all such Persons, whether such
Debt now exists or shall hereafter be created, an
event of default which has caused the holder
thereof to declare such. debt to be due and payable
prior to its stated maturity and such Debt has not
been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of
such acceleration; or
(d) a judgment or order (not covered by insurance)
for the payment of money shall be rendered against
the Issuer or any Subsidiary of the Issuer in
excess of $500,000 in the aggregate for all such
judgments or orders against all such Persons
(treating any deductibles, self insurance or
retention as not so covered) that shall not be
discharged, and all such judgments and orders
remain outstanding and there shall be any period of
30 consecutive days following entry of the judgment
or order in excess of $500,000 or the judgment or
order which causes the aggregate amount described
above to exceed $500,000 during which a stay of
enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in
effect; or
(e) a court having jurisdiction in the premises
shall enter a decree or order for relief in respect
of the Issuer or any of its subsidiaries in an
involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or
similar official) of the Issuer or any of its
Subsidiaries or for any substantial part of the
property of the Issuer or any of its Subsidiaries
or ordering the winding up or liquidation of the
affairs of the Issuer or any of its Subsidiaries,
and such decree or order shall remain unstayed and
in effect for a period of 30 consecutive days; or
(f) the Issuer or any of its Subsidiaries shall
commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any
such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar
official) of the Issuer or any of its Subsidiaries
or for any substantial part of the property of the
Issuer or any of its Subsidiaries, or the Issuer or
any of its Subsidiaries shall make any general
assignment for the benefit of creditors; or
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(g) any representation, warranty, certification or
statement made by the Issuer in the Purchase
Agreement or in any certificate, financial
statement or other document delivered pursuant to
the Purchase Agreement shall prove to have been
incorrect in any material respect when made; or
(h) the Common Stock shall be delisted from Nasdaq
or shall be suspended from trading on Nasdaq
without resuming trading and/or being relisted
thereon or on a Subsequent Market or having such
suspension lifted, as the case may be, within three
Business Days; or
(i) a Registration Statement for the Underlying
Securities (each as defined in the Purchase
Agreement) shall not have been declared by the
Securities and Exchange Commission on or prior to
the 180th day after the Series A Closing Date (as
defined in the Purchase Agreement); or
(j) (x) a Change of Control shall occur and (y) the
obligations incurred by this Security shall not
have been fully assumed by the controlling entity
or otherwise fully accounted for; then, in each and
every such case (other than an Event of Default
specified in Section 3.1(e) or 3.1(f) hereof),
unless the principal shall have already become due
and payable, by notice in writing to the Issuer
(the "Acceleration Notice"), a Holder may declare
the entire principal amount of the Securities and
any interest accrued thereon to be due and payable
immediately, and upon any such declaration the same
shall become immediately due and payable. If an
Event of Default specified in section 3.1(e) or
3.1(f) occurs, the principal of and any accrued
interest on the Securities shall become and be
immediately due and payable without any declaration
or other act on the part of any Securityholder. In
the event that the Issuer shall not have promptly,
but in any event within five (5) Business Days upon
receipt of an Acceleration Notice, paid the Holder
the principal of and any accrued interest on this
Security, the Conversion Price shall automatically
be adjusted to equal the average Per Share Market
Value of the Common Stock during the preceding 30
consecutive Trading Days; provided, that the Per
Share Market Value is lower than the Conversion
Price.
The aggregate amount payable upon an Event of Default described
in Section 3.1(a), (e), (f) and (i) shall be equal to the sum of (I) the
Mandatory Prepayment Amount plus (II) the Mandatory Prepayment Amount for the
principal amount of the Securities (the "Converted Debentures") that would then
be held by such Holder had the principal amount of Securities converted into
Underlying Shares that are then held by the Holder not been so converted;
provided, that the Holder shall not be entitled to a Mandatory Prepayment Amount
with respect to Converted Debentures if both the following have occurred: (i)
prior to the occurrence of an Event of Default, the Underlying Shares into which
the Converted Debentures were converted had been held by the Holder for more
than thirty (30) days (which period shall be extended at the
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time of occurrence of the Event of Default for the number of Trading Days during
such 30-day period that an Allowable Grace Period (as defined in the
Registration Rights Agreement) is in effect) and (ii) prior to the occurrence of
the Event of Default and after receipt by the Holder of the Underlying Shares
that are held by the Holder at the time of the occurrence of the Event of
Default, the Registration Statement with respect to such Underlying Shares had
been continuously effective for thirty (30) Trading Days.
The aggregate principal amount payable on each Event of Default
other than as described in Section 3.1(a), (e), (f) and (i) shall be equal to
the sum of (I) the Mandatory Prepayment Amount plus (II) the Mandatory
Prepayment Amount for the Converted Debentures that would then be held by such
Holder had the principal amount of Securities converted into Underlying Shares
(as defined herein) that are then held by the Holder not been so converted;
provided, that the Holder shall not be entitled to a Mandatory Prepayment Amount
with respect to Converted Debentures if prior to the occurrence of an Event of
Default, the Underlying Shares into which the Converted Debentures were
converted had been held by the Holder for more than three Trading Days (which
period shall be extended at the time of occurrence of the Event of Default for
the number of Trading Days during such 3-day period that an Allowable Grace
Period is in effect).
For purposes of this Section 3.1, principal amount of the
Securities are outstanding until such date as the Holder shall have Underlying
Shares upon a conversion (or attempted conversion) thereof. Interest shall
accrue on the prepayment amount hereunder from the day after such amount is due
(being the date of an Event of Default) through the date of payment in full
thereof at the rate of 15.0% per annum, accruing daily from the date of
conversion until such amount, plus any interest thereon, if any, is paid in
full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Security. Within five (5) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Securities to the Issuer and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Underlying
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Issuer
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any demand for payment may be rescinded
and annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Upon delivery of any Acceleration Notice to the Issuer, the
Issuer shall provide a copy of such notice to the other Holders, if any. Failure
to deliver such notice shall not affect the validity of the notice delivered by
the Holders in accordance with the provisions referred to above.
III.2. POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF
DEFAULT. No right or remedy herein conferred upon or reserved to the
Holders is intended to be
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exclusive of any other right or remedy, and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or
remedy.
No delay or omission of the Holders to exercise any right or
power accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power or shall be construed to be a waiver of any
such Event of Default or an acquiescence therein; and every power and remedy
given by the Securities or by law may be exercised from time to time, and as
often as shall be deemed expedient, by the Holders.
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ARTICLE IV
EXCHANGE; CONVERSION
IV.1. RIGHT OF SECURITYHOLDERS TO EXCHANGE SECURITIES. Subject to and
upon compliance with the provisions of this Section, this Security is
exchangeable for an equal principal amount of debentures of different
authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer
or exchange.
IV.2. RIGHT OF SECURITYHOLDERS TO CONVERT SECURITIES INTO COMMON STOCK.
Subject to and upon compliance with the provisions of this Section, the
principal amount of this Security, or any portion thereof may, at any
time and at or before the close of business on December 10, 2001, be
converted into duly authorized, validly issued, fully-paid and
nonassesable shares of Common Stock at $10.00 per share (the "Conversion
Price"), or, in case an adjustment in the Conversion Price and the
securities or other property issuable upon conversion has taken place
pursuant to Article III or IV hereof, then at the applicable Conversion
Price and in such securities or other property as so adjusted, upon
surrender of the Security or Securities, the principal amount of which
is so to be converted, to the Issuer at any time during usual business
hours at the Issuer's offices, accompanied by a written notice of
election to convert as provided in the form attached hereto as Exhibit A
and, if so required by the Issuer, by a written instrument or
instruments of transfer in form satisfactory to the Issuer duly executed
by the registered holder or his attorney duly authorized in writing.
IV.3. ADJUSTMENT FOR DIVIDENDS. No payment or adjustment will be made
for dividends on any Common Stock except as provided herein. On
conversion of a Security, that portion of interest accrued and unpaid
interest attributable to the period from the Original Issuance Date to
the Conversion Date with respect to the converted Security shall not be
canceled, extinguished or forfeited, but rather shall be deemed to be
paid in full to the Holder thereof through delivery of the Common Stock,
in exchange for the Security being converted pursuant to the provisions
hereof. If the Holder converts more than one Security at the same time,
the number of shares of Common Stock issuable upon the conversion shall
be based on the total principal amount of the Securities converted.
IV.4. ISSUANCE OF SHARES UPON CONVERSION. As promptly as practicable
after the surrender, as herein provided, of any Security or securities
for conversion, but in any event no later than three Trading Days, the
Issuer shall deliver or cause to be delivered at its said office or
agency to or upon the written order of the holder of the Security or
securities so surrendered a certificate or certificates representing the
number of duly authorized, validly issued, fully-paid and nonassesable
shares of Common Stock, into which such Security or Securities may be
converted in accordance with the provisions of this Article IV. Prior to
delivery of such certificate or certificates, the Issuer shall require a
written notice at its said office or agency from the Holder of the
Security or securities so surrendered stating that the holder
irrevocably elects to convert such Security or Securities, or, if less
than the entire principal amount thereof is to be converted, stating the
portion thereof to be converted. Such notice shall also state the name
or names (with address and social security or other taxpayer
identification number) in which said
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certificate or certificates are to be issued. Such conversion shall be
deemed to have been made at the time that such Security or Securities
shall have been surrendered for conversion and such notice shall have
been received by the Issuer, the rights of the holder of such Security
or Securities as a Securityholder shall cease at such time, the person
or persons entitled to receive the shares of Common Stock, upon
conversion of such Security or Securities shall be treated for all
purposes as having become the record holder or holders of such shares of
Common Stock at such time and such conversion shall be at the Conversion
Price in effect at such time. In the case of any Security which is
converted in part only, upon such conversion, the Issuer shall execute
and deliver to the holder thereof, as requested by such holder, a new
Security or securities of authorized denominations in aggregate
principal amount equal to the unconverted portion of such Security.
IV.5. ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at
any time shall be subject to adjustment from time to time upon the
occurrence of an Event of Default as set forth in Article III and upon
the happening of certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while this Security is outstanding,
(a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Issuer, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph 4.5(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rights; Warrants. If the Issuer, during the period commencing
on the date of issuance of this Security through the date which is 15 months
from the date of issuance of this Security, shall issue rights or warrants to
all of the holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Conversion Price, the
Conversion Price shall be multiplied by a fraction, the denominator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at the Conversion
Price. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Conversion Price pursuant
to this paragraph (b), if any such right or warrant shall expire and all or any
portion thereof shall not have been exercised, the Conversion Price shall
immediately upon such expiration be re-computed and
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effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of section (g) after the issuance of such rights
or warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for subscription
or purchase only that number of shares of Common Stock (if any) actually
purchased upon the exercise of such rights or warrants actually exercised;
provided, however, that if (X) the Registration Statement (as defined in the
Registration Rights Agreement) has been declared effective by the Securities and
Exchange Commission and (Y) the Per Share Market Value is greater than 150% of
the Conversion Price as of the date of issuance of this Security for five (5)
consecutive Trading Days, then this provision shall expire automatically on the
180th day following the date of issuance of this Security.
(c) Subscription Rights. If the Issuer, during the period
commencing on the date of issuance of this Security through the date which is 15
months from the date of issuance of this Security, shall distribute to all of
the holders of Common Stock evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in paragraphs 6(a) and (b) above), then in each such case the Conversion Price
at which this Security shall thereafter be exercisable shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Issuer, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing (an
"Appraiser") selected in good faith by the Holder of the Security; and provided,
further, that the Issuer, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser meeting the same
qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above; provided, however,
that if (X) the Registration Statement (as defined in the Registration Rights
Agreement) has been declared effective by the Securities and Exchange Commission
and (Y) the Per Share Market Value is greater than 150% of the Conversion Price
as of the date of issuance of this Security for five (5) consecutive Trading
Days, then this provision shall expire automatically on the 180th day following
the date of issuance of this Security.
(d) Rounding. All calculations under this section 4.5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to paragraphs 4.5(a), (b) or (c), the Issuer shall promptly
mail to the holder of this
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Security, a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(f) Reclassification, Etc. If:
A. the Issuer shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Issuer shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Issuer shall authorize the granting to all the holders
of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of
any rights; or
D. the approval of any shareholders of the Issuer shall be
required in connection with any reclassification of the
Common Stock of the Issuer, any consolidation or merger to
which the Issuer is a party, any sale or transfer of all
or substantially all of the assets of the Issuer, of any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
E. the Issuer shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Issuer;
then the Issuer shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Security, and shall cause to be mailed to the
holder of this Security, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights 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,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, 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, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
(g) Adjustment to Conversion Price. In order to prevent dilution
of the rights granted under this Security, during the period commencing on the
date of issuance of this Security through the date which is 15 months from the
date of issuance of this Security, the Conversion Price will be subject to
adjustment from time to time as provided in this Section 4.5(g); provided,
however, that if (X) the Registration Statement (as defined in the Registration
Rights Agreement)
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has been declared effective by the Securities and Exchange Commission and (Y)
the Per Share Market Value is greater than 150% of the Conversion Price as of
the date of issuance of this Security for five (5) consecutive Trading Days,
then this provision shall expire automatically on the 180th day following the
date of issuance of this Security:
(i) Adjustment of Conversion Price upon Issuance of Common Stock.
If at any time the Issuer issues or sells, or is deemed to have issued
or sold, any shares of Common Stock (other than the shares of Common
Stock underlying the Warrants or the Securities or shares issued upon
exercise of the Warrants or conversion of the Securities (collectively,
the "Underlying Shares") or shares of Common Stock deemed to have been
issued by the Issuer in connection with a Stock Option Plan, shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed in Schedule 2.1(c) of the
Purchase Agreement, shares of Common Stock issued or deemed to have been
issued in a Strategic Venture (as defined below), or shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person) for a
consideration per share less than the Conversion Price in effect
immediately prior to such issuance or sale, then immediately after such
issue or sale, the Conversion Price then in effect shall be reduced to
an amount equal to the consideration per share of Common Stock in such
issuance or sale. A "Strategic Venture" shall mean a venture between the
Issuer and a pharmaceutical or biotechnology company or an Affiliate
thereof, the primary purpose of which is not to raise capital in the
form of equity (including without limitation through the issuance of
warrants, convertible securities, phantom stock rights, stock
appreciation rights or other rights with equity features) and pursuant
to which the Issuer contributes to or issues securities of the Issuer
valued at less than 50% of the entire contribution of the Issuer. If the
Holder and the Issuer cannot agree on the value of the components of
such contribution, the last two sentences of subsection (E)(I) entitled
"Calculation of Consideration" shall apply.
For purposes of determining the adjusted Conversion Price under
this Section 4.5(g), the following shall be applicable:
(A) Issuance of Options. If at any time the Issuer in any
manner grants any rights or options to subscribe for or to
purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (other than the
Underlying Shares or shares of Common Stock deemed to have been
issued by the Company in connection with a Stock Option Plan,
shares of Common Stock issuable upon the exercise of any options
or warrants outstanding on the date hereof and listed in Schedule
2.1(c) of the Purchase Agreement, shares of Common Stock issued
or deemed to have been issued as consideration for an acquisition
by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person or shares
of Common Stock issued or deemed to have been issued in a
Strategic Venture) (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") and the
price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such
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Convertible Securities is less than the Conversion Price in
effect immediately prior to such grant, then the Conversion Price
shall be adjusted to equal the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities. No
adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(B) Issuance of Convertible Securities. If at any time the
Issuer in any manner issues or sells any Convertible Securities
and the price per share for which Common Stock is issuable upon
such conversion or exchange (other than the Underlying Shares or
shares of Common Stock deemed to have been issued by the Company
in connection with a Stock Option Plan, shares of Common Stock
issuable upon the exercise of any options or warrants outstanding
on the date hereof and listed in Schedule 2.1(c) of the Purchase
Agreement, shares of Common Stock issued or deemed to have been
issued as consideration for an acquisition by the Issuer of a
division, assets or business (or stock constituting any portion
thereof) from another person or shares of Common Stock issued or
deemed to have been issued in a Strategic Venture) is less than
the Conversion Price in effect immediately prior to issuance or
sale, then the Conversion Price shall be adjusted to equal the
price per share for which Common Stock is issuable upon the
conversion or exchange of such Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there
is a change at any time in (i) the purchase price provided for in
any Options, (ii) the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible
Securities or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then the
Conversion Price in effect at the time of such change shall be
readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold; provided
that no adjustment shall be made if such adjustment would result
in an increase of the Conversion Price then in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Conversion Price under this Section 4.5(g)(i), "Common
Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock issued and outstanding at such time, plus
the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 4.5(g)(i)(A) and 4.5(g)(i)(B) hereof
regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of
Common Stock issuable upon conversion of the Securities or
exercise of the Warrants.
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(E) Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Conversion Price under this
Section 4.5(g)(i), the following shall be applicable:
(I) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Issuer therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Issuer will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Issuer will be the arithmetic average of the Per Share Market
Values of such security for the five (5) consecutive Trading Days immediately
preceding the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Issuer is the surviving entity the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Issuer and the holders of a majority of the Underlying Shares of
the Securities then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected by the Issuer. The determination of such
Appraiser shall be binding upon all parties absent manifest error.
(II) Integrated Transactions. In case any Option is issued
in connection with the issue or sale of other securities of the Issuer, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for an aggregate consideration of $.001.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Issuer, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.
(IV) Record Date. If the Issuer takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the
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making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) Certain Events. If any event occurs of the type contemplated
by the provisions of Section 4.5(g)(i) (subject to the exceptions stated
therein) but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then the Issuer's
Board of Directors will make an appropriate adjustment in the Conversion
Price so as to protect the rights of the Holder, or assigns, of this
Security; provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section
4.5(g).
Notwithstanding anything to the contrary contained in this Section 4.5,
those shares of Common Stock issued pursuant to the transactions contemplated by
the Issuer and Rose Glen Capital Management, L.P. and certain other investors
pursuant to which the Issuer intends to complete a private placement of Common
Stock (as described in Schedule 2.1(c) to the Purchase Agreement) shall be
excluded from any adjustments provided for herein. Additionally, in no event
shall any provision in this Section 4.5 cause the Conversion Price to be greater
than the Conversion Price on the date of issuance of this Security.
IV.6. NASDAQ LIMITATION. If on any date (the "Determination Date") (a)
the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap
Market, (b) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock (x) that would then be
issuable upon conversion in full of the then outstanding principal
amount of the Securities and as payment of interest thereon, as would
equal or exceed 20% of the number of shares of the Common Stock
outstanding immediately prior to the later of (A) the Tranche A Closing
Date and (B) the Tranche B Closing Date (such number of shares as would
not equal or exceed such 20% limit, the "Issuable Maximum"), and (c) the
Issuer shall not have previously obtained the vote of the shareholders
of the Issuer (the "Shareholder Approval"), if any, as may be required
by the applicable rules and regulations of Nasdaq (or any successor
entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common
Stock are deemed to have been issued at a price that is less than the
greater of book value or fair market value of the Common Stock, then
with respect to the aggregate principal amount of the Securities then
held by the Holders for which a conversion in accordance with the
Conversion Price would result in an issuance of shares of Common Stock
in excess of the Issuable Maximum (the "Excess Principal") the Issuer
may elect to prepay cash to the Holders in an amount equal to the
Mandatory Prepayment Amount. Any such election by the Issuer must be
made in writing to the Holders within two Trading Days after the
Determination Date and the payment of such Mandatory Prepayment Amount
applicable to such prepayment must be made in full to the Holders with
ten (10) Business Days after the date such notice is delivered. If the
Issuer does not deliver timely a notice of its election to prepay under
this Section or shall, if it shall have delivered such a notice, fail to
pay the prepayment amount hereunder within ten (10) Business Days
thereafter, then the Holders of a majority of the aggregate principal
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amount of the Securities then outstanding shall have the option by
written notice to the Issuer, to declare any such notice given by the
Issuer, if given, to be null and void and require the Issuer to pay cash
to each Holder in an amount equal to the Mandatory Prepayment Amount for
such Holder's portion of the Excess Principal. The payment of the
Mandatory Prepayment Amount to each Holder pursuant to this Section
shall be determined on a pro rata basis upon the principal amount of the
Securities held by such Holder on the Determination Date. If the Issuer
fails to pay the Mandatory Prepayment Amount in full pursuant to this
Section within five Business Days after the date payable, the Issuer
will pay interest thereon at a rate of 15% per annum to the converting
Holder, accruing interest daily from the date of conversion until such
amount, plus all such interest thereon, if any, is paid in full.
In no event shall the Issuer be required to issue shares of
Common Stock upon conversion of the Securities if such issuance would violate
the rules of Nasdaq.
IV.7. CONVERSION AT THE OPTION OF THE ISSUER. Subject to the provisions
of this paragraph, this Security shall, upon ten (10) days' prior notice
to the Holders, be convertible into shares of Common Stock at the option
of the Issuer, in whole or in part, at any time and from time to time
during the 45 days following a period of 5 consecutive Trading Days that
the average of the Per Share Market Value of the Common Stock equals or
exceeds an amount equal to 175% of the Conversion Price as of the
Original Issuance Date of this Security. Any conversion of this Security
pursuant to this Section 4.7 shall be made on a pro rata basis with the
conversion of the Securities held by other Persons. The number of shares
of Common Stock issuable upon a conversion hereunder shall be determined
by dividing the outstanding principal amount of this Security to be
converted, plus all accrued but unpaid interest thereon (to the extent
such interest is not being paid in cash), by the Conversion Price on the
Issuer Conversion Date (as defined herein). Notwithstanding the
foregoing, the Issuer shall not be permitted to deliver requests for the
conversion of a Holder's Securities if (a) both (1) a Registration
Statement for the Underlying Securities is not then effective and (2)
such Holder is not permitted to resell Underlying Shares pursuant to
Rule 144(k) under the Act, without volume restrictions, as evidenced by
an opinion letter of counsel to the Issuer and acceptable to the Holder
and transfer agent for the Common Stock; (b) there are not sufficient
shares of Common Stock authorized and reserved for issuance upon such
conversion; or (c) the Issuer shall have defaulted on its material
covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement, which default has not been cured in full
to the reasonable satisfaction of the Holder. The Issuer shall exercise
its right to require conversion by delivering to the Holder a form of
conversion notice attached hereto as Exhibit B (the "Issuer Conversion
Notice"). Each Issuer Conversion Notice shall specify the principal
amount of Securities to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date
such Issuer Conversion Notice is deemed to have been delivered hereunder
(the "Issuer Conversion Date"), as well as the other information set
forth on Exhibit B. If no Issuer Conversion Date is specified in an
Issuer Conversion Notice, the Issuer Conversion Date shall be the date
that such Issuer Conversion Notice is deemed delivered hereunder.
Subject to the provisions hereof, each Issuer Conversion Notice,
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once given, shall be irrevocable. If the Issuer is requiring conversion
of less than all of the principal amount represented by the Securities
tendered by the Holder in response to an Issuer Conversion Notice, or if
a conversion hereunder cannot be effected in full for any reason, the
Issuer shall honor such conversion to the extent permissible hereunder
and pro rata with all other Holders of the Securities and shall promptly
deliver to such Holder a new Security for such principal amount as has
not yet been converted.
IV.8. RESTRICTION ON CONVERSION BY EITHER THE HOLDER OR THE ISSUER.
Notwithstanding anything herein to the contrary, in no event shall any
Holder or the Issuer have the right or be required to convert any or all
of the aggregate principal amount and interest accrued thereon of this
Security if the aggregate number of shares of Common Stock beneficially
owned by such Holder and its Affiliates would exceed 9.9% of the
outstanding shares of the Common Stock following such conversion. For
purposes of this Section 4.8, beneficial ownership shall be calculated
in accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended.
IV.9. OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of
Section 4.5, the Issuer shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office and with its
stock transfer agent, if any, an officer's certificate showing the
adjusted number of shares determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment and the manner
of computing such adjustment. Each such officer's certificate shall be
signed by the chairman, president or chief financial officer of the
Issuer and by the secretary or any assistant secretary of the Issuer.
Each such officer's certificate shall be made available at all
reasonable times for inspection by any holder of the Securities and the
Issuer shall, forthwith after each such adjustment, mail a copy, by
first class mail, of such certificate to the each of the Holders.
IV.10. RESERVATION OF SHARES. The Issuer covenants that it will at all
times reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of the Securities as herein provided, such number of shares
of the Common Stock as shall then be issuable upon the conversion of all
outstanding Securities into Common Stock. The Issuer covenants that all
shares of the Common Stock issued upon conversion of the Security which
shall be so issuable shall, when issued, be duly and validly issued and
fully paid and non-assessable.
IV.11. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Issuer covenants
that if any shares of Common Stock required to be reserved for purposes
of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or state law,
or any national securities exchange, before such shares may be issued
upon conversion, the Issuer will use its best efforts to cause such
shares to be duly registered or approved, as the case may be.
IV.12. FRACTIONAL SHARES. Upon a conversion hereunder, the Issuer shall
not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Per
Share Market Value at such time. If the Issuer elects not, or is unable,
to make such a cash payment, the holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common Stock.
25
<PAGE> 22
IV.13. PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of
certificates for shares of the Common Stock on conversion of the
Securities shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Issuer shall
not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such
Securities so converted and the Issuer shall not be required to issue or
deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Issuer the amount
of such tax or shall have established to the satisfaction of the Issuer
that such tax has been paid.
IV.14. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery
by telex (with correct answer back received), telecopy or facsimile
(with transmission confirmation report) at the address or number
designated below (if received by 8:00 p.m. EST where such notice is to
be received), or the first business day following such delivery (if
delivered on a business day after during normal business hours where
such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications are
(i) if to the Issuer to Geron Corporation, 230 Constitution Drive, Menlo
Park, California 94025 attn: David Greenwood, fax no. (650) 473-7701 and
(ii) if to any Holder to the address set forth on Schedule II to the
Purchase Agreement with copies to Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
fax no. (212) 872-1002 or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
ARTICLE V
MISCELLANEOUS
V.1. MODIFICATION OF SECURITIES. The Securities may be modified without
prior notice to any Holder upon the written consent of the Holders of a
majority in principal amount of the Securities then outstanding. The
Holders of a majority in principal amount of the Securities then
outstanding may waive compliance by the Issuer with any provision of the
Securities without prior notice to any Holder. However, without the
consent of each Holder affected, an amendment, supplement or waiver may
not (1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver, (2) reduce the principal amount of or
extend the fixed maturity of any Security or (3) make any Security
payable in money or property other than as stated in the Securities.
V.2. MISCELLANEOUS. This Security shall be deemed to be a contract under
the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State, except as may
otherwise be required by mandatory provisions of law. The parties
hereto, including all guarantors or endorsers, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this
Security, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other
26
<PAGE> 23
indulgence without notice. The Holder of this Security by acceptance of
this Security agrees to be bound by the provisions of this Security
which are expressly binding on such Holder.
V.3. SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In determining
whether the holders of the requisite aggregate principal amount of
Securities have concurred in any direction, consent or waiver under this
Security, Securities which are owned by the Issuer or any other obligor
on the Securities shall be disregarded and deemed not to be outstanding
for the purpose of any such determination; provided that any Securities
owned by the Purchasers shall be deemed outstanding for purposes of
making such a determination. Securities so owned which have been pledged
in good faith may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Issuer the pledgers right so to act with
respect to such Securities and that the pledgee is not the Issuer or any
other obligor upon the securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control
with the Issuer or any other obligor on the Securities.
V.4. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
V.5. NO RIGHTS AS STOCKHOLDER. This Security shall not entitle the
Holder to any rights as a stockholder of the Issuer, including without
limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of
stockholders or any other proceedings of the Issuer, unless and to the
extent converted into shares of Common Stock in accordance with the
terms hereof.
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<PAGE> 24
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under its corporate seal.
GERON CORPORATION
[Seal]
By
---------------------------------
Name:
Title:
Dated:
Attest:
- --------------------------
28
<PAGE> 25
EXHIBIT A
(FORM OF CONVERSION NOTICE]
To: Geron Corporation
The undersigned owner of this Security hereby: (i) irrevocably
exercises the option to convert this Security, or the portion hereof below
designated, for shares of Common Stock, par value $.001 per share ("Common
Stock"), of Geron Corporation in accordance with the terms of this Security and
(ii) directs that such shares of Common Stock deliverable upon the conversion,
together with any check in payment for fractional shares and any Security(ies)
representing any unconverted principal amount hereof, be issued and delivered to
the registered holder hereof unless a different name has been indicated below.
If shares are to be delivered registered in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Dated:
-------------------
Name:
--------------------------------------
Signature:
---------------------------------
Principal Amount to be Converted: (if less
than all)
$
--------------------------
Fill in for registration of shares if to be delivered, and of
Securities if to be issued, otherwise than to and in the name of the registered
holder.
----------------------------------
Social Security or Other
Taxpayer Identifying Number
----------------------------------
(Name)
----------------------------------
(Street Address)
----------------------------------
(City, State and Zip Code)
<PAGE> 26
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE ISSUER
The undersigned in the name and on behalf of Geron Corporation (the "Issuer")
hereby notifies the addressee hereof that the Issuer hereby elects to exercise
its right to convert Series A Zero Coupon Convertible Debentures (the
"Debentures") held by the Holder into shares of Common Stock, par value $.001
per share (the "Common Stock") of the Issuer according to the terms hereof, as
of the date written below. No fee will be charged to the Holder for any
conversion hereunder, except for such transfer taxes, if any which may be
incurred by the Issuer if shares are to be issued in the name of a person other
than the person to whom this notice is addressed.
Conversion Calculations:
Date to Effect Conversion
Principal Amount of Debentures to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Please issue the shares of Common Stock indicated above.
GERON CORPORATION
By:
--------------------------------
Name:
Title:
30
<PAGE> 1
EXHIBIT 4.2
Form of Warrant
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
December 10, 1998
___________ shares Warrant No. [A] [B]-_____
GERON CORPORATION
STOCK PURCHASE WARRANT
Registered Owner:
This certifies that, for value received, Geron Corporation, a Delaware
corporation, the ("Company") grants the following rights to the Registered
Owner, or assigns, of this Warrant:
1. ISSUE. Upon tender (as defined in section 5 hereof) to the Company,
the Company shall issue to the Registered Owner, ______________, or assigns, up
to the number of shares specified in paragraph 2 hereof of fully paid and
non-assessable shares of Common Stock, par value $.001 per share ("Common
Stock"), that the Registered Owner, or assigns, is otherwise entitled to
purchase.
2. NUMBER OF SHARES. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is ________ shares of Common Stock, subject to
adjustment from time to time as set forth in paragraph 6 below. The Company
shall at all times reserve and hold available sufficient shares of Common Stock
to satisfy all conversion and purchase rights represented by outstanding
convertible securities, options and warrants, including this Warrant. The
Company covenants and agrees that all shares of Common Stock that may be issued
upon the exercise of this Warrant shall, upon issuance, be duly and validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the purchase and the issuance of the shares.
31
<PAGE> 2
3. EXERCISE PRICE. The initial exercise price of this Warrant, the
price at which the shares of stock issuable upon exercise of this Warrant may be
purchased, is $12.00 and subject to adjustment from time to time pursuant to the
provisions of paragraph 6 below (the "Exercise Price").
3A. PAYMENT OF EXERCISE PRICE. The Registered Owner may pay the
Exercise Price in one of the following manners:
(i) Cash Exercise. The Registered Owner shall deliver
immediately available funds or a check payable to the Company; or
(ii) Cashless Exercise. At such time as, but only at such time
as, after the 180th day after the date of issuance of this Warrant, all
of the Underlying Shares are not registered pursuant to an effective
registration statement, the Registered Owner shall have the right to
surrender this Warrant to the Company together with a notice of cashless
exercise, in which event the Company shall issue to the Registered Owner
the number of Warrant Shares determined as follows:
where: X = Y (A-B)/A
X = the number of Warrant Shares (as defined in
the Purchase Agreement) to be issued to the
Registered Owner
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised
A = the average of the Per Share Market Value of
the Common Stock for the five (5) Trading Days
immediately prior to (but not including) the date
of exercise
B = the Exercise Price
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Registered
Owner, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date to the extent permitted by Rule 144.
4. EXERCISE PERIOD. This Warrant may only be exercised beginning on
December 10, 1998 and up to and including June 10, 2000 (the "Exercise Period").
If not exercised during this period, this Warrant and all rights granted under
this Warrant shall expire and lapse.
5. TENDER. This Warrant may be exercised, in whole or in part, by actual
delivery of (i) the Exercise Price in cash, (ii) a duly executed Warrant
Exercise Form, a copy of which is
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<PAGE> 3
attached to this Warrant as Exhibit A, properly executed by the Registered
Owner, or assigns, of this Warrant, and (iii) by surrender of this Warrant. The
payment and Warrant Exercise Form must be delivered, personally or by mail, to
the registered office of the Company. Documents sent by mail shall be deemed to
be delivered when they are received by the Company.
6. ADJUSTMENT OF EXERCISE PRICE.
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while this Warrant is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Exercise Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph (6)(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rights; Options; Warrants. If the Company, during the period
commencing on the date of issuance of this Warrant through the date which is 12
months from the date of issuance of this Warrant, shall issue rights or warrants
to all of the holders of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Exercise
Price, the Exercise Price shall be multiplied by a fraction, the denominator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at the Exercise
Price. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Exercise Price pursuant
to this paragraph (6)(b), if any such right or warrant shall expire and all or
any portion thereof shall not have been exercised, the Exercise Price shall
immediately upon such expiration be re-computed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Exercise Price made pursuant to the
provisions of section 6(g) after the issuance of such rights or warrants) had
the adjustment of the Exercise Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock (if any) actually purchased upon the
exercise of such rights or warrants actually exercised. If (X) the Registration
Statement (as defined in the Registration Rights Agreement) has been declared
effective by the Securities and Exchange Commission and (Y) the Per Share Market
Value is
33
<PAGE> 4
greater than 150% of the Exercise Price as of the date of this Warrant for five
consecutive Trading Days, then this Section 6 (b) shall expire automatically on
the 180th day following the date of issuance of this Warrant.
(c) Subscription Rights. If the Company, during the period
commencing on the date of issuance of this Warrant through the date which is 12
months from the date of issuance of this Warrant, shall distribute to all of the
holders of Common Stock evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in paragraphs 6(a) and (b) above), then in each such case the Exercise Price at
which the Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing (an
"Appraiser") selected in good faith by the Registered Owner of the Warrant; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser meeting the
same qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above. If (X) the
Registration Statement (as defined in the Registration Rights Agreement) has
been declared effective by the Securities and Exchange Commission and (Y) the
Per Share Market Value is greater than 150% of the Exercise Price as of the date
of this Warrant for five consecutive Trading Days, then this Section 6 (c) shall
expire automatically on the 180th day following the date of issuance of this
Warrant.
(d) Rounding. All calculations under this section 6 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Exercise Price is adjusted
pursuant to paragraphs 6(a), (b) or (c), the Company shall promptly mail to the
holder of the Warrant, a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(f) Redemption Events. In case of (A) any reclassification of the
Common Stock, (B) any consolidation or merger of the Company with or into
another person pursuant to which (i) a majority of the Company's Board of
Directors will not constitute a majority of the board of directors of the
surviving entity or (ii) less than 51% of the outstanding shares of the capital
stock of the surviving entity will be held by the same shareholders of the
Company prior to such reclassification, consolidation or merger, (C) the sale or
transfer of all or substantially all
34
<PAGE> 5
of the assets of the Company, (D) any compulsory share exchange pursuant to
which the Common Stock is converted into other securities, cash or property, (E)
suspension from listing or delisting of the Common Stock from the National
Market System of the Nasdaq Stock Market ("Nasdaq") or any other exchange on
which the Common Stock is listed for a period of five (5) consecutive Trading
Days, (F) the Company's notice to any registered owner of the Tranche A Warrants
or the Tranche B Warrants, including by way of public announcement, at any time,
of its intention, for any reason, not to comply with proper requests for the
exercise of any such warrants, or (G) a breach by the Company of any
representation, warranty, covenant or other term or condition of the Purchase
Agreement, the Registration Rights Agreement or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby or hereby, except to the extent that such breach would not
have a Material Adverse Effect (as defined in Section 2.1(a) of the Purchase
Agreement) and except, in the case of a breach of a covenant which is curable,
only if such breach continues for a period of at least ten days after the
Company knows or reasonably should have known of the existence of such breach
(clauses (A) through (G) above referred to as a "Redemption Event"), the holder
of the Warrant shall have the right thereafter to exercise the Warrant within
ten (10) Business Days of the Redemption Event for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Redemption Event, and the holder of the Warrant
shall be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the Warrant
could have been converted immediately prior to such Redemption Event would have
been entitled.
(g) Reclassification, Etc. If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all of the
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of
any class or of any rights; or
D. the approval of any shareholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
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<PAGE> 6
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be mailed to the
holder of this Warrant at its address as it shall appear below, at least 30
calendar days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any material
non-public information) stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights 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, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, 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, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(h) Adjustment to Exercise Price. If the Company, during the
period commencing on the date of issuance of this Warrant through the date which
is 12 months following the date of issuance of this Warrant takes any of the
actions described in this Section 6 (h), then, in order to prevent dilution of
the rights granted under this Warrant, the Exercise Price will be subject to
adjustment from time to time as provided in this Section 6(h); provided,
however, that if (X) the Registration Statement (as defined in the Registration
Rights Agreement) has been declared effective by the Securities and Exchange
Commission and (Y) the Per Share Market Value is greater than 150% of the
Exercise Price as of the date of issuance of this Warrant for five consecutive
Trading Days, then this provision shall expire automatically on the 180th day
following the date of issuance of this Warrant.
(i) Adjustment of Exercise Price upon Issuance of Common Stock.
If at any time during the Exercise Period, the Company issues or sells, or is
deemed to have issued or sold, any shares of Common Stock (other than the
Underlying Shares (as defined in the Purchase Agreement) or shares of Common
Stock deemed to have been issued by the Company in connection with an Approved
Stock Plan (as defined below), shares of Common Stock issuable upon the exercise
of any options or warrants outstanding on the date hereof and listed in Schedule
2.1(c) of the Purchase Agreement (as defined below), shares of Common Stock
issued or deemed to have been issued in a Strategic Venture (as defined below),
or shares of Common Stock issued or deemed to have been issued as consideration
for an acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another person) for a consideration per
share (the "New Issuance Price") less than the Conversion Price (as defined in
the Debenture issued on the Tranche A Closing Date in connection with the
transactions contemplated by the Purchase Agreement) in effect immediately prior
to such issuance or sale, then immediately after such issue or sale, the
Exercise Price then in effect shall be reduced to an amount equal to 120% of the
New Issuance Price. A "Strategic Venture" shall mean a venture between the
Company and a pharmaceutical or biotechnology company or an Affiliate thereof,
the primary purpose of which is not to raise capital in the form of equity
(including without limitation through the issuance of warrants, convertible
securities, phantom stock rights, stock appreciation rights or other rights with
equity features) and pursuant to which the Company contributes or
36
<PAGE> 7
issues securities of the Company valued at less than 50% of the entire
contribution of the Company. If the Registered Holder and the Company cannot
agree on the value of the components of such contribution, the last two
sentences of subsection (F)(I) entitled "Calculation of Consideration" shall
apply.
If at any time during the Exercise Period, the Company issues or
sells, or is deemed to have issued or sold, any shares of Common Stock (other
than Underlying Shares, shares of Common Stock deemed to have been issued by the
Company in connection with an Approved Stock Plan or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the date
hereof and listed in Schedule 2.1(c) of the Purchase Agreement then, for
purposes of determining the adjusted Exercise Price under this Section 6(h)(i),
the following shall be applicable:
(A) Issuance of Options. If at any time during the
Exercise Period, the Company in any manner grants any rights or options
to subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (other than
the Underlying Shares or shares of Common Stock deemed to have been
issued by the Company in connection with an Approved Stock Plan, shares
of Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed in Schedule 2.1(c) of the
Purchase Agreement, shares of Common Stock issued or deemed to have been
issued as consideration for an acquisition by the Company of a division,
assets or business (or stock constituting any portion thereof) from
another person or shares of Common Stock issued or deemed to have been
issued in a Strategic Venture) (such rights or options being herein
called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") and the price
per share (the "New Option Price") for which Common Stock is issuable
upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities is less than the Conversion Price in effect
immediately prior to such grant, then the Exercise Price shall be
reduced to an amount to equal 120% of the New Option Price. No
adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If at any time
during the Exercise Period, the Company in any manner issues or sells
any Convertible Securities and the price per share (the "New Convertible
Price") for which Common Stock is issuable upon such conversion or
exchange (other than the Underlying Shares or shares of Common Stock
deemed to have been issued by the Company in connection with an Approved
Stock Plan, shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in
Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued
or deemed to have been issued as consideration for an acquisition by the
Company of a division, assets or business (or stock constituting any
portion thereof) from another person or shares of Common Stock issued or
deemed to have been issued in a Strategic Venture) is less than the
Conversion Price in effect immediately prior to issuance or sale, then
the Exercise Price shall be reduced to equal 120% the New Convertible
Price.
37
<PAGE> 8
(C) Change in Option Price or Rate of Conversion. If there
is a change at any time in (i) the purchase price provided for in any
Options, (ii) the additional consideration, if any, payable upon the
issue, conversion or exchange of any Convertible Securities or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock, then the Exercise Price in effect at the
time of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold; provided that no
adjustment shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Exercise Price under this Section 6(h)(i), the following terms
have meanings set forth below:
(I) "Approved Stock Plan" shall mean any contract,
plan or agreement which has been approved by the Board of Directors of
the Company, pursuant to which the Company's securities may be issued to
any employee, officer, director or consultant.
(II) "Common Stock Deemed Outstanding" means, at any
given time, the number of shares of Common Stock issued and outstanding
at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 6(h)(i)(A) and 6(h)(i)(B) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the Warrants.
(F) Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under this Section
6(h)(i), the following shall be applicable:
(I) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company will be the
fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the arithmetic average of the Per Share
Market Values of such security for the five (5) consecutive Trading Days
immediately preceding the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company
is the surviving entity the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of
38
<PAGE> 9
the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined
jointly by the Company and the registered owners of a majority of the
Underlying Shares of Tranche A Warrants and the Tranche B Warrants then
outstanding. If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be
determined within forty-eight (48) hours of the tenth (10th) day
following the Valuation Event by an Appraiser selected by the Company.
The determination of such Appraiser shall be binding upon all parties
absent manifest error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or
held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(V) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6(h)(i) (subject to the
exceptions stated therein) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price so as to protect the rights
of the Registered Owner, or assigns, of this Warrant; provided, however,
that no such adjustment will increase the Exercise Price as otherwise
determined pursuant to this Section 6(h).
Notwithstanding anything to the contrary contained in this
Section 6, those shares of Common Stock issued pursuant to the transactions
contemplated by the Company and Rose Glen Capital Management, L.P. and certain
other investors pursuant to which the Company intends to complete a private
placement of Common Stock (as described in Schedule 2.1(c) to the Purchase
Agreement) shall be excluded from any adjustments provided for herein.
Additionally,
39
<PAGE> 10
in no event shall any provision in this Section 6 cause the Exercise Price to be
greater than the Exercise Price on the date of issuance of this Warrant.
7. LIMITATIONS.
(a) Nasdaq Limitation. If on any date (the "Determination Date")
(a) the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap
Market, (b) the Exercise Price then in effect is such that the aggregate number
of shares of Common Stock (x) that would then be issuable upon exercise in full
of this Warrant, would equal or exceed 20% of the number of shares of the Common
Stock outstanding immediately prior to the later of (A) the Tranche A Closing
Date (as defined in the Purchase Agreement) and (B) the Tranche B Closing Date
(as defined in the Purchase Agreement) (such number of shares as would not equal
or exceed such 20% limit, the "Issuable Maximum"), and (c) the Company shall not
have previously obtained the vote of the shareholders of the Company (the
"Shareholder Approval"), if any, as may be required by the applicable rules and
regulations of Nasdaq (or any successor entity) to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum in a private placement
whereby shares of Common Stock are deemed to have been issued at a price that is
less than the greater of book value or fair market value of the Common Stock,
then with respect to the aggregate shares of Common Stock underlying this
Warrant then held by the Registered Owners for which an exercise in accordance
with the Exercise Price would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum (the "Excess Share Amount") the Company may elect
to prepay cash to the Registered Owners in an amount equal to the Per Share
Market Value. Any such election by the Company must be made in writing to the
Registered Owners within two Trading Days after the Determination Date and the
payment of such Per Share Market Value must be made in full to the Registered
Owners with ten (10) Business Days after the date such notice is delivered. If
the Company does not deliver timely a notice of its election to pay under this
Section or shall, if it shall have delivered such a notice, fail to pay the
payment amount hereunder within ten (10) Business Days thereafter, then the
Registered Owners of a majority of shares underlying the Warrants then
outstanding shall have the option by written notice to the Company, to declare
any such notice given by the Company, if given, to be null and void and require
the Company to pay cash to each Registered Owner in an amount equal to the Per
Share Market Value for such Registered Owner's portion of the Excess Share
Amount. The payment of the Per Share Market Value to each Registered Owner
pursuant to this Section shall be determined on a pro rata basis upon the number
of shares underlying this Warrant held by such Registered Owner on the
Determination Date. If the Company fails to pay the Per Share Market Value in
full pursuant to this Section within five Business Days after the date payable,
the Company will pay interest thereon at a rate of 15% per annum to the
exercising Registered Owner, accruing interest daily from the date of exercise
until such amount, plus all such interest thereon, if any, is paid in full.
(b) Restriction on Exercise by the Registered Owner.
Notwithstanding anything herein to the contrary, in no event shall any
Registered Owner have the right or be required to exercise any portion or all of
this Warrant if the aggregate number of shares of Common Stock beneficially
owned by such Registered Owner and its Affiliates would exceed
40
<PAGE> 11
9.9% of the outstanding shares of the Common Stock following such exercise. For
purposes of this Section 7(b), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended.
8. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" has the meaning assigned to it in section 6(c) hereof.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Common Stock" means the shares of the Company's common stock, par value
$.001 per share.
"Company" means Geron Corporation, a Delaware corporation.
"Convertible Securities" has the meaning assigned to it in section
6(h)(i)(A) hereof.
"Exercise Period" has the meaning assigned to it the section 4 hereof.
"Exercise Price" has the meaning assigned to it in section 3 hereof.
"Market Price" has the meaning assigned to it in section 6(h)(i) hereof.
"Options" has the meaning assigned to it in section 6(h)(i)(A) hereof.
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on Nasdaq or another
registered national stock exchange on which the Common Stock is then listed or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (ii) if
the Common Stock is not listed then on the National Market System of the Nasdaq
Stock Market or any registered national stock exchange, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (iii) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the holder of this Warrant; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case, the fair
41
<PAGE> 12
market value shall be equal to the average of the determinations by each such
Appraiser; and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated December 10, 1998, among the Company, Brown Simpson Strategic Growth Fund,
Ltd., Brown Simpson Strategic Growth Fund, L.P., LB I Group Inc. and RGC
International Investors, LDC.
"Redemption Event" has the meaning assigned to it in section 6(f)
hereof.
"Registered Owner" means ________, or such other Person as shown on the
records of the Company as being the registered owner of this Warrant.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of December 10, 1998, among the Company, Brown Simpson
Strategic Growth Fund, Ltd., Brown Simpson Strategic Growth Fund, L.P., LB I
Group Inc. and RGC International Investors, LDC.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Tranche A Warrants" means the warrants issuable at the Tranche A
Closing.
"Tranche B Warrants" means the warrants issuable at the Tranche B
Closing.
9. REGISTRATION RIGHTS. The Company will undertake the registration of
the Common Stock into which this Warrant is exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement.
10. RESERVATION OF UNDERLYING SHARES. The Underlying Shares are and will
at all times hereafter continue to be duly authorized and reserved for issuance
pursuant to this Warrant.
11. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to Geron
Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David
Greenwood, fax no. (650) 473-7701 and (ii) if to any Registered Owner to the
address set forth on Schedule II to the Purchase Agreement with copies to Akin,
Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York
10022, Attn: James Kaye, fax no.
42
<PAGE> 13
(212) 872-1002 or such other address as may be designated in writing hereafter,
in the same manner, by such Person.
[signature page follows]
43
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
GERON CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
44
<PAGE> 15
EXHIBIT A
Warrant Exercise Form
TO: GERON CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Geron Corporation, pursuant to
Warrant No. ___ heretofore issued to ___________________ on December 10, 1998;
(2) encloses a payment of $__________ for these shares at a price of $12.00 per
share (as adjusted pursuant to the provisions of the Warrant); and (3) requests
that a certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address specified below.
Date:
--------------------------------
Investor Name:
--------------------------------
Taxpayer Identification
Number:
--------------------------------
By:
--------------------------------
Printed Name:
--------------------------------
Title:
--------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with the
name of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
<PAGE> 1
EXHIBIT 10.40
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
GERON CORPORATION,
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.,
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.,
LB I GROUP INC.
and
RGC INTERNATIONAL INVESTORS, LDC
Dated as of December 10, 1998
================================================================================
46
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as
of December 10, 1998, among Geron Corporation, a Delaware corporation (the
"Company"), Brown Simpson Strategic Growth Fund, Ltd., a Cayman Islands exempt
company ("Brown Simpson Limited"), Brown Simpson Strategic Growth Fund, L.P., a
New York limited partnership ("Brown Simpson LP"), LB I Group Inc., a Delaware
corporation ("LB Group") and RGC International Investors, LDC, a Cayman Islands
limited duration company ("RGC"). Brown Simpson Limited, Brown Simpson LP, LB
Group and RGC are each referred to herein as a "Purchaser" and are collectively
referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate of seven million
five hundred thousand dollars ($7,500,000) principal amount of Series A
Zero-Coupon Convertible Debentures (the "Tranche A Debentures"), and warrants
(the "Tranche A Warrants") to purchase up to $7,500,000 of the Company's common
stock, par value $.001 per share (the "Common Stock"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate of seven million
five hundred thousand dollars ($7,500,000) principal amount of Series B
Zero-Coupon Convertible Debentures (the "Tranche B Debentures" and, together
with the Tranche A Debentures, the "Debentures"), and warrants (the "Tranche B
Warrants", and together with the Tranche A Warrants, the "Warrants") to purchase
up to $7,500,000 of the Company's Common Stock.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS
I.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth herein, the
Company shall issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, shall purchase from the
Company:
(i) On the Tranche A Closing Date (as defined below), the
principal amount of Tranche A Debentures as set forth for
such Purchaser on Schedule I; and
(ii) On the Tranche B Closing Date (as defined below), the
principal amount of Tranche B Debentures as set forth for
such Purchaser on Schedule I.
(b) Each Purchaser shall purchase that principal amount of
Debentures set forth opposite such Purchaser's name on Schedule I
attached hereto and each Purchaser shall deliver to the Company
the portion of the purchase price for each
<PAGE> 3
of the Tranche A Debentures and the Tranche B Debentures as set
forth next to its name on Schedule I.
I.2 The Closings.
(a) The Tranche A Closing. The closing of the purchase and sale
of the Tranche A Debentures (the "Tranche A Closing") shall take
place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, or by
transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different
location as the parties shall agree, but not prior to the date
that the conditions set forth in Section 4.1 have been satisfied
or waived by the appropriate party (the "Tranche A Closing
Date"). At the Tranche A Closing:
(i) Each Purchaser shall deliver to the Company its
portion of the purchase price as set forth next to its
name on Schedule I in United States dollars in immediately
available funds to an account designated in writing by the
Company;
(ii) The Company shall deliver to each Purchaser a
Debenture, substantially in the form of Exhibit A hereto,
representing the principal amount purchased by such
Purchaser as set forth on Schedule I hereto;
(iii) The Company shall deliver to each Purchaser a
Warrant, substantially in the form of Exhibit B hereto,
representing the number of Tranche A Warrants purchased by
such Purchaser as set forth on Schedule I hereto;
(iv) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof; and
(v) The Company shall pay to Brown Simpson Asset
Management, LLC ("Brown Simpson Asset") a fee of $25,000
(the "Brown Simpson Asset Fee") in United States dollars
in immediately available funds to an account designated in
writing by Brown Simpson Asset.
(b) The Tranche B Closing. Subject to the terms and conditions
set forth in Section 4.2 and elsewhere in this Agreement, the
closing of the purchase and sale of the Tranche B Debentures (the
"Tranche B Closing") shall take place in the same manner as the
Tranche A Closing, on the date after the Company fulfills the
conditions set forth in Section 4.2 (the "Tranche B Closing
Date"); provided that in no case shall the Tranche B Closing take
place unless and until the conditions listed in Section 4.2 have
been satisfied or waived by the appropriate party. At the Tranche
B Closing:
(i) Each Purchaser shall deliver to the Company its
portion of the purchase price as set forth next to its
name on Schedule I in United States dollars in immediately
available funds to an account designated in writing by the
Company;
(ii) The Company shall deliver to each Purchaser a
Debenture, substantially in the form of Exhibit A hereto,
representing the principal amount of Tranche B Debentures
purchased by such Purchaser as set forth on Schedule I
hereto;
(iii) The Company shall deliver to each Purchaser a
Warrant, substantially in the form of Exhibit B hereto,
representing the number of
2
<PAGE> 4
Tranche B Warrants purchased by such Purchaser as set
forth on Schedule I hereto; and
(iv) The parties shall execute and deliver each of the
documents referred to in Section 4.2 hereof.
With respect to the Tranche B Debentures and Tranche B Warrants,
in no event shall any Purchaser have the right or be required to purchase
Tranche B Debentures or Tranche B Warrants if the aggregate number of shares of
Common Stock beneficially owned by such Purchaser and its affiliates exceeds
9.9% of the outstanding shares of the Common Stock following such conversion.
For purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
II.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to
each of the Purchasers:
(a) Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate
power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Except as set
forth on Schedule 2.1(a), the Company has no subsidiaries
(collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation,
with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of any of this Agreement or
the Transaction Documents (as defined below) or any of the
transactions contemplated thereby, (y) have or result in a
material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and its
Subsidiaries, taken as a whole or (z) adversely impair the
Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (x), (y) or
(z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the Debentures,
the Warrants and the Registration Rights Agreement (as defined
below) (collectively, the "Transaction Documents"), and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of each of this Agreement and the
Transaction
3
<PAGE> 5
Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action and no further
action is required by the Company, its Board of Directors or its
stockholders. Each of this Agreement and the Transaction
Documents has been duly executed by the Company and when
delivered in accordance with the terms hereof will constitute the
valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles
of general application.
(c) Capitalization. As of the date hereof and immediately prior
to the Tranche A Closing Date, the authorized capital stock of
the Company is as set forth on Schedule 2.1(c). The issuance and
sale of all interests in such capital stock have been in
compliance with all applicable federal and state securities laws.
No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of this Agreement
or the Transaction Documents. Except as disclosed on Schedule
2.1(c), other than the Debentures and the Warrants, there are no
outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to securities,
rights or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. No anti-dilution or similar
adjustment provision of securities of the Company will be
triggered by the issuance of the Debentures or the Warrants,
except as described on Schedule 2.1(c). The Company is not
subject (contingent or otherwise) to repurchase or otherwise
acquire or retire any units of its capital stock or any security
convertible into or exchangeable for any of its capital stock.
Except as specifically disclosed in the SEC Documents (as defined
below), to the Company's best knowledge, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) or has the right to
acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common
Stock. "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Authorization and Validity; Issuance of Shares. All of the
Debentures and the Warrants have been duly authorized, and when
delivered against payment therefor as contemplated hereby, will
be validly issued, fully paid and non-assessable, free and clear
of all liens, encumbrances and Company rights of first refusal,
other than liens and encumbrances created by the Purchasers
(collectively,
4
<PAGE> 6
"Liens") and will not be subject to any preemptive or similar
rights. The shares of Common Stock issuable upon exercise of the
Debentures and the Warrants (collectively, the "Underlying
Shares") are and will at all times hereafter continue to be duly
authorized and reserved for issuance and the shares of Common
Stock issued upon conversion of the Debentures (the "Debenture
Shares") and exercise of the Warrants (the "Warrant Shares") will
be validly issued, fully paid and non-assessable, free and clear
of all Liens.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or
violate any provision of the certificate of incorporation, bylaws
or other charter documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to
in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument (evidencing a Company or Subsidiary debt
or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to
which the Company or any Subsidiary is subject (including Federal
and state securities laws and regulations), or by which any
material property or asset of the Company or any Subsidiary is
bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations or cancellations that are
not reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect).
(f) Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with,
any court or other federal, state, local or other governmental
authority or other person in connection with the execution,
delivery and performance by the Company of this Agreement or the
Transaction Documents, other than (i) the filing of a
registration statement with the Securities and Exchange
Commission (the "Commission"), which shall be filed in accordance
with and in the time periods set forth in the Registration Rights
Agreement, (ii) the application(s) or any letter(s) acceptable to
the National Market System of Nasdaq Stock Market ("Nasdaq") for
the listing of the Underlying Shares with Nasdaq (and with any
other national securities exchange or market on which the Common
Stock is then listed), and (iii) any filings, notices or
registrations under applicable state securities laws (together
with the consents, waivers, authorizations, orders, notices and
filings referred to on Schedule 2.1(f), the "Required
Approvals").
(g) Litigation; Proceedings. Except as specifically set forth on
Schedule 2.1(g), there is no action, suit, notice of violation,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the
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Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of this Agreement or the
Transaction Documents or (ii) would individually or in the
aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any
indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound except for such defaults or violations that
are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect, (ii) is in violation of any order
of any court, arbitrator or governmental body applicable to it,
or (iii) is in violation of any statute, rule or regulation of
any governmental authority to which it is subject.
(i) Disclosure; Absence of Certain Changes. Neither this
Agreement, the Schedules to this Agreement, the Transaction
Documents nor the SEC Documents contains any untrue statement of
a material fact or omits to state any material fact necessary in
order to make the statements made herein and therein, in light of
the circumstances under which they were made, not misleading.
Except as disclosed on Schedule 2.1(i) or the SEC Documents filed
on EDGAR at least five business days prior to the date hereof,
since December 31, 1997, there has been no material adverse
change and no material adverse development in the business,
properties, operations, financial condition, liabilities or
results of operations or, insofar as can reasonably be foreseen,
prospects of the Company or the Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps,
to seek protection pursuant to any bankruptcy law nor does the
Company or any of its Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary
bankruptcy proceedings. No event, liability, development or
circumstance has occurred or exists, or is contemplated to occur,
with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial
condition or, insofar as can reasonably be foreseen, prospects,
that would be required to be disclosed by the Company under
applicable securities laws on a registration statement (including
by way of incorporation by reference) filed with the SEC, on the
date this representation is made or deemed to be made, relating
to an issuance and sale by the Company of its Common Stock and
which has not been publicly disclosed.
(j) Private Offering. The Company and all Persons acting on its
behalf have not directly or indirectly made, and will not make,
offers or sales of any securities or solicited any offers to buy
any security under circumstances that would require registration
of the Debentures, the Warrants, the Debentures Shares, the
Warrant Shares or the Underlying Shares or the issuance of such
securities under the Securities Act of 1933, as amended (the
"Act"). The issuance of the Debentures, the Warrants, the
Debenture Shares and the Warrant Shares to the Purchasers will
not be integrated with any other issuance of the Company's
securities (past, current, or future). Subject to the accuracy
and completeness of the
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<PAGE> 8
representations and warranties of the respective Purchasers
contained in Section 2.2 hereof, the offer and sale by the
Company to the Purchasers of the Debentures and the Warrants is
exempt from the registration requirements of the Act.
(k) SEC Documents; Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange
Act. The Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13, 14 or
15(d) thereof (the foregoing materials being collectively
referred to herein as the "SEC Documents"), on a timely basis or
has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the
Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All
material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any
Subsidiary are subject have been filed as exhibits to the SEC
Documents as required; neither the Company nor any of its
Subsidiaries is in breach of any agreement where such breach,
individually or in the aggregate, would have a Material Adverse
Effect. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto as in effect
at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all
material respects the financial position of the Company as of and
for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments.
(l) Investment Company. The Company is not, and is not controlled
by or under common control with an affiliate (an "Affiliate") of
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(m) Broker's Fees. Except for a $25,000 fee paid to Brown Simpson
Asset upon execution of that certain letter agreement dated
November 25, 1998 between the Company and Brown Simpson Asset and
an additional fee of $25,000 payable by the Company to Brown
Simpson Asset at the Tranche A Closing, no fees or commissions or
similar payments with respect to the transactions contemplated by
this Agreement or the Transaction Documents have been paid or
will be payable by the Company to any broker, financial advisor,
finder, investment banker, or bank. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
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<PAGE> 9
contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the
Transaction Documents.
(n) Form S-3 Eligibility. The Company is, and at the Tranche A
Closing Date and the Tranche B Closing Date will be, eligible to
register securities (including the Underlying Shares) for resale
with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.
(o) Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is
Nasdaq. Except as disclosed on Schedule 2.1(o), the Company has
not in the three years preceding the date hereof received notice
(written or oral) from Nasdaq (or any stock exchange, market or
trading facility on which the Common Stock is or has been listed
(or on which it has been quoted)) to the effect that the Company
is not in compliance with the listing or maintenance requirements
of such market or exchange. The Company is not aware of any facts
which would reasonably lead to delisting or suspension of the
Common Stock by Nasdaq. After giving effect to the transactions
contemplated by this Agreement and the Transaction Documents, the
Company believes that it is and will be in compliance with all
such maintenance requirements.
(p) Patents and Trademarks. To the Company's best knowledge, the
Company or its Subsidiaries has, or has rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights
(collectively, the "Intellectual Property Rights") which are
necessary for use in connection with its business, as currently
conducted and as described in the SEC Documents. To the best
knowledge of the Company, there is no existing infringement by
another Person of any of the Intellectual Property Rights which
are necessary for use in connection with the Company's business
which would, individually or in the aggregate, have a Material
Adverse Effect and the Company is not infringing on any other
person's Intellectual Property Rights.
(q) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such
dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and
the Company and its Subsidiaries believe that relations with
their employees are good. Except as set forth on Schedule 2.1(q),
no executive officer (as defined in Rule 501(f) of the Act) has
notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the
Company.
(r) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (i) the Company has not
granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental
authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of
the Company, underwriters, brokers or agents, has any right of
first refusal, preemptive right, right of
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<PAGE> 10
participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction
Document.
(s) Title. Except as disclosed on Schedule 2.1(s), the Company
and the Subsidiaries have good and marketable title in fee simple
to all real property and personal property owned by them which is
material to the business of the Company and its Subsidiaries, in
each case free and clear of all Liens, except for Liens that do
not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property
and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and, to the
Company's best knowledge, enforceable leases with such exceptions
as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company
and the Subsidiaries.
(t) Permits. The Company and the Subsidiaries possess all
certificates, authorizations, licenses, easements, consents,
approvals, orders and permits necessary to own, lease and operate
their respective properties and to conduct their respective
businesses as currently conducted except where the failure to
possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is
no proceeding pending, or, to the knowledge of the Company,
threatened relating to the revocation, modification, suspension
or cancellation of any Material Permit. Neither the Company nor
any of the Subsidiaries is in conflict with or default or
violation of any Material Permit.
(u) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged.
Neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverages as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue
its business.
(v) Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(w) Tax Status; Firpta. The Company and each of the Subsidiaries
has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books
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<PAGE> 11
provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on
it books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company is not a "United States
real property holding corporation" within the meaning of Section
847(c)(2) of the Internal Revenue Code of 1986, as amended.
(x) Transactions With Affiliates. Except as set forth on Schedule
2.1(c) or Schedule 2.1(x), none of the officers, directors, or
employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to
or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or
partner.
(y) [Intentionally omitted.]
(z) Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permits, licenses or
other approvals except where the failure of any of the foregoing
would not result in a Material Adverse Effect.
(aa) Foreign Corrupt Practices. To the Company's best knowledge,
neither the Company, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person acting on
behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company used any
corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee form
corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
(bb) Solicitation Materials. The Company has not (i) distributed
any offering materials in connection with the offering and sale
of the Debentures or the Warrants, other than the SEC Documents,
the Schedules to this Agreement, any
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<PAGE> 12
amendments and supplements thereto and the materials listed on
Schedule 2.1(bb), or (ii) solicited any offer to buy or sell the
Debentures or the Warrants by means of any form of general
solicitation or advertising.
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II.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation or a
limited duration company duly incorporated or a limited liability
company or limited partnership duly formed, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to
consummate the transactions contemplated hereby and by the
Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Purchaser of the
Debentures and the Warrants hereunder has been duly authorized by
all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly
executed and delivered by such Purchaser and constitutes the
valid and legally binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the Debentures
and the Warrants for its own account for investment purposes only
and not with a view to or for distributing or reselling the
Debentures, the Warrants, the Debentures Shares or the Warrant
Shares or any part thereof or interest therein in violation of
any securities laws; provided, however, that by making the
representations herein, such Purchaser does not agree to hold any
of the Debentures, the Warrants, the Debentures Shares or the
Warrant Shares for any minimum or other specific term and
reserves the right to dispose of the securities at any time in
accordance with or pursuant to a registration statement or an
exemption under the Act.
(c) Purchaser Status. At the time such Purchaser was offered the
Debentures and the Warrants, and at the Tranche A Closing Date
and the Tranche B Closing Date, (i) it was and will be an
"accredited investor" as defined in Rule 501 under the Act or
(ii) such Purchaser, either alone or together with its
representatives, had and will have such knowledge, sophistication
and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective
investment in the Debentures and the Warrants.
(d) Reliance. Each Purchaser understands and acknowledges that
(i) the Debentures and the Warrants are being offered and sold to
the Purchaser without registration under the Act in a private
placement that is exempt from the registration provisions of the
Act under Section 4(2) of the Act or Regulation D promulgated
thereunder and (ii) the availability of such exemption, depends
in part on, and the Company will rely upon the accuracy and
truthfulness of, the representations set forth in this Section
2.2 and such Purchaser hereby consents to such reliance.
(e) Information. Each Purchaser and its advisors, if any, have
been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to
the offer and sale of the Debentures and Warrants which have been
requested by the Purchaser or its advisors. The Purchaser and its
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<PAGE> 14
advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received what the Purchaser
believes to be satisfactory answer to any such inquiries. Neither
such inquiries nor any other due diligence investigation
conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect Purchaser's right to rely on the
Company's representations and warranties contained in Section 2.1
above. The Purchaser understands that its investment in the
Debentures and Warrants involves a significant degree of risk.
(f) Governmental Review. The Purchaser understands that no United
States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Debentures or Warrants.
(g) Residency. Each Purchaser is a resident of the jurisdiction
set forth immediately below such Purchaser's name on the
signature pages hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III.
OTHER AGREEMENTS
III.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of the Debentures,
the Warrants, the Debentures Shares or the Warrant Shares held by
it, each Purchaser understands and agrees that it may do so only
pursuant to an effective registration statement under the Act, to
the Company or pursuant to an available exemption from the
registration requirements of the Act. In connection with any
transfer of any Debentures, Warrants, Debenture Shares or Warrant
Shares other than pursuant to an effective registration statement
or to the Company, the Company may require the transferor thereof
to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected
by the transferor, the form and substance of which opinion shall
be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred
securities under the Act; provided, however, that if the
Debentures, Warrants, Debenture Shares or Warrant Shares may be
sold pursuant to Rule 144(k), no written opinion of counsel shall
be required unless a written opinion of counsel is required by
any transfer agent. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register any transfer by any
Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Act. Any such
transferee shall be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Debentures, the Warrants, the Debenture Shares and the Warrant
Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
Neither the Debentures, the Warrants, the Debenture Shares, nor
the Warrant Shares shall contain the legend set forth above if (i) the issuance
of any of such securities occurs at any time while the Registration Statement
(as defined in the Registration Rights Agreement) is effective under the Act,
(ii) in the written opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) or (iii) such Debentures, Warrants,
Debenture Shares or Warrant Shares may be
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sold pursuant to Rule 144. The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Debentures, Warrants, Debenture Shares or Warrant Shares, free from such legend
at such time as such legend is no longer required hereunder.
III.2 Stop Transfer Instruction. The Company may make notations on its
records or give instructions to any transfer agent with regard to the
restrictions on transfer set forth in Section 3.1; provided, however,
the Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the
restrictions on transfer set forth in Section 3.1.
III.3 Furnishing of Information. As long as any Purchaser owns the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares,
the Company will cause the Common Stock to continue at all times to be
registered under 12(g) of the Exchange Act, will timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act and will
not take any action or file any document (whether or not permitted by
the Exchange Act or the rules thereunder) to terminate or suspend such
reporting and filing obligations. The Company further covenants that it
will take such further action as any holder of the Debentures, the
Warrants, the Debenture Shares or the Warrant Shares may reasonably
request, all to the extent required from time to time to enable such
Person to sell the Debentures, the Warrants, the Debenture Shares, or
the Warrant Shares without registration under the Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Act.
III.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Debentures Shares and the
Warrant Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchasers may request and shall continue such
qualification at all times through the third anniversary of the Tranche
B Closing Date.
III.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Act) that would be integrated with the offer
or sale of the Debentures, the Warrants, the Debenture Shares or the
Warrant Shares in a manner that would require the registration under the
Act of the sale of the Debentures, the Warrants, the Debenture Shares or
the Warrant Shares to any Purchaser.
III.6 Listing and Reservation of Debenture Shares and Warrant Shares.
(a) The Company shall (i) not later than 5 days after the Tranche
A Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock
is then listed) an additional shares listing application or a
letter acceptable to Nasdaq covering and listing a number of
shares of Common Stock which is at least equal to the aggregate
amount of Underlying Shares sold or to be sold in the Tranche A
Closing and Tranche B Closing, (ii) take all steps necessary to
cause the Underlying Shares to be approved for listing on Nasdaq
(as well as on any other national securities exchange or market
on which the Common Stock is then listed) as soon as possible
thereafter and (iii) provide to the Purchasers evidence of such
listing.
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Neither the Company nor any of its Subsidiaries shall take any
action which may result in the delisting or suspension of the
Common Stock on Nasdaq. The Company shall promptly provide to
each Purchaser copies of any notices it receives from Nasdaq
regarding the continued eligibility of the Common Stock for
listing on such automated quotation system.
(b) The Company at all times shall reserve the number of shares
of its authorized but unissued Common Stock which would be
issuable upon conversion of the Debentures and exercise of the
Warrants. Shares of Common Stock reserved for issuance upon
conversion of the Debentures and the exercise of the Warrants
shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Debentures and Warrants issued and
delivered to such Purchaser at the Tranche A Closing and Tranche
B Closing, as applicable.
III.7 Notice of Breaches.
(a) The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation,
warranty or other agreement contained in this Agreement or in the
Registration Rights Agreement, as well as any events or
occurrences arising after the date hereof and prior to the
Tranche A Closing Date or the Tranche B Closing Date, as
applicable, which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as
the case may be, contained herein to be incorrect or breached as
of such Closing Date provided such notice will not constitute
material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any
breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not
constitute material non-public information, each Purchaser of any
notice or claim (written or oral) that it receives from any
lender of the Company or any Subsidiary to the effect that the
consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any
written agreement or understanding between such lender and the
Company or any Subsidiary, and the Company shall promptly furnish
by facsimile to the Purchasers a copy of any written statement in
support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the
Registration Rights Agreement shall not be imputed to, and shall
have no effect upon, any other Purchaser or affect the Company's
obligations under this Agreement or any Transaction Document to
any non-defaulting Purchaser.
III.8 Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Debentures and Warrants as required by Rule 506 under
Regulation D and to provide a copy thereof to each Purchaser promptly
after such filing. The Company shall, on or before the applicable
closing, take such action as the Company shall reasonably determine is
necessary to qualify the Debentures and Warrants for sale to the
Purchasers at the applicable closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United
States (or to obtain an exemption from such
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qualification), and shall provide evidence of any such action so taken
to each Purchaser on or prior to the applicable closing.
III.9 Future Financings. Except for (i) those transactions contemplated
by the Company and Rose Glen Capital Management, L.P. and certain other
investors pursuant to which the Company intends to complete a private
placement of Common Stock (as described in Schedule 2.1(c) hereto); (ii)
issuance of the Underlying Shares; (iii) shares of Common Stock deemed
to have been issued by the Company in connection with any contract, plan
or agreement which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant of the Company; (iv) shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed in Schedule 2.1(c) hereto; (v)
shares of Common Stock issued or deemed to have been issued in a
Strategic Venture (as defined below); or (vi) shares of Common Stock
issued or deemed to have been issued as consideration for an acquisition
by the Company of a division, assets or business (or stock constituting
any portion thereof) from another person, if the Company agrees to issue
Securities prior to the first anniversary of the Tranche A Closing Date
at an effective price per share of less than an amount equal to the
Conversion Price (as defined in the Debentures) of the Debentures as of
the date hereof and Debentures are still then outstanding (a "Future
Financing"), the Company shall provide by 5:00 p.m. (New York time) on
the third (3rd) Trading Day after the decision to issue the Securities
has been made, written notice of the Future Financing containing in
reasonable detail (i) the proposed terms of the Future Financing, (ii)
the amount of the proceeds that will be raised and (iii) the Person with
whom such Future Financing shall be effected, and attached to which
shall be a term sheet or similar document relating thereto (the "Future
Financing Notice"). Upon receiving the Future Financing Notice, each
Purchaser shall have the pro rata right to purchase, on the same terms
as the Future Financing, an amount of Securities not to exceed the sum
of (i) the number of Securities which may be purchased by the amount of
the then outstanding principal amount of and any interest owing on such
Purchaser's Debenture and (ii) the number of Securities which is the
product of the Exercise Price (as defined in the Warrants) multiplied by
that number of shares of Common Stock underlying the Warrant. In the
event a Purchaser desires to exercise the right granted under this
Section 3.9, such Purchaser must notify the Company on or prior to the
fifth (5th) Trading Day after the Purchaser has received the Future
Financing Notice. In the event one or more Purchasers elects not to
exercise its rights granted hereby, the Company shall permit those
Purchasers electing to exercise the right granted under this Section 3.9
to purchase, on a basis equal to its percentage ownership of the then
aggregate outstanding principal of the Debentures, the sum of the number
of Securities that the other Purchaser(s) were eligible to Purchase, if
they had exercised their right hereunder. Those Purchasers desiring to
purchase additional Securities must notify the Company of their
intention to do so within three (3) Trading Days after the Company has
informed the Purchasers of their right to purchase additional
Securities. Within five (5) Trading Days of the termination of the final
notice period, the transactions contemplated by this Section 3.9 shall
close and the Company shall tender to each Purchaser certificates
representing that number of the Securities that it agreed to purchase
and the Purchasers shall make payment for the entire purchase price in
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immediately available funds at the closing of such sale; provided,
however, that each Purchaser, in lieu of providing cash as consideration
for the purchase price, may retire all or a portion of the outstanding
principal amount of and any interest owing on the Debentures as payment
of the purchase price for the Securities that it desires to purchase
pursuant to this Section 3.9. "Strategic Venture" shall mean a venture
between the Company and a pharmaceutical or biotechnology company or an
Affiliate thereof, the primary purpose of which is not to raise capital
in the form of equity (including without limitation through the issuance
of warrants, convertible securities, phantom stock rights, stock
appreciation rights or other rights with equity features) and pursuant
to which the Company contributes or issues securities of the Company
valued at less than 50% of the entire contribution of the Company.
III.10 Use of Proceeds. The Company shall use the proceeds from the sale
of the Debentures and the exercise of the Warrants for general corporate
purposes and shall not, directly or indirectly, other than in connection
with a strategic or research collaboration, use such proceeds for any
loan to or investment in any other corporation, partnership, enterprise
or other Person.
III.11 Reimbursement. In the event that any Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved
in any capacity in any action, proceeding or investigation brought by or
against any person, including shareholders of the Company, in connection
with or as a result of (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or
the Transaction Documents or any other certificate, instrument or
document hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Purchaser and arising out of or resulting
from the execution, delivery, performance or enforcement of this
Agreement or the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, the Company will
reimburse such Purchaser for its legal and other actual out-of-pocket
expenses (including the cost of any investigation and preparation)
incurred in connection therewith. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and
conditions to any affiliate of the Purchasers and partners, directors,
agents, employees and controlling persons (if any), as the case may be,
of the Purchasers and any such affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such affiliate
and any such Person. The Company also agrees that neither the Purchasers
or any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of this Agreement or
any of the Transaction Documents except to the extent that any losses,
claims, damages, liabilities or expenses incurred by the Company result
from the gross negligence or willful misconduct of such Purchaser or
entity in connection with the transactions contemplated by this
Agreement or the Registration
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Rights Agreement. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of its obligations
hereunder which is permissible under applicable law.
III.12 [Reserved.]
III.13 Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent,
to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Debenture Shares and the Warrant Shares
in such amounts as specified from time to time by each Purchaser to the
Company in a form acceptable to the Purchasers (the "Irrevocable
Transfer Agent Instructions"). Prior to registration of the Debenture
Shares and Warrant Shares under the Act, all such certificates shall
bear the restrictive legend specified in Section 3.1(b) of this
Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section
3.13, and stop transfer instructions to give effect to Section 3.1
hereof, prior to registration of the Debenture Shares and the Warrant
Shares under the Act, will be given by the Company to its transfer agent
and that the Debentures, the Warrants, the Debenture Shares and the
Warrant Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. If a Purchaser provides the
Company with an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that a public sale,
assignment or transfer of the Debentures, the Debenture Shares, the
Warrants and the Warrant Shares may be made without registration under
the Act or the Purchaser provides the Company with reasonable assurances
that the Warrants, the Debenture Shares and the Warrant Shares can be
sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the
Debenture Shares and the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive
legend. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchasers by violating the
intent and purpose of the transactions contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 3.13 will be inadequate and agrees, in
the event of a beach or threatened breach by the Company of the
provisions of this Section 3.13, that the Purchasers, shall be entitled,
in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any
bond or other security being required.
III.14 Filing of Form 8-K. On or before the 10th business day following
each of the Tranche A Closing Date and the Tranche B Closing Date, the
Company shall file a Form 8-K with the Commission describing the terms
of the transaction contemplated by this Agreement and the Transaction
Documents in the form required by the Exchange Act.
III.15 Ordinary Course Brokerage and Trading. Subject to compliance with
all applicable securities laws and Nasdaq regulations, no Purchaser
shall be prohibited from engaging in its ordinary course brokerage and
trading activities in respect of the
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Company's Common Stock (including establishing short positions);
provided that the personnel engaged in such activities have not been
involved with the transactions contemplated hereby and have not been
provided with confidential information with respect to the Company.
ARTICLE IV.
CONDITIONS
IV.1 (a) Conditions Precedent to the Obligation of the Company to Sell
the Tranche A Debentures and Tranche A Warrants. The obligation of the
Company to sell the Tranche A Debentures and Tranche A Warrants (and to
pay the Brown Simpson Asset Fee) hereunder is subject to the
satisfaction or waiver (with prior written notice to each Purchaser) by
the Company, at or before the Tranche A Closing, of each of the
following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each
Purchaser in this Agreement shall be true and correct in
all material respects as of the date when made and as of
the Tranche A Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to the Tranche
A Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the
transactions contemplated by this Agreement or the
Transaction Documents.
(a) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche A Debentures and Tranche A Warrants. The
obligation of each Purchaser hereunder to acquire and pay for the
Tranche A Debentures and Tranche A Warrants is subject to the
satisfaction or waiver (with prior written notice to the Company)
by such Purchaser, at or before the Tranche A Closing, of each of
the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the
Company set forth in this Agreement shall be true and
correct in all material respects as of the date when made
and as of the Tranche A Closing Date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with
by the Company at or prior to the Tranche A Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or
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endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement and
the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended
by the Commission or on Nasdaq which suspension shall
remain in effect;
(v) Listing of Common Stock. The Common Stock shall have
been at all times since the date hereof, and on the
Tranche A Closing Date shall be, listed for trading on
Nasdaq;
(vi) Required Approvals. All Required Approvals shall have
been obtained other than those relating solely to the
Tranche B Debentures and Tranche B Warrants;
(vii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this
Agreement and the Transaction Documents to be reserved for
issuance upon conversion of the Tranche A Debentures and
the exercise of the Tranche A Warrants;
(viii) Change of Control. No Change of Control shall have
occurred between the date hereof and the Tranche A Closing
Date. "Change of Control" means the occurrence of any of
(i) an acquisition after the date hereof by an individual
or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act), other
than the Purchasers or any of their Affiliates, of in
excess of 50% of the voting securities of the Company,
(ii) a replacement of more than one-half of the members of
the Company's Board of Directors which is not approved by
those individuals who are members of the Board of
Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into
another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a
series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii); and
(ix) Transfer Agent Instructions. The Irrevocable Transfer
Agent Instructions, in a form acceptable to the
Purchasers, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(b) Documents and Certificates. At the Tranche A Closing, the
Company shall have delivered to the Purchasers the following in
form and substance reasonably satisfactory to the Purchasers:
(i) An opinion of the Company's legal counsel in the form
attached hereto as Exhibit C dated as of the Tranche A
Closing Date;
(ii) A Debenture(s) representing the principal amount of
Tranche A Debentures purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser, each in form
satisfactory to the Purchaser;
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(iii) A Warrant(s) representing the Tranche A Warrants
purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of
such Purchaser;
(iv) The Company shall have executed and delivered the
Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated
the Tranche A Closing Date and signed by an executive
officer of the Company confirming the accuracy of the
Company's representations, warranties and covenants as of
such Closing Date and confirming the compliance by the
Company with the conditions precedent set forth in this
Section 4.1 as of the Tranche A Closing Date.
(vi) Secretary's Certificate. A Secretary's Certificate
dated the Tranche A Closing Date and signed by the
Secretary or Assistant Secretary of the Company certifying
(A) that attached thereto is a true and complete copy of
the Certificate of Incorporation of the Company, as in
effect on the Tranche A Closing Date, (B) that attached
thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Tranche A Closing Date and
(C) that attached thereto is a true and complete copy of
the resolutions duly adopted by the Board of Directors of
the Company authorizing the execution, delivery and
performance this Agreement and of the Transaction
Documents, and that such resolutions have not been
modified, rescinded or revoked.
IV.2 (a) Conditions Precedent to the Obligation of the Company to Sell
the Tranche B Debentures and Tranche B Warrants. The obligation of the
Company to sell the Tranche B Debentures and Tranche B Warrants
hereunder is subject to the satisfaction or waiver (with prior written
notice to each Purchaser) by the Company, at or before the Tranche B
Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each
Purchaser in this Agreement shall be true and correct in
all material respects as of the date when made and as of
the Tranche B Closing Date (except for representations and
warranties that speak as of a specific date);
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to the Tranche
B Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the
transactions contemplated by this Agreement and the
Transaction Documents.
(a) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche B Debentures and Tranche B Warrants. The
obligation of each Purchaser hereunder to acquire and pay for the
Tranche B Debentures and Tranche B
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Warrants is subject to the satisfaction or waiver (with prior
written notice to the Company) by each Purchaser, at or before
the Tranche B Closing, of each of the following conditions:
(i) Tranche A Closing. The Tranche A Closing shall have
occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all
material respects as of the date when made and in all
material respects as of the Tranche B Closing Date (except
for representations and warranties that speak as of a
specific date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
this Agreement and the Transfer Documents to be performed,
satisfied or complied with by the Company at or prior to
the Tranche B Closing Date;
(iv) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the
transactions contemplated by this Agreement and the
Transaction Documents;
(v) Effective Registration Statement. The Registration
Statement with respect to the Underlying Shares shall have
been declared and shall be effective under the Act by the
Commission; not subject to any stop order and not be
subject to any suspension pursuant to Section 3(p) of the
Registration Rights Agreement, and shall have been
effective and shall not have been subject to any stop
order for the thirty (30) business days prior to such
Closing Date and no stop order shall be pending or
threatened as at such Closing Date;
(vi) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended
by the Commission or on Nasdaq (except for any suspension
of trading of limited duration solely to permit
dissemination of material information regarding the
Company);
(vii) Listing of Common Stock. The Common Stock shall have
been at all times since the date hereof and, on the
Tranche B Closing Date the Common Stock, including the
Underlying Shares, shall be listed for trading on Nasdaq;
(viii) Required Approvals. All Required Approvals shall
have been obtained;
(ix) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this
Agreement to be reserved for issuance upon conversion of
the Tranche B Debentures and exercise of the Tranche B
Warrants;
(x) Change of Control. No Change of Control in the Company
shall have occurred; and
(xi) Transfer Agent Instructions. The Irrevocable Transfer
Agent Instructions, in a form acceptable to the
Purchasers, shall have been
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delivered to and acknowledged in writing by the Company's
transfer agent.
(b) Documents and Certificates. At the Tranche B Closing, the
Company shall have delivered to the Purchasers the following in
form and substance reasonably satisfactory to the Purchasers:
(i) An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit C dated
as of the Tranche B Closing Date;
(ii) A Debenture(s) representing the principal amount of
Tranche B Debentures purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser, each in form
satisfactory to the Purchaser;
(iii) a Warrant(s) representing the Tranche B Warrants
being purchased by such Purchaser as set forth next to
such Purchaser's name on Schedule I, registered in the
name of such Purchaser;
(iv) Officer's Certificate. The Company shall deliver to
the Purchasers an Officer's Certificate dated the Tranche
B Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's
representations, warranties and covenants as of the
Tranche B Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in
this Section 4.2 as of the Tranche B Closing Date; and
(v) Secretary's Certificate. A Secretary's Certificate
dated the Tranche B Closing Date and signed by the
Secretary or Assistant Secretary of the Company certifying
(A) that attached thereto is a true and complete copy of
the Certificate of Incorporation of the Company, as in
effect on the Tranche B Closing Date, (B) that attached
thereto is a true and complete copy of the bylaws of the
Company, as in effect on the Tranche B Closing Date and
(C) that attached thereto is a true and complete copy of
the resolutions duly adopted by the Board of Directors of
the Company authorizing the execution, delivery and
performance of the Agreement and the Transaction Documents
and that such resolutions have not been modified,
rescinded or revoked.
ARTICLE V.
MISCELLANEOUS
V.1 Fees and Expenses. Except as set forth in the Registration Rights
Agreement and as otherwise set forth in this Agreement, each party shall
pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debenture
Shares and the Warrant Shares pursuant hereto.
V.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the Registration Rights Agreement
contain the entire understanding
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of the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings, oral or written, with respect
to such matters.
V.3 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated
below (if received by 8:00 p.m. EST where such notice is to be
received), or the first business day following such delivery (if
delivered on a business day after during normal business hours where
such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications are
(i) if to the Company to Geron Corporation, 230 Constitution Drive,
Menlo Park, California 94025 attn: David Greenwood, fax no. (650)
473-7701 and (ii) if to any Purchaser to the address as set forth on
Schedule II hereto with copies to Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
fax no. (212) 872-1002, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
V.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter. Notwithstanding
the foregoing, no such amendment shall be effective to the extent that
it applies to less than all of the holders of the Debentures
outstanding. The Company shall not offer or pay any consideration to a
Purchaser for consenting to such an amendment or waiver unless the same
consideration is offered to each Purchaser and the same consideration is
paid to each Purchaser which consents to such amendment or waiver.
V.5 Headings; Interpretive Matters. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof. No
provision of this Agreement will be interpreted in favor of, or against,
any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
V.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the
Purchasers. The Purchasers may assign this Agreement or any rights or
obligations hereunder to any Affiliate thereof without the prior written
consent of the Company, except that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise
comply with the terms of this Agreement otherwise applicable to its
assignor. This provision shall not limit a Purchaser's right to transfer
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<PAGE> 27
securities in accordance with all of the terms of this Agreement or
under the Registration Rights Agreement.
V.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other Person.
V.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the nonexclusive jurisdiction of the state
and federal courts sitting in the City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.
V.9 Survival. The agreements, covenants, representations, warranties and
provisions contained in this Agreement shall survive the delivery of the
Debentures and the Warrants pursuant to this Agreement and each closing
hereunder and any conversion of the Debentures or exercise of the
Warrants.
V.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an
original thereof.
V.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any
such public statement without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed, except that
no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement. The Company shall not
publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent.
V.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision
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<PAGE> 28
which shall be a reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Agreement.
V.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations
of the Company under this Agreement or the Transaction Documents without
the showing of economic loss and without any bond or other security
being required. Each of the Company and the Purchasers (severally and
not jointly) agree that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
V.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with
the obligations of the other Purchasers hereunder, and no Purchaser
shall be responsible in any way for the performance of the obligations
of any other Purchaser hereunder. Nothing contained herein or in any
other agreement or document delivered at any closing, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such
obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of
the Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
V.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Purchasers hereunder or pursuant to the Registration
Rights Agreement or the Purchasers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently
invalidated, declared fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under
any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or
setoff had not occurred.
27
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
GERON CORPORATION
By:
---------------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By:
---------------------------------------
Name: Mitchell Kaye
Title: Principal
Residence: Grand Cayman, Cayman Islands
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By:
---------------------------------------
Name: Mitchell Kaye
Title: Principal
Residence: New York, New York
LB I GROUP INC.
By:
---------------------------------------
Name: Steven Berkenfeld
Title: Senior Vice President
Residence: New York, New York
<PAGE> 30
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
BY: RGC GENERAL PARTNER CORP.,
AS GENERAL PARTNER
By:
-----------------------------------
Name: Wayne D. Bloch
Title: Managing Director
Residence: Grand Cayman, Cayman Islands
29
<PAGE> 31
Schedule I
<TABLE>
<CAPTION>
Principal
Amount of Principal Amount
Convertible of Convertible
Debentures at Debentures at
Tranche A No. of Tranche A Tranche B No. of Tranche B
Name of Purchaser Closing Date Warrants Closing Date Warrants
- ----------------- ------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Brown Simpson
Strategic Growth Fund,
Ltd. $1,400,000 116,667 [$2,000,000 to
be allocated
between Brown
Simpson
Strategic Growth
Fund, Ltd. and
Brown Simpson
Strategic Growth
Fund, L.P.]
Brown Simpson
Strategic Growth Fund,
L.P.
$600,000 50,000
LB I Group Inc. $3,000,000 250,000 $3,000,000
RGC International $2,500,000 208,333 $2,500,000
Investors, LDC
</TABLE>
- --------
(1) As may be adjusted from time to time in accordance with and subject to
paragraph 6 of the Warrant.
30
<PAGE> 32
Schedule II
<TABLE>
<CAPTION>
Name of Purchaser Address
- ----------------- -------
<S> <C>
Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
LB I Group Inc. c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Kevin Jenirs
Fax: (212) 526-2198
RGC International Investors, LDC c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 Saint Asaphs Road
Bala Cynwyd, PA 19004
Attn: Wayne D. Bloch
Fax: (620) 617-0570
</TABLE>
31
<PAGE> 1
EXHIBIT 10.41
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 10, 1998, among Geron Corporation, a Delaware
corporation (the "Company"), and the parties who have executed this Agreement
and whose names appear on Schedule I hereto (each party listed on Schedule I
hereto is sometimes individually referred to herein as a "Purchaser" and all
such parties are sometimes collectively referred to herein as the "Purchasers."
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(o) hereof.
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Allowable Grace Period" has the meaning set forth in Section
3(p) hereof.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall mean the Tranche A Closing Date as defined
in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
32
<PAGE> 2
"Common Stock" means the Company's Common Stock, par value $.001
per share.
"Debentures" means collectively, the Company's Series A Zero
Coupon Convertible Debentures and Series B Zero Coupon Convertible Debentures
issuable pursuant to the Purchase Agreement.
"Effectiveness Date" means the earlier of (i) the 90th day
following the Closing Date, or (ii) the fifth day after the Company has received
notice (written or oral) from the Commission that the Commission Staff will not
be reviewing the Registration Statement.
"Effectiveness Period" has the meaning set forth in Section 2(a)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Event" has the meaning set forth in Section 2(d) hereof.
"Filing Date" means as soon as practicable but in no event later
than the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c)
hereof.
"Indemnifying Party" has the meaning set forth in Section 5(c)
hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
33
<PAGE> 3
"Purchase Price" has the meaning set forth in Section 2(d)
hereof.
"Registrable Securities" means the shares of Common Stock
issuable upon (i) conversion of the Debentures, (ii) payment of interest in
respect of the Debentures, (iii) exercise of the Warrants, and (iv) any shares
of the Company's capital stock issued with respect to (i), (ii) and (iii) as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise.
"Registration Delay Payment" has the meaning set forth in Section
2(d) hereof.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rose Glen Agreements" means that certain Registration Rights
Agreement entered into by the Company and the Initial Investors (as defined
therein) in connection with the issuance of Series A Convertible Preferred Stock
by the Company on March 27, 1998 and any successor or additional registration
rights agreements entered into by the Company and any of the Initial Investors.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 416" means Rule 416 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" means the warrants issuable pursuant to the Purchase
Agreement.
34
<PAGE> 4
2. Shelf Registration
(a) The Company shall use its best efforts to prepare and file
with the Commission, on or prior to the Filing Date, the Registration Statement
covering all Registrable Securities for an offering to be made on a continuous
basis pursuant to a "Shelf" registration statement under Rule 415. The
Registration Statement shall be on Form S-3 or any successor form (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith, subject to the reasonable consent of the original
Holders of the Registrable Securities). The Registration Statement shall state,
to the extent permitted by Rule 416, that it also covers such indeterminate
number of shares of Common Stock as may be required to effect conversion of the
Debentures (and payment of interest thereon) or exercise of the Warrants, in
each case to prevent dilution resulting from stock splits, stock dividends or
similar events, or by reason of changes in the Conversion Price in accordance
with the terms of the Debentures or by reason of changes in the Exercise Price
(as defined in the Warrants) in accordance with the terms of the Warrants. The
Company shall (i) not permit any securities other than the Registrable
Securities to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event on or prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date which
is three years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144 as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "Effectiveness Period").
(b) [Intentionally Omitted].
(c) [Intentionally Omitted].
(d) If (i) the Registration Statement covering all the applicable
Registrable Securities and required to be filed by the Company pursuant to this
Agreement is not (A) filed with the Commission on or before the Filing Date or
(B) declared effective by the Commission on or before the applicable
Effectiveness Date or (ii) on any day after the Registration Statement has been
declared effective by the Commission, other than days during an Allowable Grace
Period, (A) sales of all the Registrable Securities required to be included on a
Registration Statement cannot be made pursuant to the respective Registration
Statement (including, without limitation, because of a failure to keep the
Registration Statement effective, to disclose such information as is necessary
for sales to be made pursuant to the Registration Statement, or to register
sufficient shares of Common Stock) or (B) the Common Stock is not listed or
included for quotation on the National Market System of the Nasdaq Stock Market
("Nasdaq"), the New York Stock Exchange ("NYSE") or the American Stock Exchange
(the "AMEX") after being so listed or included for quotation, (each such event
specified in (i) and (ii) above, an "Event"), then, as partial relief for the
damages to any Holder by reason of any such delay in or reduction
35
<PAGE> 5
of its ability to sell the Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each Holder an amount in cash (a "Registration Delay Payment")
equal to the then outstanding principal amount of the Debentures (and, in the
case of Holders, the principal amount of Debentures from which such Registrable
Securities were converted) (the "Aggregate Price") multiplied by two hundredths
(.020) times the sum of: (i) the number of months (prorated for partial months)
after the end of the Effectiveness Date and prior to the date the Registration
Statement is declared effective by the Commission, provided, however, that there
shall be excluded from such period any delays which are solely attributable to
changes required by the Purchasers in the Registration Statement with respect to
information relating to the Purchasers, or to the failure of the Purchasers to
conduct their review of the Registration Statement pursuant to Section 3(a);
(ii) the number of months (prorated for partial months) that sales cannot be
made pursuant to the Registration Statement after the Registration Statement has
been declared effective (including, without limitation, when sales cannot be
made by reason of the Company's failure to properly supplement or amend the
Prospectus in accordance with the terms of this Agreement, or otherwise, but
excluding when such sales cannot be made solely by reason of any act or omission
solely attributable to the Purchasers and excluding any days during an Allowable
Grace Period; and (iii) the number of months (prorated for partial months) that
the Common Stock is not listed or included for quotation on the Nasdaq, NYSE or
AMEX or that trading thereon is halted after the Registration Statement has been
declared effective.
(e) The Company represents and warrants that it meets the
registrant eligibility and transaction requirements for the use of Form S-3 (for
primary and secondary offerings) for the registration of the sale of Registrable
Securities by the Purchasers and any other Holders and the Company shall file
all reports required to be filed by the Company with the Commission in a timely
manner so as to maintain such eligibility for the use of Form S-3.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Use its best efforts to prepare and file with the Commission
on or prior to the Filing Date a Registration Statement on Form S-3 or its
successor form (or if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3 such registration shall be on another
appropriate form in accordance herewith or in accordance with the method or
methods of distribution thereof as specified by the Holders (except if otherwise
directed by the Holders), and cause the Registration Statement to become
effective and remain effective as provided herein.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
36
<PAGE> 6
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond as
promptly as possible to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold and
their Special Counsel as promptly as possible (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) [Intentionally Omitted].
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent
37
<PAGE> 7
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
and their Special Counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free,
to the extent permitted by applicable law, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at least two
(2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on Nasdaq and any other
securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.
38
<PAGE> 8
(l) [Intentionally Omitted].
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that if any information is determined
in good faith by the Company in writing to be of a confidential nature at the
time of delivery of such information, then prior to delivery of such
information, the Company and the Holders shall enter into a confidentiality
agreement reasonably acceptable to the Company and the Holders providing that
such information shall be kept confidential, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
Company shall be given notice of any such pending disclosure so that the Company
may seek a protective order); (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which statement shall
conform to the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
39
<PAGE> 9
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(p) If (a) there is material non-public information regarding the
Company which the Company's Board of Directors reasonably determines not to be
in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (b) there is a significant business
opportunity (including but not limited to the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Company's Board of Directors determines not to be in the
Company's best interest to disclose, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
20 consecutive days (an "Allowable Grace Period"), provided that the Company may
not postpone or suspend its obligation under this Section 3(p) for more than 30
days in the aggregate during any 365-day period and there shall be an aggregate
of not more than two (2) such suspensions during any 365-day period; provided,
however, that no such postponement or suspension shall be permitted for
consecutive 20 day periods, arising out of the same set of facts, circumstances
or transactions.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with Nasdaq and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws
40
<PAGE> 10
(including, without limitation, fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications of the Registrable Securities
and determination of the eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as the managing underwriters, if
any, or the Holders of a majority of Registrable Securities may designate)),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading (in the case of any Prospectus or form of Prospectus or
supplement thereto, in light of the circumstances under which they were made),
except to the extent, but only to the extent, that such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (provided that
41
<PAGE> 11
the Company amended any disclosure with respect to the method of distribution
upon written notice from the Holders that such section of the Prospectus should
be revised in any way). In addition, the Company shall not be liable for any
Losses to any Holder with respect to any untrue or alleged untrue statement or
omission or alleged omission if such statement or omission was made in a
preliminary Prospectus that is corrected in a final Prospectus (or any amendment
or supplement thereto) if the person asserting such Losses purchased Common
Stock from a Holder in reliance upon such preliminary Prospectus (or a
Prospectus which was subsequently amended or supplemented) or the Prospectus, as
subsequently amended or supplemented, that was made available by the Company to
such Holder at or prior to written confirmation of the sale of the Common Stock
to such person in any case where such delivery of such Prospectus (as amended or
supplemented) is required, unless such failure to deliver such final Prospectus
(as amended or supplemented) was a result of noncompliance by the Company with
Section 3(g) of this Agreement. The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, however, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which
42
<PAGE> 12
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
43
<PAGE> 13
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Rule 144
As long as any Holder owns Registrable Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or l5(d) of the Exchange
Act and to promptly furnish the Holders with true and complete copies of all
such filings. As long as any Holder owns Registrable Securities, if the Company
is not required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions referred to in the
Purchase Agreement. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
44
<PAGE> 14
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
it of any of the provisions of this Agreement and hereby further agrees that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company shall use its best
efforts to cause the Rose Glen Agreements to be consistent in all material
respects with the rights granted to the Holders pursuant to this Agreement and
to cause such Rose Glen Agreements to not conflict with any of the terms,
provisions or rights granted hereunder. Other than the Rose Glen Agreements,
neither the Company nor any of its subsidiaries has, as of the date hereof, nor
shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(r) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth in Section
2 herein, and are not otherwise in conflict or inconsistent with the provisions
of this Agreement. This Agreement, together with the Purchase Agreement, contain
the entire understanding of the parities with respect tot he subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on
Schedule 7(c) of the Purchase Agreement, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its securityholders, unless the right so granted is subject in all
respects to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict or inconsistent with the provisions of this Agreement.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering the Registrable Securities, the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within fifteen (15) days after receipt of such notice, any
such Holder shall so request in writing, (which request shall specify the
Registrable Securities intended to be disposed of by the Purchasers), the
Company will use reasonable efforts to effect
45
<PAGE> 15
the registration under the Securities Act of all Registrable Securities which
the Company has been so requested to register by the holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the Underwriter's Representative should reasonably
determine that the inclusion of such Registrable Securities, would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer Registrable Securities then proposed to be sold by the Holders, then
(x) the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro-rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration); provided, however, that if securities are being offered for the
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (other than the Company).
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated
46
<PAGE> 16
below (if received by 8:00 p.m. EST where such notice is to be received), or the
first business day following such delivery (if delivered on a business day after
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications are
(i) if to the Company to Geron Corporation, 230 Constitution Drive, Menlo Park,
California 94025 attn: David Greenwood, fax no. (650) 473-7701 and (ii) if to
any Purchaser to the address set forth on the signature pages hereto with copies
to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New
York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other address as
may be designated in writing hereafter, in the same manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
a majority in interest of the Holders. Each Purchaser may assign its rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(h) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(j) Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed in accordance with
47
<PAGE> 17
the laws of the State of New York, without regard to principles of
conflicts of law. Each party hereby irrevocably submits to the
nonexclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consent to process
being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in
any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(n) [Intentionally Omitted]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
48
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
GERON CORPORATION
By:
---------------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By:
Name: Mitchell Kaye
---------------------------------------
Title: Principal
Residence: Grand Cayman, Cayman Islands
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By:
---------------------------------------
Name: Mitchell Kaye
Title: Principal
Residence: New York, New York
LB I GROUP INC.
By:
---------------------------------------
Name: Steven Berkenfeld
Title: Senior Vice President
Residence: New York, New York
49
<PAGE> 19
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
BY: RGC GENERAL PARTNER CORP.,
AS GENERAL PARTNER
By:
-------------------------------
Name: Wayne D. Bloch
Title: Managing Director
Residence: Grand Cayman, Cayman Islands
50
<PAGE> 20
SCHEDULE I
Company
- -------
GERON CORPORATION
230 Constitution Drive
Menlo Park, CA 94025
Fax: (650) 473-7701
Purchasers:
- -----------
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Debentures
Warrants
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Debentures
Warrants
LB I GROUP INC.
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Kevin Jenirs
Fax: (212) 526-2198
Debentures
Warrants
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 Saint Asaphs Road
Bala Cynwyd, PA 19004
Attn: Wayne D. Bloch
Fax: (620) 617-0570
Debentures
Warrants
<PAGE> 1
EXHIBIT 99.1
GERON ANNOUNCES $15 MILLION IN FINANCING
MENLO PARK, CA -- December 10, 1998 -- Geron Corporation (NASDAQ:GERN) announced
today that it has entered into an agreement to sell $15 million in convertible
zero coupon debentures to investment funds managed by three institutional
investors.
"This financing, together with cash on the balance sheet and committed funding
from partners, brings our total cash available to $56 million, which will allow
Geron to accelerate development programs relating to recent discoveries in
embryonic stem cell technology as well as our telomerase programs," stated David
L. Greenwood, Geron chief financial officer and vice-president of corporate
development.
The debentures were purchased by investment funds managed by Brown Simpson Asset
Management, LLC and an investment fund managed by Rose Glen Capital Management,
L.P. The debentures are convertible by the holders at a fixed conversion price
of $10.00 per share. The debentures convert at the company's option when the
common stock has traded at a certain premium to the fixed conversion price for
five (5) consecutive trading days. For a period of eighteen (18) months, the
investors hold a right to purchase up to $15,000,000 of additional Geron common
stock at a premium to the fixed conversion price.
Geron Corporation is a biopharmaceutical company focusing on discovering and
developing therapeutic and diagnostic products based upon the company's
understanding of human embryonic stem cells, and of telomere and telomerase in
cells -- fundamental biological platforms underlying cancer and other
age-related degenerative diseases.
The company desires to take advantage of the "safe harbor" provision of the
Private Securities Litigation Reform Act of 1995. Specifically, the company
wishes to alert readers that the matters discussed in this press release may
constitute forward-looking statements that are subject to certain risks and
uncertainties. Actual results may differ materially from the results anticipated
in these forward-looking statements. Additional information on potential factors
that could affect the company's results is included in the company's quarterly
report on Form 10-Q for the quarter ended September 30, 1998.
Contact:
<TABLE>
<S> <C> <C>
Company Media Inquiries Investor Inquiries
David Greenwood Carole Melis or Lisa Burns or
Chief Financial Officer Mike Jackman John Nugent
Geron Corporation CLM Communications Burns McClellan
650-473-7700 650-342-5686 212-213-0006
</TABLE>
To receive an index and copies of recent press releases, call Geron's News on
Demand toll-free fax service, 1-800-782-3279. Additional information about the
company can be obtained at www.geron.com.
